Mark Harper, the Secretary of State, set out his vision for the rail industry in the George Bradshaw address on 7February. At first glance, the speech showed dynamism and drive, and included a commitment to establish Great British Railways with the winner of the GBR HQ competition to be revealed before Easter. He stressed the need for fundamental reform of the industry and explained he would “re-energise that process. Freeing reform from the sidings and getting it back on the mainline”, creating a more customer focussed industry and enhancing “the role of the private sector…in maximising competition, innovation and revenue growth right across the industry.”
However, beneath the stirring words, there was an absence of any convincing policy. There was a nod to fares reform and a commitment to fairer ticket prices, with passengers benefitting from simpler ticketing – he asserted that “the industry needs to learn from the aviation sector and better manage capacity, as well as raising revenue, trialling demand-based pricing”. Which cave do his speechwriters live in if they are unaware that long distance operators adopted airline-style yield management techniques over twenty years ago? In reality, fares reform has been parked in the sidings for years because of concerns that any changes might result in some passengers seeing their fares increase and/or the risk that revenue might fall, at least in the short term. The problems in the fares structure have not been addressed for years; for example, the regulated long distance off-peak fare has been an anomaly for ever, causing an artificial peak at 1900 in departures from Euston.
Similarly, there is to be a more competitive retail market, with new players welcomed “to spur more innovation and give passengers the services they need”. Trainline and its private sector competitors may reasonably argue they rose to this challenge some years ago, including offering savings through split ticketing, helping passengers find their way round some of the glaring anomalies in the current fares structure.
More importantly, there was no coherent explanation of how costs and revenues are to be brought together at a meaningful level within the industry, rather closer to the ground than the Prime Minister’s desk – given that at present, costs are DfT’s responsibility but revenue goes to the Treasury. Absent this, all the warm words about an enhanced role for the private sector are little more than guff.
It may be that the Secretary of State realises that this position is incoherent? A cynical observer might take the view that the Conservatives are odds-on to lose the next election and, realistically, no longer have the time to take real action to reform the industry’s structure, so the best thing to do is to continue to kick the can down the road.
This presents Labour with a significant opportunity. Given the continued need for subsidy and the lack of real scope for the private sector if GBR is the “guiding mind” where revenue and cost are brought together, I would assert that ownership is essentially irrelevant. Mr Harper threw some bones to right wing Tories with his enthusiastic nods to the private sector but, in the real world, LNER in the public sector is well managed and delivering on increased passenger numbers, revenue and operational performance. In contrast, both Avanti West Coast and TransPennine Express are private sector companies but are in the relegation zone on any measure.
So, Labour could simply bring all the train companies back into public ownership, which would play well both with its base and with the country. GBR could be structured in the form of around twenty-five subsidiaries each with its own profit and loss account, with the centre holding the ring on capacity and disputes and holding its managers responsible for safety, quality, and operational and financial performance but working within a culture of empowerment and innovation, with each responding to the stakeholders in the region it serves. There is of course a historic precedent for this – the “Organising for Quality” (OfQ) structure driven through by the first Bob Reid and widely regarded by senior managers at the time as the most effective industry structure since nationalisation in 1948. However, after the Conservatives’ surprising 1992 election victory, it also enabled John Major’s government to fragment and privatise the industry before the new structure was able to realise its full potential.
Of course, it’s still possible that Rishi Sunak might win the next election, in a re-run of 1992; in that event, I would argue that the same structure would still be appropriate but the individual business units could be – dare I say it – progressively franchised. The trick would be to limit revenue risk by rebasing the revenue line, say, every three years. This would prevent super profits but put a floor under potential losses while maintaining incentives to grow the business.
I fear we face two more years of drift.
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Depressingly, industrial action looks set to continue. After a further round of negotiations, including withdrawal of the proposed national introduction of driver only operation – a red line for RMT and not a realistic requirement for many parts of the network in any case – it seemed that RMT was potentially going to settle. However, the Union went into a huddle, and eventually announced further strikes and an overtime ban which will potentially cause serious longer-term disruption, mainly as a result of signal box closures for periods that would otherwise be covered by overtime. The demand was for a higher, no-strings pay award; not surprisingly, on the employers’ side, this was seen as acting in bad faith.
The strike dates were called with four weeks’ notice, and, presumably, the RMT Executive thought this would allow the Government, Network Rail and the Rail Delivery Group to fold, dropping the productivity elements of the offer. But this time, I suspect, “best and final offer” means just that and we face a war of attrition, made more damaging by the overtime ban.
Short of a general strike and a socialist revolution, both of which look extraordinarily unlikely, it’s difficult to see how the RMT Executive can believe they will win. Bluntly, continued industrial action is now seen as the norm, and the industry doesn’t matter enough to the Government, or the country, for a solution to be a priority. As an indication of this, RMT announced its further action on 16th February but, when I scanned The Times the following day, I could find no coverage of it whatsoever.
Photo credit: Paul Bigland.
