- This feature was published in RAIL 843, available now on Android and iPad
Shortly after his election as Labour Party leader, Jeremy Corbyn summed up his party’s policy aim for the railway as “a fully integrated railway in public ownership”.
Two years on, after Election results unanticipated by the commentariat and with Labour now riding in front of the Conservatives in some polls, there is heightened interest from the rail industry and others in understanding more about Labour Party policy for the railway.
Why and how is the Labour Party developing a policy for a railway fully integrated across all of its functions throughout the whole of Britain and entirely within public ownership?
As short-hand, we will shorten this policy aim to a ‘national vertically integrated railway under public ownership’, with apologies to Britain’s component nations of England, Scotland and Wales for using the term ‘national’ to mean Britain-wide. The Northern Ireland railway is already unified under public ownership and is spatially separate, so does not need to be considered as part of this discussion.
I will concentrate on some of the key issues that Labour wants its plans for the railway to resolve, the main things it wants the railway to deliver that it presently cannot, and the principles it is applying to development of detailed proposals for the structure and operation of a publicly owned railway. In a future issue of RAIL, I will look at those proposals in more detail.
Fragmentation: politically under-appreciated
The biggest structural issue for a Labour government to address will be the fragmentation of the railway resulting from privatisation. However, for understandable reasons, political discussion of issues arising from rail privatisation has tended to focus much more on the issue of ‘dividend leakage’ from the railway to private shareholders, with the profit levels of some of the rolling stock companies offering particularly juicy targets.
Dividend leakage is, of course, a valid concern. Indeed, I was co-author to Transport for Quality of Life’s 2012 report Rebuilding Rail, which pointed out that some £0.7 billion of about £1.2bn yearly excess costs to the railway from privatisation could be attributed to dividend leakage. That report attributed about £0.3bn of excess costs per year to fragmentation of the railway.
At the time of that calculation, we applied fragmentation costs estimated by background research for McNulty’s Rail Value for Money Study. That costing was almost certainly a considerable underestimate, since it applied solely to the fragmentation between the different train operating companies, and between them and Network Rail. Fragmentation costs deriving from ‘friction’ at the many interfaces created from Network Rail’s continuing high levels of outsourcing should be added in, as should the £60 million or so spent by train operators bidding for franchise competitions every year.
However, rather than the added costs of fragmentation, it is the direct frontline impacts that fragmentation has on the railway that are liable to be most damaging. These are many and varied, but have been the subject of even less political discussion. This matters, because there is a particular political challenge for Labour at this moment in railway development - Britain is moving towards a much more devolved railway.
Scotland has full devolved powers over rail franchising, and Wales will gain equivalent powers in the near future (albeit later than anticipated). London and Merseyside have full devolved powers over rail franchising, while the North of England, although presently chaffing at merely having ‘statutory influence’ over franchising, still hopes to gain full powers over franchising in future. The West Midlands aspires to follow suit and has formed a rail governance body for that purpose. Other regions of England have also expressed interest in devolution of rail franchising.
From a political perspective, this process appears to have unstoppable momentum. And from a railway perspective, it appears to be gaining a record of local improvements that adds weight to the devolution case as time goes on.
So, the context in which Labour must consider how to tackle fragmentation is: “what is the best way to achieve both the benefits of devolution and the benefits of a national vertically integrated railway under public ownership?”
For this reason, Transport for Quality of Life has undertaken research into the direct impacts of fragmentation, to inform Labour Party policy development. The data arising provides the background for discussion of how Labour should structure a publicly owned railway to function better. Most of this data is original and has not been published before.
The passenger perspective of fragmentation
More than 18,000 rail passengers throughout Britain were contacted to understand how they are affected by fragmentation in the railway system. The survey asked rail travellers to relate their experiences in their own words, with multiple-choice questions to enable easier input from those who did not wish to provide personal comments. Some 2,600 people responded, of whom 700 provided personal comments, amounting to more than 1,600 comments on the different questions.
About a third of respondents appear to experience no significant problems from fragmentation, because their rail journeys are restricted to repeated simple trips within the area of one operator that essentially operates a monopoly service, for which they are acquainted with the travel options and ticket variants.
However, a litany of problems was described by those who make journeys across boundaries between train operators, or on parts of the network where multiple train companies operate. The overall impression was of an outpouring of anguish, confusion and frustration. Comments were highly consistent and can largely be summarised by six big themes.
- Myriad ticket variants, instead of ease-of-use and simplicity.
Result: Passengers waste hours trying to work out the best ticket, feel frustrated at the end of it all, often feel they still don’t have the best ticket, resent the system making it so hard, and feel it is designed for the train companies rather than the passengers. Many give up and travel by other means.
- Different rules (for example - peak/off-peak) on different parts of the railway.
Result: Passengers are often caught out and treated as criminals. Some get very anxious. Some therefore avoid making train journeys, because they fear getting it wrong or find it all too stressful.
- Misinformation or lack of information, due to breaks in the system or complexity.
Result: Passengers waste time and energy trying to find information (often the information requirement itself arising from complexity of the system). They find their journey stressful as a result, and when they find information about one part of the system cannot be provided by another part, or find that information is wrong, they feel upset and aggrieved.
Result: Passengers have increased journey times - in some instances they pay more to take an alternative train company’s service for the continued trip. Some lament not travelling by car or coach.
- Failure of the railway to take a responsibility for getting the passenger to their final destination.
Result: When journeys don’t go according to plan passengers feel abandoned, let-down, charged for bad service, and in some instances see that alternative capacity on the rail system is not being used to help them (or is explicitly forbidden to them). Some feel inclined (or forced) to switch to other modes of transport. Disabled passengers have a horrendous time when bits of the system supposed to assist them fail to link up.
- Trains that could easily be held to connect with slightly late-running services rarely wait.
Result: Passengers have increased journey times, in some instances pay more to take an alternative train company’s service for the continued trip, and some lament not travelling by car or coach.
- When passengers seek redress they fall between parts of the railway that blame one another.
Result: Insult is added to injury, with the consequence that passengers feel under-valued and exploited.
The operational staff perspective of fragmentation
Railway staff were surveyed with the assistance of the rail unions. Nearly 100 staff responded, most of whom work in ‘frontline’ operational roles.
The survey asked for examples of how the different parts of the railway fail to work together, and also asked how the different parts of the railway do successfully work together.
Some answers add professional insights to the six big fragmentation issues raised in the passenger survey, as shown by the examples below.
Other staff responses raised operational and technical issues that may seriously affect the functioning of the railway, but which are only obvious to rail professionals. Professional fragmentation issues raised by staff include:
- Company-specific careers mean lack of understanding between roles.
- Proliferation of rolling stock types means loss of in-depth engineering know-how.
- Companies operating similar rolling stock fail to share useful knowledge.
- Rolling stock shortages cannot be covered by other TOCs’ rolling stock.
- Disputed responsibility for station maintenance delays repairs and wastes effort.
- Outsourcing functions to contractors leads to delays in repairs to facilities.
- Functions are duplicated between different companies.
- Some rail activities are in a constant state of flux as multiple companies change.
- Stations operate to different procedures, providing inconsistent service.
- NR-TOC disputes over blockades hinder timeliness of infrastructure work.
- Rail infrastructure work is complicated by involvement of multiple companies.
- Solo procurement by each company loses scale economies and adds waste.
- Long-term thinking is destroyed by planning constrained by franchise terms.
- Drivers with TOC-specific training are unable to work available diversion routes.
- Trains are delayed or cancelled when drivers from other TOCs are available.
- Information provision at some stations only covers the TOC that runs the station.
Few respondents were able to offer examples of different parts of the railway working together successfully, with most explicitly stating that they could think of none in response to a question seeking such examples. However, some traffic control staff noted that co-location of Network Rail and train operating company controllers had brought benefits because it “improves the flow of communications”.
Taken overall, comments from staff give an impression of railway staff who care about passengers and the railway, who are frustrated that its present structure tends to undermine their professionalism, and who are doing their best to make the railway work for passengers despite its fragmented structure.
There were multiple replies that spoke of staff developing informal systems to try to overcome the fractures. For example: “Informally, we often ignore the fact that we are supposed to be working for competing businesses, and just do what is best for the passengers anyway. Ignoring the fact that we are supposed to be in competition makes my job a lot easier because I am able to give passengers a much better service.”
The strategic management perspective of fragmentation
Two official reports precipitated by failures of cost control in the British railway (the McNulty and Bowe reports) compiled evidence showing how fragmentation resulting from the privatised railway structure impairs strategic management and everyday operation of the railway.
A third (the Shaw report) into the future shape and financing of Network Rail mainly focused on other matters, but did recognise that “the railway needs to function as an interoperable system” and explicitly noted that there is a need to “balance devolution with national system operation”.
The McNulty and Bowe reports describe a litany of issues arising from fragmentation. These are discussed in more detail in RailReview Q4-2017.
How an integrated railway in public ownership has to do it better
It is striking that all of the official reports that identified problems and excess costs arising from fragmentation of the railway failed to recommend major reduction of fragmentation. This striking omission derives from the fact that fragmentation is a pre-requisite for privatisation, and the reports’ authors regarded privatisation as an unchallengeably good thing.
The Labour Party challenges the underlying misperception that the market is the best way to design a railway and can adopt the obvious solution to fragmentation - reintegration of the railway.
The perspectives of passengers, staff and managers in the previous sections reveal the challenges to be addressed. The points emerging from these perspectives can be drawn together to summarise the functional attributes that the future railway must have if a Labour Government’s reform of the railway is to be judged a success. Very few of these attributes can be achieved within the present fragmented railway structure.
The capabilities required of a reintegrated railway within public ownership include:
- A railway that functions as a whole in its strategic planning for improvements - with infrastructure and train operations working as a unified whole rather than divorced from one another (so that, for example, trains no longer get ordered without certainty whether the routes they run on will be electrified or will need diesel traction).
- A railway that functions as a whole in its daily operation - with infrastructure and all train operations working as an integrated whole to maximise service continuity around planned and unplanned disruption.
- A railway able to take responsibility to get passengers from one end of their rail journey to the other.
- A railway that is easy to use from one side of the network to the other.
- A railway that is integrated with other forms of local public transport.
- A railway that works together to give the densest possible network of services at regular spacings, rather than multiple operators but fewer available travel options.
- A railway where ticketing is unified, simple and logical - and where it does not feel like a lottery to get reasonable price tickets.
- A railway where information is reliable, timely, consistent, comprehensive and readily available.
- A railway that is cost-effective in how its parts work together, without duplication and conflict between parts in its day-to-day operation or its strategic planning.
- A railway that is cost-effective in procuring and managing its rolling stock and other equipment so that all parts of the railway can maximise possible economies of scale, and so that rail manufacturing is supported in Britain.
- A railway that maximises opportunities to move freight by rail - where a ‘guiding mind’ controls all train operations and gives the benefits of freight on rail appropriate weight in trade-offs against passenger services (where travellers’ opinions alone would lead to sub-optimal overall outcomes).
Rail devolution has the potential to make all of these issues better - or worse. The way in which Labour accommodates both national integration and devolution within its publicly owned rail structure must enable these functional outcomes.
Necessity to sharply define the new rail model
The railway was, at a stroke, cut into pieces to facilitate privatisation of its parts. Putting it back together again will, necessarily, be a slower process.
At the earliest stage, a Labour government will put in place an overarching integrated structure for the railway that will create a guiding mind and deliver strategic planning for the whole railway.
Thereafter, franchises will be reclaimed from the train operating companies as they expire and become available at zero cost. It is possible that some franchisees, as in the past, will fail to meet over-optimistic franchise financial targets and so will wish to hand back those franchises before term.
Nevertheless, it is clear that there will be an unavoidable period of a ‘hybrid’ railway as the process of change proceeds. This makes it all the more important that the intended final structure for the railway is clearly defined from the outset, so that the whole railway is clear what will happen and can plan accordingly.
In a future article, I will present a possible structure for a nationally integrated railway within public ownership, and discuss its pros and cons in regard to how it accommodates rail devolution and various other requirements.
Rail users’ answers to the multiple-choice questions give an impression of the prevalence of the different fragmentation issues...
Proportions of passengers suffering different surveyed issues:
- 63% have spent a long time at a ticket office or online trying to work out an economical way to make a rail journey involving more than one train company.
- 56% have had a long wait after a delayed train just missed a connection with a train that apparently was not held because it was run by a different operator.
- 53% make journeys on a route where the timetabling just misses a connection that would make the trip much better.
- 53% have had to buy several tickets to get to and from their destination at a better price than one simple ticket.
- 43% have had difficulties finding out whether their ticket was valid because different train companies operate different peak and off-peak rules.
- 43% have been unable to travel back by a possible alternative route because their tickets tied them to a particular train company.
- 36% have had to miss the first available train because their tickets were only valid on another train company’s services.
- 33% have found the National Rail Enquiries website failed to transfer essential ticket details to a train company’s website, and so they have had to restart from scratch using that company’s website.
- 28% have been told they had to talk to staff of another train company when they wanted information.
- 27% have found staff of one train company have been unable to advise on times or routes for which their ticket would be valid on another train company.
- 24% have been charged extra or had to buy another ticket because unforeseen circumstances required them to travel with a different train company.
- 19% have not been allowed to transfer on their existing tickets to another train company, despite disruption to trains.
- 16% have been refused compensation for delays due to one train company blaming another train company (or another part of the railway).
Although no single issue had been a problem for all respondents, 92% considered that the railway would work better rather than worse if it was reunited in a single organisation.
Michael Holden, Former Chief Executive, Directly Operated Railways
Dr Taylor has done us all a service by moving the political debate away from simplistic soundbites on things such as foreign ownership and high fares, and into the realm of research and analysis.
I liked his use of the umbrella concept of fragmentation to wrap up a series of undesirable consequences arising from the structure of today’s railway: from incremental costs at organisational interfaces, through sub-optimal resource allocation, to a failure to put passengers’ needs first across arbitrary TOC boundaries.
Dr Taylor uses the increased costs arising from friction at the interfaces, and the passenger dissatisfaction with service across the current arbitrary organisational boundaries, to make his case for renationalisation in a single vertically integrated business within public ownership.
I think this would be a huge mistake on two counts: a single behemoth running the GB rail network and responsible directly to Government would take us straight back to the British Rail era. I have been there, and no matter how many problems we have with our railway structure now, that is not the answer.
- More on this from Michael Holden can be read in RailReview Q4-2017.
Mick Cash, General Secretary, RMT
It is a breath of fresh air to have a Labour leadership at last which is committed to bringing our railways back into public ownership and ending the racket of privatisation. That is good news for passengers who have been fleeced for the past two decades, and it is good news for staff who have been pawns in the game throughout the privatisation fiasco.
The 70% of the British public who support the public ownership of our railways have been ignored for too long, it is a massive boost that Labour is now firmly lined up on their side.
The Tory position on public ownership has always been about political ideology and nothing else. Why else would they allow three-quarters of our railways to fall into overseas ownership where fares paid in London, Manchester and Liverpool are siphoned off to subsidise passengers in Berlin, Paris and Amsterdam?
Public ownership is coming to our railways. And with this shambolic, minority government lurching from crisis to crisis, the private rail companies who have had a free ride on Britain’s railways for over 20 years should wake up and realise that it is coming sooner than they might think.
Dick Fearn, Independent Chairman, Western Route Supervisory Board
High-quality rail services for passengers and freight customers are, in my view, best achieved on systems where rail infrastructure provision and train operation is well co-ordinated and where train services are well-connected.
However, having worked for over four decades in the rail industry in Great Britain and the Republic of Ireland, in both public and private sector companies, I do not subscribe to the view that public ownership is necessary for delivery of the high-quality services that passengers and freight customers require.
It is an undeniable fact that over the last 20 years since the introduction of passenger rail franchising in Britain, innovative franchise bid plans and commitments have brought about substantial increases in train service frequency throughout the network, not only on main line inter-city and intensive suburban commuter routes, but also on many provincial inter-urban and rural lines.
This has, in turn, driven unprecedented rail passenger volume growth in Britain that is the envy of many state-owned railways throughout Europe.
Jim Steer, Director, Steer Davies Gleave
How the railway functions runs deep. Despite the ownership revolution brought about by privatisation, much of what BR had developed through the creation of customer-facing business sectors and sub-sectors survived unscathed - indeed, it shaped the franchise map. Disparities in fares levels and ticket types, mostly created by BR and some of which can be traced back to before 1948 (the first nationalisation), were ossified.
Dr Ian Taylor makes much of complaints about fares complexity, operators following different approaches, poor information, and so on - complaints that centre on the problems of fragmentation.
But the risk he runs is believing that these are the creation and responsibility of unruly rival private sector operators, problems that he expects to vanish in a calm era of renewed public goodwill as the railway returns to its proper home, under Government control.
No! These are problems that are endemic to the operation of a complex network where the rigid application of uniform policies and the upheaval necessary to bring them about have not been faced by successive governments (or indeed by BR).
- More on this from Jim Steer can be read in RailReview Q4-2017.
Christian Wolmar, RAIL columnist
The hastily drawn-up privatisation of the railways in the mid-1990s was always flawed, not least because it was based on the idea of stimulating on-rail competition.
That Holy Grail was not only unachievable, because of the limitations of a technology dependent on trains running to timetable on a limited number of tracks, it also inevitably (as Ian Taylor shows) resulted in the fragmentation of an industry which traditionally had been run in an integrated way. Indeed, railways around the world throughout history, with very few exceptions, had been run by organisations which controlled both the infrastructure and the operations.
The impossible pursuit of competition led John Major’s government to break up the railways, to put in place an experimental system which had never been tried anywhere else in the world.
If one were to choose between which aspect of the structural changes of the 1990s was the most damaging to the smooth and economic running of the railway network, fragmentation would undoubtedly come top of the list. Oddly enough, Chris Grayling recognises that his ideological adherence to privatisation means he is unable to tackle the issue.
Tom Harris, Former Transport Minister
Dr Taylor’s analysis and study of the railways should provide his boss, Andy McDonald, with an impressive armoury of facts and figures with which to do battle with Chris Grayling across the despatch box. It will undoubtedly improve Labour’s understanding of how the network operates and the issues with which any government (current or future) must get to grips.
But where is the flipside? Dr Taylor is only too happy to recount the complaints of 2,600 respondents, but what about the industry’s successes?
Has Labour nothing to say about the year-on-year improvements in safety, making the UK system the safest in Europe for passengers and workers? Why is there no mention of record patronage? What has Dr Taylor to say about the many advances that have been made in joint working between Network Rail and the TOCs? No comment on the 2,000-plus new weekday services that have been introduced since privatisation?
No? A pity.
- More on this from Tom Harris can be read in RailReview Q4-2017.
Richard George, Group Managing Director, Rail and Transit Engineering, SNC-Lavalin
There is no evidence to me that organisations become “more efficient” in the public sector, nor (from experience of BRB) that fragmentation would automatically reduce if it were a unified state-run industry. The issue is about having ‘good managers’ with strategic vision and the right objectives, not driven by short-term financial results - regardless of ownership.
Coherent long-term funding, good strategic management, careful reconsideration of network benefits, joined-up management objectives - to that end a ‘guiding mind’ all sounds to me to be good for the railways, and I have a great deal of sympathy with Dr Taylor’s views.
But as to whether nationalisation is necessary to achieve that, I am not convinced. A whole load of ‘different’ disbenefits would resurface to be dealt with.
- More on this from Richard George can be read in RailReview Q4-2017.
Paul Plummer, Chief Executive, Rail Delivery Group
The rail industry welcomes debate over the future of our railway, and Dr Ian Taylor’s contribution to it.
Ian is correct to say that further devolution on Britain’s railway is inevitable, and he’s right to identify that the way in which devolution is managed presents further challenges.
Where we differ is that a changing and improving public and private partnership, working together with a single long-term plan, is the best model for Britain’s railway. It offers the best of both worlds. Rail has already been transformed radically over recent decades, and we should celebrate and build on this.
There is an alternative to nationalisation. Indeed, the industry is already evolving and adapting to new circumstances and the demands placed on our railway. The experiences of the past 20 years - both the positive and the less so - have taught us a great deal. We don’t need to look back into history through rose-tinted binoculars to feel positive about the railway.
We can be proud of what’s happening today and help the nation to be proud as well. And we will continue to learn together, to secure unprecedented improvements to it.
- More on this from Paul Plummer can be read in RailReview Q4-2017.
Nick Gallop, Managing Director, Intermodality Ltd
There’s a version of Ian’s railway panacea that lies between the bi-polar political extremes - I’ll call it the ‘John Lewis Railway’ where each of the stakeholders (including the unions) has a meaningful share in the responsibilities and rewards.
Reflecting on the ‘alliancing’ initiative that was all the rage for a while, I’d have the following three tiers, with very little overlap:
- A relatively small national co-ordination/regulatory/safety function, to provide and monitor the high-level outputs, enforce safety standards and safeguard longer-distance passenger and freight services.
- Regionally devolved management of services, using a mixture of service agreements which public or private (or even joint venture) organisations could bid to operate.
- Territorial management of infrastructure, allowing local delivery units to maintain the railway without unnecessary micro-management by HQ.
In other words, focus on the 20% of people who do 80% of the work, and give them all a share in a railway never knowingly undersold…
Barry Doe, RAIL Fares & Services Consultant
I always maintain that British Rail was far more efficient than the privatised railway, enjoying commercial freedom unknown today. Had it remained and received today’s level of government support it would be far more successful than today’s railway, and Ian Taylor’s paper is timely in laying out the future under a Labour administration.
It’s important everyone knows what is on offer well before a General Election, so that the knee-jerk reactions that will inevitably follow from those putting dogma before logic can be sensibly debated.
Doesn’t everyone want ‘a railway where ticketing is unified, simple and logical and where it does not feel like a lottery to get reasonably-priced tickets’?
Of course, we’re always told that’s on the way. But it never happens and never will while the government, rather than railway professionals, controls fares policy.
Should it happen, we have a golden opportunity to restore a single, vertically run national railway and bring an end to a failed 22-year experiment.
John Smith, Managing Director, GB Railfreight
It’s perhaps worth reflecting that whatever the rights and wrongs of privatisation, in the past 20 years there has been unprecedented investment (both public and private), unprecedented growth in passenger/freight numbers, and ultimately it has delivered the safest railway in Europe for both customers and employees. All this on an extremely constrained network that was made so by British Railways removing infrastructure due to Treasury control and constraints.
Regarding rail freight, at privatisation the industry was on its knees. Worn-out locomotives pulled ancient wagons in a decreasing market. What has taken place since has been transformational. Modern locomotives pulling efficient track-friendly wagons with people and equipment delivering double the productivity that they used to. GBRf alone has spent some £100 million on rolling stock in the past three years and employed a further 200 people.
Consequently, Dr Taylor needs to be very careful what he wishes for. Clearly some change is necessary, particularly in the franchising model, but diverting good railway managers away from the day job onto another politically driven whim will be disastrous. It will also put Government far closer to being held accountable for the wrongs of the network, something Dr Taylor will not be thanked for.
If Labour succeeds in an election, I fear the worst as political dogma will win out. Hopefully some pragmatism can be injected by those who know what they are talking about. British Railways sandwich anyone?
Ed Burkhardt, Founder & Chairman, Rail World Inc
Ian Taylor’s paper on Labour’s plan for Britain’s railway is a valuable addition to the debate about obtaining excellent rail service (both passenger and freight) at reasonable cost.
While no one can accuse me of being a closet Marxist (and I am not in favour of reinstating the ‘dead hand of government’), I find myself in complete agreement with his main thesis: that fragmentation of the railway is a bad idea. While he focuses on the costs of fragmentation to the passenger, my focus is on broader management issues.
When I first became interested in rail privatisation in the UK, I was surprised to find that a vertically separated model had been selected, whereas British Rail had been vertically integrated. This seemed to me a bad idea, as my experience in North America and New Zealand had been solely with successful integrated railways.
Unfortunately, my concerns have proved valid, and the disaggregated model has prevented managerial accountability for the total product being offered to the rail customer.
The result has been high costs (particularly at Network Rail), a sub-optimal infrastructure design and capability, and a broken chain of managerial responsibility for outcomes.
- About the author
Dr Ian Taylor is Rail Policy Adviser to Shadow Transport Secretary Andy McDonald, with responsibility to lead development of detailed policies to implement Labour Party plans for a fully integrated railway in public ownership. He is seconded to this role from specialist transport consultancy Transport for Quality of Life Ltd, of which he is co-director.
- This feature was published in RAIL 843, available digitally on Android and iPad.
- Visit www.railreview.com for Q4 where there is more analysis of the plans .