Rail reform has never been easy

Rail reform is back on track, as legislation was promised in the new Labour government's first King's speech to parliament. Everyone agrees that changes must be made to how the railway operates, but no structure has ever been perfect. Richard Foster delves into the history books to consider what we can learn from the best of railway times… and what to avoid from the worst of railway times…

“Britain’s railways are in a deepening crisis. There is significant consensus about the causes: perennial under-investment, fragmentation, inefficiency and waste, a lack of strategic direction, and, most recently, 14 years of tinkering around the edges and failing to address root causes.”

The introduction to Getting Britain Moving: Labour’s Plan to Fix Britain’s Railways pulls no punches. It reflects a feeling that seems to grow daily, both from passengers and those within the rail industry: Britain’s railways are ‘broken’ and need fixing. 

When did it all go wrong? 

Fingers immediately point to privatisation, but is that actually true? Did the rot really set in during the 1990s? And has there, in fact, ever been a true point in British railway history of true harmony between railway management, railway staff, the government, and the passenger?

Former Network SouthEast MD Chris Green points to two ‘golden eras’ for the railways since 1980: BR’s Sectorisation period (1982 to 1993), and the early years of privatisation.   

For those who think that the current cost of living crisis has been bad, with inflation topping 11%, the situation that the incoming Conservative government found in 1979 was even worse. 

New Chancellor Geoffrey Howe embarked on a radical policy to fix it. But by 1980, things were worse, and inflation was at 22%. It improved slightly the following year (dropping to ‘only’ 13%), but interest rates were at 17% and unemployment was skyrocketing. 

And then, in 1982, Howe’s policy began to bear fruit. Inflation dropped like a stone. However, unemployment was stubbornly high and remained so, forever tainting Thatcher’s premiership. 

British Rail was one of the casualties of Howe’s policy, as its funding was slashed. It was into this world that Bob Reid stepped. 

One of the common criticisms of the current organisational structure is that the railway is solely focused on cutting costs, in order to improve its financial position. BR, under then-new Chief Executive Bob Reid, did what many are calling for today: BR, said Reid, would improve its lot by generating more revenue. And it would do this by focusing on the customer. 

To do this, BR’s regions - a legacy from the early years of nationalisation - were replaced by five business sectors. And what this new structure did, as Chris Green explained in RAIL 1000, was to empower management, to inject enthusiasm, and to change management culture. 

“We were judged on our delivery, and not on every detailed decision made,” he wrote.

Sectorisation, Green added, “brought costs and revenues together in one place, so that you could make decisions based on improving profit”. 

While critics point to privatisation as the source of all wrongs, Green argues that its early years were another “golden era”. 

It’s a view echoed by Richard Bowker, the former Virgin Rail Group co-chairman who says that what the early years of privatisation did was to bring “two different worlds” together.

“You had good commercial people and good operational people. And the two worlds created something more than the sum of its parts,” he adds. 

While Sectorisation injected passion into BR, privatisation injected cash. New trains offered the most visible indication of this, and the likes of Chiltern Railways, Virgin and new freight operator EWS were soon enjoying the benefits of new fleets. 

Private companies have, traditionally, dominated Britain’s railway history. The first railways were built by private individuals and groups, and by the late 1830s building a railway was considered the ideal ‘get rich quick’ scheme. 

Britain’s railway map simply exploded in size. But the boom was short-lived, as what became known as the ‘Railway Mania’ imploded in 1847 - although it didn’t stop enthusiastic promoters from embarking on an energetic railway building programme. 

The system had consolidated itself just before the First World War. This was arguably when the railways were at their most profitable. Yes, there were hundreds of companies in existence, but a form of natural selection was taking place. Weaker companies were swallowed up by larger ones. Others existed in name only, while day-to-day operation was carried out by larger, more successful neighbours.

There was great co-operation. For example, the Great Northern, North Eastern and North British Railways banded together in 1860 to provide rolling stock (under the banner East Coast Joint Stock) for through running between London and Edinburgh. A similar body for the West Coast Main Line emerged in 1862. 

Clearly there needed to be some sort of body to oversee the railway. That body was the Railway Clearing House, initially formed in 1842 but given legal status in 1850. 

Its first role was to calculate how much revenue to allocate when goods and passengers travelled over different company’s metals on the same journey. Eventually, it would deal with everything from managing tickets and setting minimum standards for wagon construction to dealing with lost property. 

What is remarkable about the 1840-1914 period is the lack of government intervention - Acts of Parliament were passed when something important needed resolving. 

The Railway Regulation Act 1840 ensured that a railway was officially inspected before it could open. The Railway Regulation (Gauge) Act 1846 set the standard gauge of 4ft 81/2in for main line railways in Britain. And the Regulation of Railways Act 1889 forced companies to fit continuous brakes to passenger trains. 

The Light Railways Act of 1896 was designed, in today’s parlance, to ‘level up the economy’. It enabled railway promotors to cut through the red tape of railway construction in order to build lines more cheaply. You didn’t need an Act of Parliament to build the line (just a licence from the Board of trade), and you didn’t even need signalling or even fences. 

The concept behind the act was that by reducing costs, it might encourage promotors to build lines to rural communities that might otherwise have proved unremunerative. Here was government trying to use the railway as a force for economic good. 

This was taken a stage further in the West Highlands, where an 1892 Royal Commission presented a gloomy picture. 

The Commissioners believed that a railway would rejuvenate the area’s economy, but realised that given the difficult terrain, it would never recoup its costs. They suggested a £100,000 grant to the builders, whereas the North British Railway, which operated the West Highland Railway’s Glasgow to Fort William line, suggested that the government subsidise its construction. And that’s what happened. 

Such involvement from the government made the planned Mallaig line a political hot potato. The Conservatives liked the concept of government subsidy; the Liberals did not. 

After two years of political wrangling, both the West Highland’s Extension Bill and the novel West Highland Railway (Guarantee) Bill passed in 1896, and the first sod was cut on January 21 1897. 

Labour relations have placed a great strain on the railway in recent years. It’s made running the railway extremely difficult, while simultaneously destroying public trust. 

Disputes between employer and employee is not a new phenomenon, but it’s an area where the situation improved greatly during the pre-Grouping era. 

In 1879, GWR enginemen met management to try to obtain agreement that ten hours was a fair working day, but they were sent away empty-handed. 

By 1897, railways were recognising trade unions (the North Eastern Railway became the first British railway company to do so).

And by the First World War, the membership of the National Union of Railwaymen, the Associated Society of Locomotive Engineers and Firemen, and the Railway Clerks Association had nearly 500,000 members between them. 

Strike action was still comparatively rare. David Lloyd George, President of the Board of Trade, managed to avoid a general railway strike in 1906 (over pay, naturally), and after a series of strikes in 1911 he encouraged the railways to form Conciliation Boards to solve disputes with the unions. 

The pre-First World War era sounds like an ideal scenario: the government made important decisions and kept an overall eye on things (a guiding mind, if you will), while the individual railway companies were left to get on with running their businesses. 

It wasn’t perfect, however. 

In the 1830s, government control had threatened to make the railways a state-controlled public service, reflecting what was happening in Europe. 

The Habsburg Empire, in 1841, produced a plan for a strategic railway network that it would build, utilising private finance. 

Germany’s first railway, the Bavarian Ludwig Railway which opened in 1835, was built using a concession from the state of Bavaria. 

And the French state, under Napoleon III, rewarded railway companies to build strategic routes that were considered uneconomic. 

In Britain, however, the proposed government leash was loosened when it became apparent that the railways represented the very spirit of Victorian free trade and entrepreneurism. 

You can’t imagine it today, when MPs are hauled over the coals over the slightest whiff of financial irregularities or corporate influence. But in 1873, some 132 MPs (that’s almost one in five) were railway directors, and many others had significant railway shareholdings. They were dubbed the ‘Railway Interest’, and any act or decision had to appease the Railway Interest. 

The railways could appeal to the ‘Railway Interest’ using the Railway Companies Association. This was formed by a group of railway chairmen in 1854, but by 1867 was a properly co-ordinated body with its own secretariat and premises. It would exist until Nationalisation in 1948. 

Britain’s railway network was never intended to become a network. Railways were set up by local concerns, such as colliery owners, merchants and manufacturers. But keen-eyed investors saw the financial benefits of railways in neighbouring towns and wanted to tap into this success. 

To Victorian railway promoters, the concept of the ‘Benefit:Cost Ratio’ was alien. There was no control on building railways. Duplication of routes was rife. Some lines were built to tap into markets that simply didn’t exist, while others were built purely to ‘block’ a competitor. A more sustainable approach, with greater government involvement, might not have led to the The Reshaping of British Railways in 1963. 

Should the 21st century railway be modelled more along the lines of the ‘Big Four’ - the Great Western Railway, the London Midland & Scottish Railway, the London & North Eastern Railway, and Southern Railway - that controlled Britain’s main line network from 1923 until 1948? 

This period is often considered a ‘golden age’ of rail travel, and it’s easy to see why. Speed and power were the order of the day. Headlines were made by faster train services and technological innovation, helped by the railway companies recognising the power of marketing to sell their services. 

They diversified, too. Railways owned canals and harbours, while their ships plied the English and Irish Channels. They owned hotels, invested in bus companies, and in 1929 were given powers to run their own air services. 

They even managed to achieve that panacea that today’s railway companies dream of… door-to-door goods services with lorries undertaking ‘last mile’ journeys. 

And while there was public rivalry (the locomotive ‘arms race’ being one), the railway companies were working together like never before.

They even managed to ‘fix’ ticketing. Ticket prices were fixed at 1½d per mile for Third Class and 2½d per mile for First. The shortest route between two locations would determinate the fare. Therefore, you’d pay the same to get from London to Manchester whether using the LMS from Euston (187 miles) or the LNER from Marylebone(212 miles). 

This was taken a stage further in 1928, when the ‘Big Four’ pooled its ticket revenue together, took out their working expenses, and equally divided what was left. 

The railways were free to manage their own development. Southern Railway embarked on a massive programme of electrification. It was a rolling programme which historian Michael R Bonavia said avoided “the loss of momentum and the costly delays in regaining it which have characterised government ‘stop go’ policies for railway investment ever since the Second World War”.

Government remained at arm’s-length, stepping in when necessary. With the economy beginning to struggle as the 1920s progressed, it introduced the Development (Loans Guarantees and Grants) Act 1929. These grants were for public works that would offer employment opportunities, and the railways used them for everything from building new locomotive sheds to widening main lines. 

Using infrastructure projects to stimulate the economy? Now, there’s a novel idea. 

Critics of privatisation point to the ‘Big Four’ as a model for how British Rail ought to have been divided. They were vertically integrated, maintaining their own track and trains. They were in charge of both passenger and goods operation. 

But, again, the ‘Big Four’ was not a perfect solution. Forming three new companies from formerly competing ones caused no end of issues. (The GWR was not affected, as it absorbed other companies.) 

The Southern got off lightly, too. But the LNER’s newly formed ‘Area Groups’ made it a ‘federation’ of railway companies and not a single, harmonious organisation. 

The LMS, meanwhile, was hamstrung in its early days by bitter infighting, particularly between ex-LNWR and ex-Midland factions, that continued until 1932 when William Stanier became Chief Mechanical Engineer. 

The ‘Big Four’ had to deal with the financial repercussions of Britain’s declining manufacturing industry, as well as the Great Depression. 

But it was the lack of government involvement that caused them the biggest headache. It took until 1938 for the Railway Companies Association to finally persuade the government to abolish the archaic rules which meant that the railways had to move any load that was offered, even if it was uneconomic to do so. 

But this ‘Square Deal’ legislation was never implemented, because on September 24 1938, the ‘Big Four’ were once again under government control. 

This was not nationalisation as per the BR model. The Railway Executive Committee had been an intermediary body co-ordinating efforts between the government, the military, and Britain’s railway companies during wartime. Take out the wartime angle, and the REC could be viewed as a ‘guiding’ or ‘directing’ mind - a group of top railway professionals interacting between government and railway workers. 

True nationalisation had been considered in the wake of the First World War. Even though the REC was co-ordinating efforts, the war offered the first glimpse that myriad railway companies was problematic. 

However, new Transport Manager Sir Eric Geddes opted to group the railway companies together. He said: “State management is more costly than private management, lacks incentive to initiative and inevitably become more ‘red tapey’… Politics corrupts railway management and the railway management corrupts politics.”

In many ways, Geddes’ initial vision was perfect. He believed that efficient transportation was key to rebuilding the economy. 

His 1919 proposal involved uniting railways and tramways, road transport, inland waterways and harbours, shipping companies and the embryonic airlines. He wanted control of electricity production, too, in order to replace steam with electric power over the entire railway network. 

An environmentally friendly, integrated transport network: isn’t that what we’re all striving for?

It was the Transport Act 1947 that finally made Geddes’ vision a reality. The newly formed British Transport Commission (BTC) took control of everything transport-related - railways, docks, road hauliers, and bus groups. Many of these organisations had been inherited via the railway companies. 

But just as the 1993 privatisation model no longer works in 2024, Geddes’ 1919 vision was less workable after the Second World War. 

If we count the British Railways/British Rail period from January 1 1948 until November 5 1993 (when the Railways Act 1993 was passed), that’s 45 years of the railway being controlled by one master. Yet, as alluded to by Chris Green, the structure of control was constantly changing - and some structures were better than others.  

The BTC was structured so that it left the running of each transport undertaking to an ‘Executive’. BTC would set policy and the Executive would implement it. 

Unfortunately, the Railway Executive (RE) organised itself along ‘Big Four’ lines, maintaining ‘Big Four’ practices. Rivalry disrupted the RE and the BTC over policy decisions and the RE was dissolved with the Transport Act 1953.

Now, a Traffic Advisor would report to the BTC’s Secretary General. Reporting to the Traffic Advisor were the likes of the Chief Traffic Officer, Chief Operating Officer & Motive Power Officer, and the Chief Operating Officer. 

It was this structure that introduced the 1955 Modernisation Plan, which proposed the gradual introduction of diesel and electric traction to replace steam. This was a structured approach - it would be implemented within five years and be completed within 15. It would cost the government £500 million. 

However, the railway’s economic position was coming under increasing scrutiny from politicians. The BTC believed that another £500m would fix its problems. The government disagreed, and the result was the Transport Act 1962, which replaced the BTC with the British Railways Board. 

It was this organisation that proposed (and then implemented) The Reshaping of British Railways, which had such a huge impact on Britain’s railways. 

The vast closure programme is the most tangible aspect, but the confused and hurried implementation of diesel traction shouldn’t be overlooked either. Fixing that legacy would consume a lot of time and (more importantly) money for many years after. 

If we place a marker in the sand of 1825, when the Stockton & Darlington Railway opened, there has never been a period of prolonged stability in how the railways were structured. 

Several periods come close: the later years of the pre-Grouping era; the ‘Big Four’ years; and parts of the BR era. Yet events, both close to home and on the world stage, always intervened, bringing periods of relative stability to a swift end. 

And that’s the challenge with trying to decide which ‘structure’ was best. 

The ‘Big Four’ period was (if you ignore the infighting within some companies) a time of stability. Was it the best? Had the Square Deal been introduced, had the ‘Big Four’ been able to proceed with their modernisation policies (including, in some cases, electrification), and had they not had the Second World War to contend with, the answer might have been ‘yes’. But we’ll never know. 

Growth unites the pre-Grouping, Sectorisation and early privatisation years. There was freedom to drive growth, and with that growth came innovation, - whether that was a 1905 North Eastern Railway ‘steeple cab’ Bo-Bo electric or a Virgin ‘Pendolino’. 

Again, it’s intriguing to speculate on what might have beens. 

What would the pre-Grouping companies have done if left unchecked by the First World War? Would privatisation be hailed as a success if the likes of Virgin or GNER had been given the same opportunity that Chiltern Railways had, with infrastructure investment complementing new trains?

Is the answer not even to speculate on what era’s structure was the best? Is the real answer that actually mixing up the best bits from the ‘Big Four’, BR and privatisation eras would result in the ‘ideal’ railway structure?

Ultimately, we are where we are… and Labour will now be charged with adding more detail to its Getting Britain Moving: Labour’s Plan to Fix Britain’s Railways document. 

What happens next? We will all just have to wait and see.

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