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The tide is turning at Network Rail

One of the privileges of spending a long time in a job like mine is that it gives a unique perspective of how your surroundings evolve over time. And so preparing for this interview, I counted the number of Railtrack/Network Rail chief executives I’ve known, reported on and interviewed since 1995.

It’s seven. That ought to be unsurprising, given that the ‘new’ privatisation era is now in its third decade, but it did rather raise an eyebrow, nonetheless. In order, those CEOs were: John Edmonds (ex-British Rail and Railtrack’s first CEO to chairman John Welsby, also ex-BR), 1990-1995; Gerald Corbett (1997-2000); Steve Marshall (2000-2002); John Armitt (2002-2007); Iain Coucher (2007-2010); David Higgins (2011-2013); and now Mark Carne, who slipped into the hot seat in January 2014.

The relationship between chairman and chief executive in any successfully managed company is enormously important - where it’s dysfunctional or materially non-existent, that organisation is going to end up in trouble.

This at least partly explains some of Railtrack/NR’s tribulations over the years. There have also been seven chairmen since 1995: Sir Robert Horton (1993-1999); Sir Phillip Beck (1999-2001); John Robinson (2001-2002); Sir Ian McAllister (2002-2009); Rick Haythornthwaite (2009-2012); Richard Parry-Jones (2012-2015); and finally Sir Peter Hendy CBE, parachuted in very rapidly from first soundings with the DfT to the formal announcement of his appointment in about a week, in July 2015. 

Before Hendy, none of those non-executive chairmen - how shall I put this? - either excelled or covered themselves in glory. Interestingly, while I rattled off the names and order of service of the CEOs without hesitation, I had to look up the chairmen. Some I had completely forgotten (hardly surprising, as I barely spoke to some of them). Indeed, one I neither met nor spoke to personally at all! With a wry smile, I wondered in passing if some of the CEOs might have said a similar thing?

That’s one of the things that makes Mark Carne different from every one of his predecessors. Unlike them, and from what I can see, Carne clearly does have a very close and highly effective relationship with his chairman. Hendy never fails to speak highly of his CEO. 

I know Hendy well from his days as Transport Commissioner for London, and I have seen him speak on countless occasions. Every single time I have seen Hendy speak at a lectern since joining NR in the summer of 2015, he has made a point of stressing how capable and effective Mark Carne is as CEO.

“I’m not NR’s CEO - it’s already got one of those in Mark Carne, and he’s a very good one too,” is a typical comment. The most recent such occasion was in print in an interview with John Collingridge for the Sunday Times (Business Section) on February 18. 

Hendy wouldn’t be drawn into repeating (let alone expanding) his inflammatory public comments of a year or three ago, when as TfL Transport Commissioner he described Southeastern’s commuter services as “shit awful”, and likened on-train revenue protection officers to the Gestapo. He could not resist repeating, however, that while most London black cab drivers “are fabulous”, he also believes that “a couple of hundred of them are real arseholes”.

Clearly Hendy doesn’t beat about the bush - he always ‘calls it as it is’. And while discussing the tectonic changes which NR has endured in the past three years, he said: “One of the reasons Mark is such a brilliant chief executive is he’s managed to embrace that change.”

Praise indeed. So, as I’ve got to know Carne well over those three years (and he’s an extremely likeable chap one-to-one), I thought it was time for us to sit down for a formal and honest on-the-record conversation.

As ever, Carne was affable, open, professional and highly polished. He’s been like that from Day 1, and as a former very senior global oil and gas executive, that’s precisely what I’d expect. But what lies beneath the professional gloss and impeccable grooming? 

NR is always ‘in the news’ in ways that doubtless create executive discomfort. Is he at ease ‘baring his soul’ to a specialist journal?

“Of course I am!” he replies cheerfully. “There’s a very strong story to tell about the railway and about Network Rail, and I’m always really happy to tell that.”

You’ve been here three years now. Former Labour Prime Minister Harold Wilson said a week was a long time in politics…

“A lifetime on the railway!”

Does it seem like three years - or much longer?!

“Let’s face it, it has been a very, very challenging three years,” he says. “I don’t think anyone anticipated the reclassification of the debt at the time. Nor did they appreciate the extent that it would change the whole relationship with NR and Government, and how it all works. The change in funding arrangements has had such a profound effect on NR and the industry.”

He’s right that at the time Secretary of State for Transport (now Sir) Patrick McLoughlin said that reclassification was a procedural move, and that it would largely be “business as usual”. But there was certainly great apprehension - very rapidly borne out - about the effect that reclassification of its ballooning debt would have on NR. We’ll come back to that.

It very rapidly stopped being the job you’d actually been appointed to, didn’t it? As a successful oil and gas executive, you were suddenly head of an effectively nationalised industry. Why did you decide to carry on, once it wasn’t what you’d been recruited for?

“I never thought about walking away,” he replies without any hesitation. “The reasons I wanted to do this job are the same today as they were then. I profoundly believe that there is an opportunity in Britain’s railways to improve the railway’s performance. 

“To play a part in that is very exciting, because Britain’s railways really matter. This is not like running a business where if you manufacture something well you make a little bit more money for shareholders. What we and the train operating companies do really matters.

“It impacts people’s lives. And if you’re an engineer, as I am, and you’re driven to want to do something that makes a difference, then this has to be the best job in the country. I genuinely do not believe that there is another job that even comes close to this one.”

There’s no lack of commitment or enthusiasm there. Does he now see himself as part of Government?

“Yes - yes I do. We are part of Government, so there’s no point in trying to pretend we’re not.”

Does that run against a grain with you, given your extensive - and pretty high-octane - private sector experience? 

He reflects for a moment.

“Well… yes and… no!” he says with a smile. “I used to run the North Sea for Shell under 40-year licences. They are essentially four-decade monopolies. You don’t work among other companies who are trying to produce better performance out of that asset, which you might experience if you were running, say, a car plant. But you still have to inspire and motivate those people working on that platform to do a better job every single day, and that’s the thrill of leadership in those situations. It’s exactly the same sort of thrill in this job - to try to inspire NR people to outperform every day.”

So does the Treasury act as a proxy for the shareholder for you? Do you still feel that sense of hot breath on the back of your neck?

“Yes - the Treasury and DfT are the shareholder and I have to treat them and behave with them in the same way - because they also have choices about where to spend their money. 

“In my case, we work with the DfT and Treasury to convince them to invest in the railway, rather than in other things like roads or hospitals or police, defence or whatever. We have to give them confidence that railways are the right place to invest and that we will spend the money wisely, at a good rate of return. So we are a business with all the same drivers as a normal business, even though we are part of Government. That’s why I stress continually that even though we are a public sector body we absolutely MUST behave like a private business.”

Nevertheless, Carne is keen to stress the unique nature of the railway and the instant pressures it brings to bear. 

“There are similarities with oil and gas in that both industries are safety-critical and always operationally intense. There are massive ‘moments’ because the railway is both politically sensitive and economically vital. The difference is that molecules of oil and gas don’t complain if they are late on arrival to a terminal, whereas passengers quite rightly do complain - loudly. And so the intensely operational intensity of the railway is of a completely different magnitude to oil and gas. That’s totally different from anything I’d ever experienced before.”

In the mid-1990s, Stagecoach top man Brian Souter had a similar shock when he took over South West Trains, where vociferous complaints were instant when it all went wrong. Bus passengers don’t complain in anything like the same way. Yes, railways are different.

Carne had an early, painful baptism of fire with intensely critical media focus and passenger complaints over Christmas 2014, when engineering work at both King’s Cross and Paddington ran horribly late. There was chaos at Finsbury Park, operational meltdown, and thousands of angry passengers inconvenienced. Carne was at home in Cornwall, and at first remained there before driving back to London rather than taking the train. The media was merciless. 

The ineptly planned and launched Great Western electrification programme followed, which ultimately derailed other major wiring projects around the country - principally on the Midland Main Line and in the North West. The Government suspended the wider OLE programme and Hendy was parachuted in to replace the near-invisible Richard Parry-Jones. The reputation of the railway as a whole, and NR in particular as steward of our rail infrastructure, hit a new low. ‘Discuss’ - as all the best A-level exam papers used to say…!

Carne takes a deep breath. “I agree with the National Audit Office report,” he says with commendable honesty. “The Great Western electrification project is an almost text book example of how not to initiate a major programme. I absolutely agree with that - I said it at the Public Accounts Committee last year, and I’ll say it again this year.”

We all know the DfT hasn’t helped by changing its mind, ordering the trains before planning the infrastructure they’d run on… but we are where we are, in that respect.

“We are where we are, but let’s also recognise that while last year was really bad, we rebalanced the portfolio. We still have £15.7 billion to spend, and we are actually pretty much on target to deliver that. We are going to hit all of the major milestones this year. 

“We’ve had hugely successful major programmes that have worked - the Severn Tunnel, Patchway Tunnel, every Bank Holiday has successfully delivered extraordinary work in the last two years. Yes, there have been blips, but this is actually an organisation which is delivering - I would say delivering brilliantly - on a huge portfolio of projects. We are investing £100 million every week improving Britain’s railways, and that’s something to be proud of.” 

Yes it is, but it has to be spent properly, doesn’t it? And that demands world-class scoping. Does Carne accept that there has been poor scoping, poor costing and poorly initiated projects? If so, has he now ‘got a grip’ on that? And if he has, then how long before the backlog of poorly scoped, costed and implemented projects are flushed through the system to be replaced by best practice and rapidly improving efficiency?

To his credit, he takes this on the nose. “Well you’re exactly right. Those will have to work out through the system…”

So how long before all we see are properly specified projects, being implemented to world’s best standards?

The answer is much more careful… guarded: “Well, we are not going to put any projects into CP6 that haven’t been properly scoped. We are not going to agree and approve major projects with funders until we know what it’s going to cost and how long it’s going to take. That was a commitment that we made last year and that’s exactly how we are working today. 

“But yes, you’re right, we do have a whole series of programmes where problems are still going to emerge, because of the way they were born. Unfortunately, that’s going to continue…”

For how long?

“Well until, bluntly...”

Two years? Five years?

“Well until these projects are completed we will still have some of those issues.”

Presumably there must be a forecast…? Can you share it? I fear I will not get a completely clear and unequivocal answer. He dives into the specifics of NR’s biggest embarrassment.

“Look at Great Western. I think we’ve got a very good grip on it now, but it’s not free of risk because it still has a lot of the features of a project born in the way that it was. You can’t change horses midstream. I wouldn’t have set it up in this way if we were to do it all again - but I can’t change it midstream, so you just make the best of what you’ve got… put your best people on it and do what you can to deliver… and that’s what they’re doing.” 

What about the alleged High Output Plant System train for installing lineside catenary masts at the rate of around 24 a night, but which has been doing maybe seven or eight? Clearly it was unsuitable for the role, otherwise it would be working perfectly? Was that part of the poorly-specified past that needs to be worked out of the system?

“Yes, it absolutely was,” he replies evenly, although he can’t be enjoying this much. “There are two aspects - firstly we bought a piece of equipment for a project which had been approved and agreed, with assumptions made about achievable delivery. All this was completely untested and had never been done before, so huge assumptions were made that we then tried to play out. But we found we just couldn’t deliver, for lots of reasons.”

Again, full marks for not wriggling. So is Carne saying that we won’t see that again - these assumptions will all be properly stress-tested and fully scoped on all projects in future?

“Absolutely.” 

So by the time we see a project to remodel the King’s Cross station throat, for example, it will have been looked at from every possible angle? 

“Exactly that,” he replies with great emphasis and clarity. “Let me give you a really good example - the trans-Pennine upgrade. When that was unpaused last year we undertook to come back at the end of 2017 with a proper design to deliver the required outputs. That’s what we will deliver. I don’t yet know what it’s going to cost and I don’t know when it’s going to be finished - because I haven’t done the work yet.”

But wasn’t the GRIP investment approval process supposed to avoid all these issues? Was NR just not going by its own procedures? Was it just being widely optimistic - or were the people not competent…?” 

That stirs him. “No. No!” he counters. “This is not about competence. The system worked by listing projects together with an estimate of costs, accompanied by a regulatory process featuring an enhancement cost-adjust mechanism which allowed NR to borrow more money if it ended up costing more. That was planned. So everybody acknowledged - and clearly knew up front - that cost estimates really were approximate and that it might cost more. And the regulator even built a system to allow this.”

If I was to ‘simplify and exaggerate’ what Carne is saying, it is that scoping was rudimentary, costs were of the ‘finger in the air’ variety, and that as costs increased as the job progressed, NR could simply borrow more on its credit card to meet rising prices, and ‘move the job to the right’ on the spreadsheet to deliver it later than planned. 

All this was, in fact, forecast by previous CEO David Higgins, and he warned of precisely this outcome in a letter during his tenure. Reclassification aggressively ‘pulled the rug’ on this arrangement - the Treasury immediately put a stop to credit card borrowing on the one hand, while on the other NR came under increasing pressure for the late delivery that was an inevitable outcome of the previous regulatory regime. And it all happened with a whole load of work ‘planned’ in this way already stored in the pipeline. He doesn’t take issue with my summary. 

“The point is, the industry - and by that I mean not just Network Rail, but the industry - didn’t behave and act like a normal company with normal capital discipline and constraints. That’s the crucial, fundamental point. And that’s why - and I’ve said this before and I’ll keep saying it, even though some people are surprised - I actually welcome NR’s reclassification in many respects. It has forced NR to actually start behaving like a normal company, with proper capital discipline.” 

Rather than planning it poorly, borrowing more and keep ‘moving timings to the right’ more and more? 

“Yes. I’ve spent my whole life delivering projects all over the world, and I can promise you I have never worked in an industry that approved projects on the back of an envelope like the railway did.” 

But the GRIP process was supposed to be anything but the back of an envelope, wasn’t it? So, was GRIP just not being observed, or…?

“No - GRIP is being observed, Nigel.”

I’m talking about previously.

“No - GRIP was being observed then, too.”

Excuse me? It was either back of an envelope or GRIP - it surely can’t have been both? Carne concedes the point.

“Well, GRIP wasn’t observed in the case of Great Western, you’re right. The project was initiated and approved at essentially GRIP 1 - the trains were bought at GRIP 1.”

That powerfully illustrates his point that NR is not alone in creating the problems that overtook it. The Government ordered trains right at the start of the assessment and approval process, rather than at a more appropriate later date. NR can hardly be blamed for the DfT getting the cart and horse in the wrong order.

“The NAO report is very clear that the commitment to the decision to do that project was given at a very early stage, before any design had been properly done and before… …that’s what we have to change,” he concludes. 

While he’s careful (and absolutely right) to contextualise them, I admire how he doesn’t seek to evade or excuse NR’s failings. Has he never gone home at night, poured a scotch and thought: “This isn’t all my, or our, doing by any means - and I’m getting my arse kicked for it!”?

He smiles: “To be honest, it is SO frustrating to get beaten by the same stick all the time, when actually what we’ve done over the last two years is try to sort out the problems, which I honestly believe we’re doing.

“We’ve put in place an organisation which is not only capable of delivering, but IS delivering. As you quite rightly say, there will still be issues that will come through because those older poorly-scoped projects still have to be delivered, and throughout the rest of this Control Period we will still have issues. But going forward we are on a very different footing, and if you look at the performance of the company today actually we are delivering some amazing stuff.”

And yet… the prevailing winds in the media remain cold. The GW upgrade, even in Hendy’s own words in the Sunday Times interview, remains “a nightmare”, while in Scotland Transport Minister Humza Yousaf is demanding full NR devolution north of the border. 

The Scots are particularly irked by what they see as £100m of general costs being exported to Milton Keynes, and they want it back - with full control. Carne counters that the majority of this is fixed costs which would simply be invoiced in Edinburgh rather than London, so this is an argument that has some way to go.

He is adamant that devolution is not only working already, it is gaining momentum and starting to deliver, and that the rest of us will notice this soon. Hendy, by the way, raised the same point with me in a phone call, while I was writing this interview.

“It’s like standing on a beach waiting for the tide to turn,” he explained. “For ages you can’t tell whether it’s going out or starting to come in - you only see gradual progress.”

Back to Carne. I tell him that whatever he says about devolution working, what I’ve been picking up in the routes until recently is that there’s still too much centralisation and too much control by the company’s controversial Infrastructure Projects (IP) division. On the day that Hendy was appointed, in 2015, Carne told me himself that the polarity of the relationship between IP and the Route Managing Directors was to be reversed, and that the RMDs would become clients and IP a supplier. Until recently, all I could detect in the routes was various versions of “yeah, right…”

Carne isn’t happy with this at all. 

“Firstly, I absolutely am in a place where IP is a provider of services to the Routes - it is the project delivery organisation that the routes depend on to deliver their projects. But it doesn’t have to be the only way in which projects have to be delivered.”  

You said at RAIL’s National Rail Conference last year that you would open projects up to the private sector if they didn’t compete - and your contestability review reinforced that view. Is this for real, or is it window dressing?

“It is absolutely real! If somebody else thinks they deliver infrastructure better than we can, I am more than happy to let them do it. If people think they can build platforms and stations that are better and cheaper, let them do it. That’s a very important point.” 

Is Carne happy with IP’s relationship with the routes? The answer is thoughtful, and if not evasive then careful. 

“I would say that I am very happy with the structure we’ve put in place.” 

That’s not exactly a ‘yes.’

“I would say that is the right structure. If you want to spend £100m on investments every week you need a really world-class, professional organisation to do that well, so that’s what IP is about. I fundamentally believe in that model. 

“However, I also believe that the ‘docking point’ with the routes needs to be strengthened. I think that we need a stronger sponsorship organisation within the routes that is capable of holding IP to account to deliver, but also to understand, what our customers really want and make sure that what we deliver actually meets those needs. That is something to be identified in our transformation plan that we need to work on - and we are working on it.”

That sounds like he believes the structure is right, but that it’s not working as he wants it to yet. Also, there is a view in the industry that a lingering legacy of the previous regulatory regime, which allowed ‘credit card’ borrowing and endless ‘moving to the right’, resulted in engineering becoming disconnected from its purpose in delivering a railway for customers. Also, that there was no effective challenge within the industry to those rising costs.

“I wouldn’t really agree with that - no,” he replies. “We have project delivery teams in IP and we have within IP levels of assurance, functional assurance and challenge. We now make sure we have standard cost estimating norms that we use across the industry, so people can’t just develop their own costs locally. We DO have challenge processes.”

But then he hints once again at the need for the routes to be gutsier in taking the control he’s offering them. 

“The sponsorship role within the routes will be a mechanism for which a stronger challenge can be brought. Market competiveness in that is a very healthy discipline as well - so yes, we DO want to see other people come forward and want to build stuff on our railway. 

“At the same time, we must remember our parallel system operator responsibility, so we have to manage the overall way in which trains and timetables operate across the network. We must also maintain consistent and safe technical standards across the network. But I am determined to allow others to come in and innovate and do things differently if they wish to.”

One criticism I pick up on is a view that IP doesn’t have the true private sector culture that Carne says he wants - they don’t behave like their jobs depend on their performance because they are way back from the front line and don’t feel the heat. Also, that there is a tendency to ‘lump in’ other modernisations within a specific project, and that this drives costs up. IS he inviting the RMDs to challenge all this?

“Those things are a quite common cause of cost escalation, because if you’re…”

But is anybody properly and effectively challenging it?

“Yes, we do need to challenge costs - but if you’re going to have a large piece of infrastructure shut down and lots of possessions for an enhancement, it does make sense to see what other jobs might need to be done at the same time.”

True - but should NR be paying for those extra jobs it wants doing, rather than hanging the cost around the neck of an enhancements project which it never envisaged and may not need those extra aspects? 

“I certainly agree that if there is renewal activity that we are wanting to do alongside a specific project, I would not expect the investor to pay for that renewal activity. Absolutely not.”

But this cost-creep is why third-party people say they can’t make the necessary challenge, because that is what happens. They find themselves asked to pay for level crossings or signalling that was never part of their job.

“I think in a way we are sort-of violently agreeing!” he replies. “Part of the problem I have with IP is that I cannot demonstrate to you how efficient it is because there aren’t comparators to benchmark against. So it’s really hard - it’s very easy for people to say you’re too expensive, you’re too slow, because we can’t compare. Hence my desire for contestability.”

He continues: “I’m not reluctant about this - I’m really passionate about it! I WANT it to happen because I passionately believe that if we do not find ways of bringing other investment into the railway, other ways of delivering improvement projects, I fear we won’t be able to deliver the improvements that the network desperately needs.”

All this comes together when Carne talks about his passionate belief in digital signalling for the network as a major contribution towards solving the closely-related congestion, capacity and performance issues bedevilling the industry.

“The Digital Railway programme is about to take off, and in the next Control Period we’re going to see many more digital trains, plus digital control and traffic management. We absolutely desperately need this because our railway is, in many places, chock-a-block. The Chancellor’s announcement of £450m in the Autumn Statement to accelerate the digital programme is hugely exciting, and we should be celebrating that. 

“I am really excited about this, but we need to be aware that this is NOT a programme for NR alone. This is an industry change programme, and I don’t believe that NR is the right company to provide all the investment. I want other companies to invest in Digital Railway and I want them to earn a return based on the investment they are prepared to make. So this is where we need to bring different sources of financing and funding to the railway.”

Carne makes an interesting point. In the early days, from an operational point of view trains and track were entirely separate - the driver moved his train according to fixed signals. That started to change after the Grouping, when the Great Western rapidly expanded its rudimentary but very effective Automatic Train Control system, when signalling equipment was carried on trains for the first time on main lines. The British Railways Automatic Warning System extended this, leading to Train Protection Warning System and ultimately Automatic Train Protection.

“Much of the equipment is increasingly on the trains, not the track, and the brains behind that technology exists in the private sector,” says Carne.

“Our whole philosophy for Digital Railway is not to specify how we achieve an increase in capacity, our philosophy is to ask those experts how we should increase the capacity? 

“Let them bring their ideas, their technology, and if they believe they can achieve that level of performance improvement, they can put their money where their mouth is. We’ll then give a return based on results - the outcome. They will manage the risk associated with the deployment of their technology. 

“I’m not asking them to take risk on existing infrastructure, tunnels, bridges, track - we’ll do that because these companies can’t manage that risk. But they can manage the risk associated with their own technology. They are far better able to do that than we are. 

“So that’s what we’re looking at. I’m using the £450m from the Treasury as the starting gun on this journey. This is not a debate anymore - it’s going to happen, so let’s get on with it.”

Now there’s a train of thought which is shot through with as much controversy as clarity. RAIL columnist Christian Wolmar is a passionate opponent of precisely this sort of outsourcing, and it’s difficult - certainly from a traditionalist standpoint - to argue with the view that a railway should be expert about its own signalling. Doubtless Carne would counter that our Air Traffic Control organisation does not manufacture its own digital control equipment, and that in the modern age the railway should follow a similar path. There are other clear benefits, he believes.

“There is also the ability not just to radically improve capacity, but also to improve reliability,” he argues. “How many times do we hear about signal failures causing disruption? Digital technology will improve reliability significantly. We’ll improve safety dramatically, too.”

He’s really hitting his stride now, and he ploughs on. 

“Around 80% of all SPADS are caused by drivers not seeing a signal. But when signalling is in the cab and is computerised, you won’t have that problem. We will therefore improve train safety and track worker safety alike, because I will need fewer people out on the tracks fixing things. 

“In the long term, it will be far, far more cost-efficient. You have to invest upfront, but it will be a lower-cost railway because you’re not stopping and starting trains all the time. As they will also be modulating their speed to boost capacity and keep traffic moving, you will also burn less fuel. Digital control will be safer, more environmentally friendly, more reliable, with lower costs and higher capacity. 

“We now have an industry team that’s really working this. It’s going to be the ‘Red Thread’ that’s runs through our next Control Period - and that’s right because it’s not just an NR change, it’s an industry change.”

In order to deliver NR’s end of that change, Carne needs the very best people as RMDs. Does he have them, or is further potentially painful change afoot? We have already seen ScotRail RMD Phil Verster leave an especially sensitive and difficult job to be MD of the exciting new East West Rail project. Former Northern MD Alex Hynes is about to slip into the hot seat there, where he effectively has three bosses - Abellio’s Dominic Booth, Carne himself and Scottish Transport Minister Humza Yousaf. Are we likely to see further changes?

“When you have a great team it makes such a difference, and there’s no doubt that the Route Managing Directors I have now are the RMDs that I want,” he says. I can almost hear the sighs of relief from around the country.

“They are the kind of business leaders that I want because the routes need to be run like a business - absolutely, relentlessly focused on customers, to deliver outstanding service.”

In his next comment, he seamlessly (and interestingly, without prompting) tackles another persistent criticism of NR… that devolution is an illusion with far too much central control.

“It’s vitally important that the routes grow the muscles needed to run real customer-focused businesses. But what I’m really excited about is the combination of the routes operating within a really clearly defined national framework, where we all understand exactly what is a central function and what’s devolved. 

“The fundamental philosophy is that we devolve as much as we can. You devolve decision-making as close to your customers as you can. But, of course, there are things that you need to do centrally across the network.” 

I remember the last CEO-but-one Iain Coucher said something very similar, but it just didn’t happen - partly (it was implied) because there wasn’t the right quality of people to devolve to. When I asked in the past why it still wasn’t happening, Carne’s view was because the RMDs were not seizing the opportunity. What has changed to make it happen now?

“The organisational changes we initiated in 2014 were really fundamental changes, and they have taken two years to properly filter through. Also, our original devolution was about devolution of operational control. That’s only one element of devolution - I’m now talking about devolution of business management.

“I want complete business management to be commercial - I want the routes to raise finance and be cost-competitive. I want them to be relentlessly efficient, focused utterly on customers. The other thing that has really changed is the transparency around our performance and setting targets for our performance, based on customers.

“That was a really profound change last year, when we asked our customers to set our targets. This year we are taking it to the next step, with even more of our scorecards focused on aligned incentives.

“There is also a new supervisory board for Great Western, which I am very excited about. Dick Fearn - do you know Dick Fearn?”

Very well - and for many years. A very successful career railwayman for BR… former Railtrack Zone Director… ran Ireland’s integrated railway for a decade. He’s now a National Rail Awards Judge and is even Chairman of the Bluebell Railway.

“Dick is going to chair this new supervisory board for the Great Western Railway. As you say, he’s really experienced, and he’s going to be holding GWR Managing Director Mark Hopwood and our RMD Mark Langman to account to deliver for passengers. That supervisory board will have Transport Focus on it as well. So we are pulling track and train together.” (See Network News, page 21).

So are you ‘getting in first’ and implementing the plan that Secretary of State for Transport Chris Grayling announced before Christmas? Regional joint boards with someone in charge?

“Absolutely everything that the Secretary of State has said he wants we are already doing, in a way. We are already bringing track and train together, although that said, you still have to recognise that there are elements of running the track that are different to anything a TOC does and vice-versa. So you’re never going to achieve perfect alignment, but this is a huge and very exciting step forward.”

Carne is keen to get across that this new-look NR is not hidebound by blinkered thinking, and nor is it seeking to impose a one-size-fits-all solution across the country. He says NR will be flexible to individual train operator needs and requirements, although he does have concerns about TOCs moving at different speeds towards this more integrated approach - he is anxious that progress should not be hampered by a gulf opening up as a result of rapid evolution that leaves some operators behind. What does he see as the problems? Are they cultural or managerial within the operators and their owners?

“It’s sometimes culture, but it can also be management capability, the length of the franchise remaining and lots of other factors. The exciting thing about our model and the way we are working is that it is not one size fits all.

“I’m not requiring TOCs to work with me in a particular way - actually it’s the other way around. I have a model which is flexible to meet the needs of TOCs. If they want a deeper alliance, like Abellio in Scotland, we’ll do that. If they want a supervisory board alliance like in Great Western, we’ll do that too. We can flex the model depending on what the customer wants, but its beauty is that you can flex while still keeping the national framework absolutely consistent.”

Is Carne succeeding in communicating an understanding within NR on what should be done nationally and what should be done more regionally - because there has been a strong, if muted, view that NR’s centre is still too big and is holding onto too much? 

For the first time, I sense if not irritation, then certainly impatience. There’s also a strong echo of Hendy’s frequent public scorning of “grey-haired old railway blokes living in the past, wanting things to remain unchanged”.

“That is rubbish!” he says with considerable passion. “Honestly it is! The people who say that are living in the past… this railway is full of people who remember what it was like and still think it should be like that - and they talk a lot of rubbish! They should come and look at the way NR is organised today, how we set it up, and people will be astonished at the amount of change that we have actually driven in a very short period of time.”

His strength of belief in a flexibility of approach is interesting, and once again very much in contrast to his predecessors. Again I recall previous NR CEO Iain Coucher’s insistence on consistency of approach. “There cannot be five best ways of doing something,” he told me on more than one occasion. This is certainly a very different NR, and it will be intriguing to watch. 

Carne returns to the subject of flexibility to emphasise his point: “Take CrossCountry. There’s a really interesting example of how aligning incentives really works in practice. When we started out on the scorecard discussion, I asked CrossCountry MD Andy Cooper what was important to him and whether he was happy with 92% PPM.

“He said: ‘That’s not what I want from you. If one of my trains arrives in Birmingham New Street nine minutes late, you count it as a success because it’s within the PPM measure, but I count it as a failure because all my passengers have missed their connection.’ 

“So the most important metric for Andy is right-time arrival at Birmingham New Street, because it’s the hub for his entire network. So RMD Martin Frobisher now has right-time running as one of his performance metrics on his scorecard. This changes behaviour.”

I ask Carne that if this is so important, why wasn’t it all done earlier?

“Yes, I do think that this should have been done earlier - but I wouldn’t criticise any of my predecessors. I think the circumstances that CEOs such as Iain Coucher found himself in were very different to those that we are in today. Iain had to pull a pretty dysfunctional organisation together.”

How far can Carne make changes without help from the DfT and ORR? Will he be seeking changes to the regulatory regime and franchise system?

“Yes, I think we will need the franchising system to change - and so yes, the role of the DfT also needs to change in terms of its thinking about the system as a whole. One of the things I find really encouraging at the moment is that the DfT really recognises the importance of the system operator and saying to us: ‘Before we sign up for this franchise is it going to work?’ And that’s a really important question.”

So what are his absolute priorities right now?

“The first priority is always safety, through planning and delivering safe work. We know that if we change the way in which we plan and execute work on our railway, then we can significantly improve safety and that we can significantly improve efficiency.

“We’ve shown that implementing this process will lead to halving the number of cancelled possessions, and so we will become much more efficient while halving the number of people who are injured at work. 

“In terms of the number of asset failures, the railway is the most reliable it’s ever been. However, it’s not the most reliable as passengers experience it - in fact, for the past seven or eight years it’s been declining because the delay that each incident causes is going up and up. 

“We need to work together with the TOCs to better manage delays for each incident, so that we actually get that to come down and improve our performance.”

He is adamant that this can only happen through faster and more effective devolution, and is passionate that he can now see things changing for the better after three torrid years of fundamental change.

“This is where the new model really comes to life. What I find really exciting this year is that the quality of the conversations our RMDs are having with their TOCs is light years ahead of where they were last year. The RMDs are now really owning their businesses in a very different kind of way, and that’s very exciting. We are really on the verge of doing something important.

“I absolutely believe that the structure we have in place today is the right one, with the devolved taking 99% of all of the decisions that need to be taken. Around 98% of all procurement decisions are taken within the routes, so please believe it - devolution has happened. 

“Now we have to really see the benefits of that, by seeing the routes actually deliver that improved performance and lower-cost operation. We really do believe that decision making locally, working closely with customers, will give better outcomes. We have given the RMDs the power now to take those decisions - and they have to get on with them and deliver the benefits.”

Do you see NR’s centre getting smaller?

“Yes, the centre will get smaller, absolutely.”

This was an intriguing meeting and a genuinely fascinating conversation. I’ve been heavily critical of NR in the past, and will continue to be so where I see the need - that’s the role of RAIL. This magazine is the railway’s best friend, and the hardest thing a best friend has to do is deliver home truths. We will never shirk that responsibility - true friendship demands that honesty.

It also demands that where you see good things, we should do likewise. And while there’s a long way to go, I honestly did see something different, positive and rather exciting in Mark Carne. I have got to know him reasonably well over the past three years, but there was honestly something different about him this time. 

He was more energised, optimistic and informed than I’ve seen him before. He was genuinely excited - and that’s infectious. And not only to me - my curiosity about this flushed out a comment which might just pave the way for the leap forward that the railway has needed and wanted for a long time.

I wanted to get a measure of whether what Carne had told me was real and not window dressing? We’re judged not by what we say, but what we do - that’s the acid test. So without saying why, I called one of his RMDs and during the conversation I gently probed how things were going within NR. 

I can’t say which one, and nor would anyone expect me to! What’s important is the answer, which both surprised and intrigued me as it was not what I was expecting. In the past I had picked up frustration with devolution and no real change in being able to really carpe diem and make things happen locally, free of the centre’s influence. But this time…

“Actually Nigel, things are really very good. Progress last year was slow, but this year it’s really picked up a gear. Carne is really driving change through now, and we can feel it. We can honestly make a difference.”

And what about all that frustration with IP - has that gone away? Has IP changed how it works?”

“No, it hasn’t,” came the reply. “IP is the same as ever. The difference is that Mark Carne is now giving RMDs the firm platform we really need to take control from the centre to the routes - and it is really exciting. We can really do things differently.”

And that’s where I shall leave it. We are all on the beach, with Hendy, gazing out to sea and waiting for that confirmation that the tide has indeed turned. Only time will tell, and RAIL will be keeping its finger on the pulse.

As I walked away from the detailed and very open conversation with Mark Carne that formed the basis of this interview, I suddenly realised that after 20 years of privatisation, what I’d finally seen a glimpse of was something that the railway has craved… the fragile flower of leadership.

I hope the NR RMDs all seize the opportunity that at least one of their number recognizes, and that the elusive tide of change will be lapping round our feet soon.

We watch and wait.

This feature was published in RAIL 821 on 25 February 2017

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