Comment: Do Labour's first few months signal a fresh start for rail?

Rail Review Editorial Board Chairman Sir Michael Holden assesses Labour's new track record in rail.

In this article:

• Labour's new government has quickly shown competence and a clear intent to tackle railway issues.
• The appointments of Louise Haigh and Lord Hendy are important, offering the potential for impactful policy despite internal challenges.
• Challenges include the risks of renationalisation plans and financial constraints, which could impede long-term rail improvements.

Sir Keir Starmer lost no time after winning the General Election on July 4.

The speed with which ministerial positions were filled, and the King’s Speech finalised, showed just how much preparatory work had been done during the run-up to the election. No doubt his omnipresent Chief of Staff, Sue Gray, had her fingerprints all over this.

It enabled the new government to hit the ground running and to achieve some early momentum before the first crisis arrived, in the shape of far-right rioting.

Even these were tailor-made for him, given his background as Director of Public Prosecutions last time there were riots in 2011. He has passed all his early tests with flying colours.

Surely even the most hardened left or right winger must have been impressed by the early competence demonstrated by the new administration.

It has made a refreshing change from the previous years, where incompetence, muddling, internal strife, dithering and delay have been the hallmarks. I’m sure I wasn’t the only railway person thinking how refreshing it was to feel that the grown-ups were now in charge.

Giving the transport portfolio to the person who had shadowed it through the past three years of opposition was an excellent decision. She also has wider experience of shadowing different Departments, with no fewer than four other shadow Ministerial roles in the years from 2015 to 2021.

In Louise Haigh, we have a politician who has a clear understanding of what she wants to do with transport, as well as a solid standing in the Labour hierarchy, so she can hit the ground running.

I didn’t see the appointment of Lord Hendy as Rail Minister coming. But in my opinion, this was a master stroke. It has catapulted into the heart of government someone who combines immense surface transport experience and credentials with huge political sensitivity.

I imagine it might have caused murmurs of unrest among senior staff at the Department for Transport (DfT), as the somewhat independently minded Network Rail had become its favourite bogey organisation for the ills of the industry.

Hendy may well experience some frustration in his new job, as he will be hemmed in by policy and financial restrictions imposed from above and beyond the DfT.

He will also be extremely circumscribed by what he is allowed to say in public, something he has not been used to. But I reckon he will be a powerful force behind the scenes, influencing Haigh both on policy development and on tactics to achieve the objective.

The second very positive sign was the appointment of Lilian Greenwood as Minister for the Future of Roads. Greenwood has extensive experience of the transport portfolio while in opposition, both as a Shadow Minister and Shadow Secretary of State, as well as chair of the Transport Select Committee.

I have always found her to be an industrious and capable politician, so it is especially pleasing that we have a second minister in support of the new Secretary of State who knows what she is talking about, and who will be prepared to argue passionately behind the scenes for the best way forward to be adopted.

The first decisions on transport have represented a seismic shift from what went before. The King’s Speech contained no fewer than four bills directly related to transport, of which three are all about railways.

This is unprecedented in the modern era. During the last government’s tenure, we were repeatedly told that there was insufficient legislative capacity to do anything on railways.

Of course, we all knew this was baloney, and more to do with a lack of agreement within the government of the day as to what exactly should be done.

But that does not stop it being a very refreshing change to see a government coming to power with such a clear signal of intent to address the railway industry’s issues.

There may be trouble ahead

So far so good. However, if we take a ‘peak under the bonnet’ of the new government’s aims and objectives for our railway, we can foresee some significant problems coming down the line.

Haigh has made much of her intention to “move fast and fix things”. This is a noble objective, but my experience suggests that taking some time to test out the pitch she developed during opposition, and successfully managed to get included in the Labour manifesto, would be a good thing.

These first few months are where the pure ideology of opposition meets the messy complexities of government. My guess is that this is not going to be pretty.

There are some early tests - and the first one is the long-running dispute with ASLEF train drivers.

It was good that Haigh called in the General Secretaries of the railway trade unions on her first day in office. This sent out a clear signal of intent and exposed a very clear difference of approach from the previous administration.

But the subsequent move, which has led to a centrally negotiated offer to settle the disputes, and which ASLEF has recommended to its members, shows a more worrying tack.

There are two problems here. Firstly, by resolving the drivers’ dispute directly itself, and at national level for English franchises, the government has created a rod for its own back.

It flies against the intent to get government out of the weeds of railway administration, and emasculates the very teams it needs to drive its future policy forward.

Secondly, by offering a no-strings straight percentage deal to cover the past three years, it has wasted a golden opportunity to perform some modernisation of employment conditions across the franchises.

While I understand the need to make a fresh start and to clear away the baggage inherited from the previous administration, I don’t think that it was sensible to offer a no-strings deal at this stage.

Given the amount of grief that the industry has taken over the past two years, and the amount that the drivers themselves have lost already, I would have pushed hard for pay and productivity deals to be negotiated on a train operator by train operator basis.

That way, the drivers can get a great retrospective pay rise, while also modernising terms and conditions that are in many cases no longer fit for purpose, and which restrict flexible deployment.

As part of this, we should be pushing for fully flexible, seven-day-a-week rostering to become universal, with a funded transition plan to get from here to a stage at which the additional drivers required to enable this have been both recruited and trained.

To hand out large back pay increases without securing these essential steps towards modernisation and productivity risks leaving the government in an even worse place than its predecessor manoeuvred itself into.

So, government should have established a framework with the key required outcomes, put budgets in place to pay for them, but then stepped back a pace and let the industry make the deals happen on a case-by-case basis.

This would have been desirable because of the wide variety of pre-existing terms and conditions packages and salary levels there are in place today.

It wouldn’t have been easy, and it would have taken time and some heartache, but it would be worth it in the long term.

ASLEF has achieved a notable success in the resolution of these disputes in its favour, but the new government has set back the process of workforce modernisation by several years.

“Renationalisation”

Much has been written on this subject, and the direction of travel is now clear at last. But I sense a degree of political naivety as to what the end of franchises will achieve.

With the exception of rolling stock, freight and open access, the key controlling levers on the railway are either already nationalised (Network Rail and the Rail Regulator) or are under effective government control (train companies).

Some English train operating companies (TOCs) are under direct control today through the existing Operator of Last Resort (OLR) arrangement, while others are on tightly controlled DfT contracts which define both costs and outputs.

As you look around England today, you would be hard pressed to tell them apart if you did not know which is which.

Of the TOCs sitting within the OLR, Southeastern is performing best and Northern worst, with TransPennine Express on an improving course and LNER struggling with train crew availability and performance.

Of the DfT-contracted TOCs, we have shining examples in the form of Greater Anglia and c2c, while many others are struggling with the basics of reliable service provision and customer satisfaction.

Haigh may now be on a fast learning curve as to why so many of these rail businesses are under-performing.

We had an inkling of this with the rather empty threat she issued to CrossCountry on August 9, in which she had to grudgingly accept a temporary service reduction for three months because the operator currently lacks the resources to maintain a full service.

She may belatedly be coming to realise that CrossCountry’s problems have evolved over the past four years, during which every meaningful decision it has taken has been under direction from DfT itself.

Why do I say the threat is empty? It’s because her government has already promised to take the franchise back in-house within this term of Parliament, and the current profit margin being earned by its owners is insufficient to make it worth their while to worry about what happens between now and then.

It’s an inconvenient truth for Labour that ownership is far less important than structure and incentives.

Simply renationalising the TOCs will not by itself do anything to make them run better. In fact, depending on the structure and organisational arrangements they put in place to manage these, it’s easy to imagine that things might actually get worse before they get better.

Assuming the Passenger Rail Services (Public Ownership) Bill passes its remaining stages in Parliament and becomes enacted in October 2024, a glance at the franchise termination table shows that the most likely first TOCs to be taken back in-house are Chiltern and Govia Thameslink Railway in March 2025, with South Western Railway following two months later, Great Western Railway in June, and c2c in July.

This would be a very challenging programme to achieve, as each transition takes at least three months of intense behind-the-scenes detailed work.

And, as yet, there is no receiving organisation in place - unless it is proposed to add each of these straight into the existing OLR organisation.

This would be a challenge in itself, as it is a very light touch organisation and is not currently staffed to enable a doubling or tripling of activity within a year.

In any case, it would be better to establish the desired end state organisation first, before making serious administrative and leadership changes.

Of the five TOCs I’ve listed above, three have the capability to have their core term extended. While this would not suit the populist agenda, it seems to me that there is a lot of sense in directing the transition carefully with a manageable workload.

SWR is the first of the TOCs whose contract reaches its full contract end date in May 2025, followed by c2c in July.

SWR has had a chequered life so far, and is not particularly well loved by its customers, so it would make sense to me if this was adopted as the first to be taken back in-house. c2c would follow two months after.

This allows time to consider the future desired organisation for the industry and to minimise the number of short-term changes or false moves made.

Track and train together

After determining the way forward on the two short-term issues identified above, the big policy initiative will be the future Railways Bill. This is the key piece of legislation setting out the version of reform on which the new government will settle.

You might be forgiven for thinking that this will be easy, given that Labour unveiled its rail policy before the election was called. I analysed this in my piece in RAIL 1011, so I won’t repeat that here.

As well as Haigh, Hendy is also an advocate of ‘track and train together’, so it is pretty clear that this is the direction of travel. But there is still some confusion over the objective to simplify regulation and the track access framework.

Independent regulation with long-term access contracts and stable access conditions are all prerequisites for successful future rail freight and open access operation.

But this flies in the face of the intention to simplify regulation. As far as I can tell, this impasse has yet to be resolved.

Whither investment?

The new Chancellor of the Exchequer, Rachel Reeves, has made it very clear that for the foreseeable future, there will be no money for any investment schemes other than core renewals. This has meant a premature end to the Restoring Your Railway programme, among other schemes. I’m guessing that it also means the end to any future programme of main line or infill electrification.

I would expect the new government to re-commit to Northern Powerhouse Rail in concept, but without any attached funding, while agreement is reached with Transport for the North and the Metro Mayors as to what the scope should be. This approach would conveniently push the necessity for serious funding some way into the future.

Reeves has made clear that the new government will not reinstate the northern elements of the HS2 programme, but I note that tunnelling between Old Oak Common and Euston is to restart.

I presume there is an intention to resolve the thorny problem of a Euston terminus, using whatever private money that can be leveraged to best advantage.

My main plea to the Chancellor, in these straitened times, is to try and make financial headroom for Phase 2a between Handsacre Junction and Crewe.

This part of the programme is really necessary - not just in order to generate any sort of return on the investment in Phase 1 already committed, but also to avoid a reduction in north-south capacity.

I would further urge the Chancellor to use her forthcoming budget to end the freeze in road fuel duty and increase Air Passenger Duty for domestic air travel.

The first is needed to help make the case for freight to invest in new electric locomotives, and the second to improve passenger rail competitiveness.

We know she needs to raise taxes this autumn, and these two approaches could help her in a small way to balance the books.

The railway now needs to buckle down and make the best of what it’s got. A period of concentration on the basics, to improve service dependability and customer satisfaction as the core priorities for the next few years, is called for.