UK: Our crazy approach to our crazy loss-making railways

[John Ashworth]

Our crazy approach to our crazy loss-making railways

Unions, passengers and politicians will all find fault with Sir Roy McNulty's review this week – and it will change little

o Julian Glover
o The Guardian, Monday 16 May 2011

Every so often, a bald-headed businessman writes a report on the efficiency of the railways and everyone panics. It happened in 1963, when Dr Beeching lopped charming lines – which steam enthusiasts with buckets of cream and chocolate paint have spent the last five decades trying to reopen – and it's about to happen again on Thursday. The McNulty review, commissioned by Labour but delivered to the coalition, is the latest hardheaded attempt to bring some order to the network's uncontrolled costs, now £11bn a year of which £5bn comes from the taxpayer.

Two things are certain. McNulty will not transform the railways. And before that there will be much wailing and gnashing of teeth from the unions, passengers and politicians about the prospect of higher fares and fewer trains and the general disaster of everything about Britain's railways since the day they stopped serving kippers for breakfast on the night sleeper to Aberdeen.

Sir Roy McNulty has come up with a series of reasonable but dull improvements intended to cut costs. In any normal business – buses, for instance, which carry twice as many passengers as trains – his report wouldn't get a second glance. But trains are not normal. They produce a sort of hysteria.

I share the madness. I love trains and use them all the time. I stood happily last week on the platform at Kirkby Stephen station, on the Settle to Carlisle line, which has just been restored so that, with a black and white camera, you could take a picture and imagine it was still 1911. I don't want to see any line closures and I don't want fares to rise (as they will from next year, on average by 3% above the retail price index). But Network Rail's debt, which is kept off the state's balance sheet, is already £21bn. We are wasting money on a bureaucracy that makes our trains the most expensive to run and use in Europe.

Here, as nowhere else, the railways are expected to be all at once an inviolate part of the national heritage, a social service, the low-carbon answer to climate change and a private business. Fares and timetables are directed by civil servants on a level not seen in wartime. It's a fallacy, really, to think of the network as private at all. Everything depends on a sort of Gosplan economics, a pretend market rigged by the state. Each year Network Rail is slipped £4bn in taxpayer subsidy so that it can charge private train firms artificially low fees to use its tracks. This allows everyone to pretend they are paying their way when they are not.

Unfortunately the McNulty report is unlikely to do much to dismantle the crazy structure created by privatisation and two decades of tinkering since. In this inexplicable world of Roscos (rolling stock companies), TOCs (train operating companies) and the ORR (Office of Rail Regulation), some private firms are allowed to walk away from contracts rather than face losses – as First Group did on the Great Western last week, while others, such as Stagecoach, demand £100m extra just to keep their promises. Operators are lured by the brevity of their franchises into running trains for what they can extract, without any incentive to invest. That's why station car park charges keep going up but it has been two years since the last order for new trains. In northern England many people have to travel on 30-year-old adapted buses, whose gearboxes keep falling on to the tracks.

So what should be done? Scrap privatisation, say some. But it hasn't failed in every regard. Trains are better, faster, busier and more frequent. Complexity and interference have skewed the railways, not the market. The best services in Britain are run by firms with the least to do with the state. On my line to Derby, private East Midland trains runs two trains an hour when before privatisation there wasn't always one.

Target the unions, say others. Ahead of McNulty, Bob Crow, the RMT leader, has warned of "class war". If so, it is a war his members are insulated from, thanks to an above-inflation pay settlement that includes a bonus of £3.50 a shift for staff working during the Olympics, a little backhander that should see off any strikes. Crow, along with the driver's union Aslef, has played his hand brilliantly since privatisation, winning pay rises from private firms who know taxpayer subsidies will meet most of the bill. Like print unions in the old Fleet Street, rail unions have kept their members in a fine old style. But it can't go on.

Concentrate on the routes that matter, cry economists. McNulty won't, as he hinted last year he might, suggest shutting lines. Much of the cost comes from a regional network on which each passenger is subsidised by 31p a mile, while commuters pay soaring fares elsewhere to stand on their way to work. I'd die in any ditch to save Britain's lovely network of rural railways, but to save them some will have to be run at lower cost.

At its worst, privatisation put the boss of Boots in charge of Railtrack, with predictable calamity. At its best, it has brought millions of new passengers: trains are busier than at any time since the 1920s. They are going to get busier still. We will never make them pay. And arguments about how to limit their losses will rage for ever.