“The challenge we have is if fares come down in real terms, which we all want to see, then what does that mean for funding? Then there’s the capacity question. We have a fixed amount of capacity, and if we drive further volume growth - which you would hope you would get with lower fares - we would increase overcrowding. That can make the passenger experience even more difficult.”
But surely all the angst we’ve gone through over the past 20 years will have been pointless if all we do is price people off the railway?
“I don’t think we are pricing people off,” he comes back quickly. “We are not pricing people off because we are still getting phenomenal growth - but at some point we have to meet that growth with new capacity.
“Take South West Trains. I am hugely excited about the potential opportunity to increase Waterloo capacity by about 30%, but I need to persuade government to do it. I need to persuade government that there is a business case to go and do it. I’m working on it, and it’s the kind of challenge that we have to deal with.”
Griffiths is sanguine about the decision that was taken to move to 75/25 in ticket support - and points out that in the South East this means that 80% of the railway is now funded by the customer, not the taxpayer.
“That’s been a huge shift,” he says.
Two-tier Britain
But what about the North of England? They’ve all the fare increases but none of the new trains, and a small fraction of the infrastructure investment we’ve seen in the South? Are we heading for a two-tier Britain? And is he happy with that?
“I agree - we don’t want a two-tier. Equally, I’ve always again been very honest that London is the economic heart of the country, and our challenges around rolling stock and infrastructure are significant because we are running around a Victorian railway a lot, and that’s not sustainable either.
“But let’s stick with fares a moment. Existing contracts can be changed and new contracts can certainly be made on a basis of lower fares, but it gives us a big funding challenge, and that’s where politicians can’t pick and choose. You’ve got to look at this holistically, you’ve got to look at fares, you’ve got to look at demand, you’ve got to look at capacity, and we have to make sure the railway is sufficiently joined up.”
I press him harder on the idea of campaigning hard for things that the Government doesn’t like and will not welcome. In conversations with key senior executives, I pick up a lot of disenchantment, opposition and even anger about how Northern is being handled. All of them regard the DfT as wrong, and wrong-headed about the North - but dare not say so for fear of ‘biting the hand that feeds’. Will RDG campaign with equal vigour on matters that the DfT will not like (such as this), where there’s a common view that managers dare not speak publicly about? Surely this is the acid test for RDG?
“RDG isn’t going to shy away from difficult discussions with government about north-south funding, or pricing - we are very much up for those discussions. Government will ultimately be receptive or not to some of those things.”
Forgive how I put this, but will RDG have the balls to make the case, when that case is not welcomed by the DfT?
“Yes, if the case is right we WILL make that case.”
So, to sum up, you are going to be a CBI that’s totally supportive of the Government when it does the right thing, but a total thorn in their side if you believe it’s not?
“RDG is very focused on doing the right thing for the industry in the long term, and if that means there are some difficulties to be had with Government then we will not avoid those difficulties,” he says.
Does he believe that the new franchises such as Essex Thameside really do represent genuine transfer of non-GDP risk to the private sector? It was surely the case before that no such risk transfer was apparent? This prompts a frown.
“No, I don’t like saying that because I think there WAS absolute risk transfer from Day One of privatisation. We’ve had different models, and I really do think that over the last ten years the cap and collar revenue support model hasn’t been good for government or private operator.
“We need to move on from that, I agree - but there has definitely been proper risk transfer. If you look at these big revenue bids now, you have to think very, very hard about an eight- to ten-year contract in terms of what cost risk you’re assuming and what revenue risk you’re going to take. You then have to back it up with a lot of capital, and this goes back to my point about how a state bidder could do this.
“Take East Coast, for example. Dependent on the bids, you could be at risk for £150m-£200m of capital if it was to go wrong. No, we don’t want the market to fail, but that’s not to say we don’t expect the market to fail from time to time - because if it doesn’t fail, then it’s not a market!
“I think we have reset the equilibrium now, and the contracts are much better for both sides,” he explains.
“Government will get a better price and so should take macro-economic risk on these types of railways, and so should incentivise the private sector and hold it accountable for what it bids - but don’t hold us accountable for what happens in the economy, or GDP or central employment, over which we have no influence. Government is much better to sit with that risk - but everything else in the franchise? Yes, absolutely, the private sector should bear that risk.”
So where do you want RDG to be in two years… in five years? How do you want it to be seen? What do you want the impression to be when you mention its name in conversation?
“I hope it will be associated with leadership of the industry - that’s what we set out to do and I think we can do that,” he says.
“I think we are now starting to do that. But it has to be a partnership. We cannot lead without taking account of where Government is - its priorities, its challenges…. we have to be able to work with and respond to where they are at any point in time. And the DfT is looking for us to come up with solutions - they are crying out for us to take the industry forward.”
That requires trust though, doesn’t it?
“Yes, it does - but I think that trust has been rebuilt.”
And how will RDG work with the DfT’s new rail directorate - because that’s supposed to be, again, a similar leadership organisation?
Working together
“I think that will be the conduit to make sure that we are working together. And ‘together’ is the key. We can lead - but only in partnership with the DfT,” Griffiths explains.
“We are never going to shoulder the ultimate decision-making because railways are too important politically. The Secretary of State ultimately is always going to say: ‘I’m accountable, it’s my job,’ so the buck stops there.
“When you drag all the decisions back into the middle of the department, which is what I think has happened over a long period of time, it isn’t as successful because you need specialist knowledge.
“If you asked everybody around the RDG table, I bet they would all say they wanted a separate agency. Our worry was that we didn’t want that separate agency to take ages to come, which would mean yet further delay in getting franchising re-established. As matters stand, the Department seems to have been able to keep going with its programme, while also putting in place the building blocks for a separate agency.”
