“The context of devolution is that you don’t stop that performance drive, you help it by giving people greater empowerment. You also look at the corporate centre of the organisation, which is by any stretch quite large, and ask ‘who’s serving who here?’
“Who should be in charge? Should it be the routes who actually demand services, or should it be a series of instructions from a remote, corporate centre?”
The philosophy Hendy is articulating fits perfectly with Osborne’s drive for both devolution and infrastructure investment, so it would indeed be difficult for anyone - reviewer or otherwise - to suggest an alternative plan. Hendy is cannily allying NR’s every move with Government policy more widely.
He continues: “Philosophically, I’m entirely with what Mark is doing. If you ask anybody at TfL, top men like Mike Brown will tell you with a wry smile that if there was some policy that should be adopted for the benefit of the day-to-day operation, it was very rare that I would ever disagree with them. Because what matters is the day-to-day operations - if you screw up London Bridge, no one else gives a shit what else you’re trying to do.
“Getting day-to-day operational improvements in very difficult circumstances and driving performance is entirely right, and I’m strongly of the opinion that devolution will make it better. Giving people at the grass roots more power will produce the right answer. Mark is doing absolutely the right thing. You wouldn’t wait for Nicola to pronounce next May, because apart from any other consideration, with the railway getting full of people every day getting better performances is absolutely essential.”
So, if devolution is the accepted principle, how far does it go? Is it Nicola Shaw’s job to pronounce on whether it should be full devolution to the routes, and leave it at that? Or put a route out to concession? Or even sell some or all of Network Rail? Is Government looking to Shaw to answer that question?
“I think it’s a genuine enquiry. From talking to people around Government, I think she has been asked to say what she thinks, rather than being told what the answer is and for her to go away and produce the evidence. That is not always the case with things that Governments do. Sometimes they know what their answer is and they just want the evidence or sufficient sway to produce the ‘right answer’.
Hendy sets today’s developments in a modern historical context - and this is interesting indeed. I have seen him speak many, many times at conferences and other gatherings, and I have lost count of the number of times I’ve heard him say: “Put your hand up now if you think the current structure is optimal…!” No one ever does. So his views now are of great interest. What does the former poacher think, now that he’s the gamekeeper?
“There have been two structures since BR that brought private money into the railway. The first was Railtrack, owned by individual shareholders, and it dramatically failed. Then NR came along, as a clever creation to get private money - or rather, Government-backed money - in a context of a private company. And that’s now been reclassified on the public balance sheet. So neither of those are now available.
“So how else do you do it? History is the most powerful argument you could make for suggesting that nationalisation and being a publicly-owned company is not the whole answer - because there’s been no time in history where anybody in a company owned by the Government has ever had any investment money. Never.
“Go right back to the formation of BR. It was created in order to compensate for the wearing out of the Big Four in the Second World War. But there was virtually no investment. Sure, BR got a big pile of money in the 1955 modernisation plan, but it petered out in 1961/62. Since then BR was hand to mouth on investment, and the great thing about the privatisation era - particularly the last 12 years of NR - is there has been quite a lot of money. And look what it’s done, at the bloody fantastic stations that have been built. Birmingham New Street… would that have ever been built under BR? Very, very doubtful.”
So Hendy (or rather, Nicola Shaw) is wrestling with the question of how to get private money reliably and securely into the railway, free of political risk, and mix it with government funding to get the very best outcome on infrastructure in particular and the wider railway as a consequence. In order to get that private money into the railway, will it be necessary to break up and Balkanise Network Rail - if only in managerial terms, if not structurally?
“It is a national network of railway,” says Hendy firmly and with no hesitation. “It is one national network and there are people who want to run all over it. If you ask freight companies, they’re very clear that they want to run over a national network whose management won’t prevent them from travelling to all the places where they can do business.
Fully cross-regional national access?
“Absolutely. Cross-country. So there isn’t really any part of NR - except for the Isle of Wight, I suppose - which is sufficiently Balkanised to be treated separately. My personal view is there are some quite strong arguments for some functions to be elegantly done on a national basis. That doesn’t necessarily tell you what the resulting structure of the company is, it just tells you there’s some very strong national functions to fulfil.
“I hope this gives you some clues about where we’re heading, without telling you what the answer is. That said, nobody here is dogmatic about any organisational solution. What I do think is absolutely essential is that whatever comes out of Nicola’s review, it has to be able to maximise third party financial input. It has to cope with growth, cope with devolution, and it has to remember that the railway’s got a load of bloody passengers on it. And those are good questions to ask.”
I can’t help feeling that whatever he says about the reviews being joined up, that statement is aimed over my head and squarely at Nicola Shaw. He adds that he is talking primarily about after 2019, after the end of CP5.
In the summer, the Government was so rattled at what it perceived as NR being out of control financially it pressed the pause button on the Midland Main Line and trans-Pennine electrification projects. Just a few months later, all was well and the projects were (ghastly word) ‘unpaused’. What made the difference? Was it just Hendy’s arrival that gave the Secretary of State confidence that the projects could be properly delivered? For the first time, the potentially thorny subject of regulation comes up.
“Where they get their advice from is an interesting question, because there must also be some interesting questions about the regulatory approach to this. But the truth is that much of the big stuff in CP5 was only at a very early stage of development when those early costs were done.”
projects not sufficiently scoped
I point out that previous NR Chief Executive Sir David Higgins said as much at the time - letters from him warning that the projects were not sufficiently scoped for accurate costing are there on record for all to see. Everyone seems to have forgotten that, and so there’s a question about NR’s wisdom in putting such vague finger-in-the-air costs out there - such as £800m for Great Western electrification, which always seemed to me to be as daft as the £2bn originally put on the West Coast Route Modenisation that eventually cost the thick end of £10bn. For the first time Hendy won’t be drawn.
“Without trying to controversially comment on history that I wasn’t there for, it’s probably best I keep clear of that.”
Blimey, a fear of controversy has never stopped you before Pete! He has the grace to look a bit sheepish.
“Well, no… but in autumn 2015 it’s much easier now to take a much better, informed view about what costs and timescales might be than it was back then. And so that’s what we’ve done. The one caution I would have is that it’s still not over yet.
“And some of these projects are phenomenally difficult to do - even I’ve been surprised by the level of consent that you need. Great Western electrification needed nearly 2,000 individual consents from a large number of public bodies, including local authorities. It seems endless.”
That’s a lot more than the people who can dig up the streets of London, isn’t it?
“You name it, I’ve been really surprised. But clearly these projects are now in a better state than they were. And clearly going through them on a consistent basis and saying: ‘Where is this project? How much is it really likely to cost? How long is it likely to take?’ has been a really valuable exercise.”
