ONE PROFIT AND LOSS ACCOUNT
“The Treasury takes the income. The Department for Transport makes the expenditure. So, the point at which profit and loss converge sits with the Prime Minister. Which is bonkers!” says NSAR’s Neil Robertson.
“We have to make a compelling vision of what an industry based around one single profit and loss account looks like. That has to be made patently obvious to the Treasury. We have to get this process out of No. 10 Downing Street, and back into No. 11. And then move it to the Department for Transport. And then on to whatever becomes of Great British Railways.
“Easier said than done… but this is a winnable argument. The real prize is that you overcome one of the big barriers to productivity. The existing contractual relationship is a huge barrier. You just cannot save money without having a look at income and expenditure together.
“For example, we could double the productivity tomorrow with a different kind of arrangement to the hated Schedule 4 and Schedule 8 system - the whole delay attribution nonsense.
“The whole point of one P&L account is to review projects in their wider context - as any other business would do: reviewing cost now against revenue over the years ahead. The railway cannot do that. Imagine a private company that never reviews its own overall performance!
“With one P&L, you can align rolling stock, maintenance, people strategies, digital signalling - all the different areas. At the moment, we exist on a series of tactical reactionary decisions. It is piecemeal, and the result is insufficient and inefficient investment. Opportunities are being lost.”
Michael Clark of GBRTT responds: “One P&L is a key part of reform. Our aim at GBR is to be quite devolved. We want to invest one P&L profit centre at regional level, where you’re on the hook for both revenue and for saving money.
“At the moment, that doesn’t happen below Prime Minister level. Treasury is on the hook for revenue and DfT is on the hook for most of the costs, so you get decision-making that is driven separately by those two streams, and not driven together. That means unintended or perverse consequences can happen.
“This is the whole point: to balance those two in the most efficient way possible, by people who understand what the real drivers and consequences are. No one comes up with a solution that is best for the railway as a whole, for passenger satisfaction or for costs. Every normal business looks across revenue and expenditure to balance the books. The railway does not do that.
“There is a team designing that one P&L. We have a couple of routes where we are putting that together to test it. I have a team working on what might replace the Network Code and the access and management regulations when the ‘guiding mind’ comes.”
SUPPLY CHAIN FEARS
The last thing the rail industry supply chain wants is more delay and obfuscation. It craves certainty.
“We don’t want this hiatus,” says Darren Caplan, chief executive of the Railway Industry Association.
“We don’t want important decisions delayed by administrative debate - that is the biggest threat to our members. Our understanding is that GBR will happen, but at a later date. How much later? There is going to be a General Eection, mostly likely in spring 2024. Who knows what that means?”
In mid-November, RIA published a poll of 160 members. It found that 77% of suppliers think a hiatus in rail work over the next 12 months is either “quite likely” or “very likely”. The implication is that they would put their investment elsewhere, or invest less, as they lack business confidence.
Caplan adds: “So the delay itself is causing concern. And there is uncertainty over what happens to policy between now and whenever GBR comes in. There’s a concern over the long-term strategic plan, which GBRTT is developing.
“What is the plan on decarbonisation? What is the plan on digitalisation? Not only do we have an issue about an overall structure, but also about elements within it that Government has previously said it was committed to, such as getting diesel trains off the rails by 2040, and net zero by 2050. We don’t know the plan to get there. It is well known that we need to replace 65% of signals within the next 15 years. What is the plan?”
RIA agrees with the principles behind GBR: the bringing of track and train closer together, the single profit and loss account.
It also supports the concept of the Department for Transport giving strategic direction and then leaving rail experts to make the day-to-day decisions in a devolved structure. But the strategic direction is the bit that is missing.
“We think it is really important that GBR is open and transparent about how its plans develop,” says Caplan.
“If there is a delay, we need to know the new timetable. We need a partnership approach - we should be involved. We need to know where private funding will help, and to what extent. We need GBR to be a guiding mind, and not a controlling mind.
“Ninety-seven per cent of people who used rail before the pandemic have returned. They have returned differently, but most people I speak to are now in the office three or four days a week. Only 8% of previous commuters now work from home all the time. So, we have to be careful not to base our structural decisions on what we see now, because it is still clearly evolving.
“In this interim period, we need clarity about who is responsible for what. We have Network Rail, the GBRTT, other rail clients including the devolved administrations, and we have the Department for Transport as well as the Treasury. If this is a longer delay, if we are not going to get full legislation passed in this Parliament, what are the roles of each of those bodies going to be in the interim? That is something we could all do with knowing.”
