“I know what comes with a nationalised industry, because I grew up with it. It will not be employment. It will not be growth. It will be a reversion back to the machinery of negotiation and consultation.
“Certainly, GBR has its positives. I’m not sure I buy into it all. We just want to run services. We want access to the network and we want green signals. We want the new structure to encourage us to add business, and not get in the way of it.”
Remedies
Recovery from COVID has swung the railway in a new direction. Through a sweltering summer, Bournemouth beach has been crowded, with packed platforms at the station and leisure passenger numbers above pre-pandemic levels. But the commuter season tickets that paid South Western Railway’s bills have not returned - Monday to Friday peak travel into London is resolutely stuck at 53% of what it was before.
“Clearly, there is a need to get every passenger we can back on board,” says Andy Bagnall. “We have to look at the growth areas and work on them. Hybrid working is here to stay.
“We looked at the difference between those operators that have some form of revenue incentive, compared with those that don’t. It was clear to us that the private sector’s commercial instinct helped drive better outcomes for those that had a stake in revenue recovery.
“The National Rail Contracts have within them dormant provisions for revenue incentives. We need to be having conversations now with the Department so that we can turn on those incentives to re-grow the railway.”
But where is that incentive, now that Government is taking all revenue risk? What’s in it for the train companies beyond following instructions correctly and collecting a fixed reward?
What we used to call franchises have become an awkward mix of contracts, largely treading water while the economy is buffeted, and while we await a longer-term solution to be invented.
“We need a system that is responsive in the short-term immediate-post-pandemic circumstances,” says Bagnall.
“Operators are efficient - they will control costs anyway - but commercial companies need to take risk by innovating, believing they will get a return on their ideas. There must be a form of revenue incentive. Longer term, we have to get the system right - get the design and culture of GBR right.”
GBRTT’s Rufus Boyd: “The problems aren’t going away. The cost base was OK when the money was rolling in, but it looks less comfortable now the revenue line is 15%-20% below what it was pre-COVID.
“Even if it isn’t on the Prime Ministerial agenda through the autumn, it will be on the Treasury agenda.
“We do have some specific duties on revenue growth: the ‘book with confidence’ scheme and the ‘get back on track’ scheme were really important statements of the industry working together.
“But until we have franchising authority with the passage of the Bill through Parliament, it is difficult for us to be the ‘guiding mind’. We all look forward to an invigorated and energised train operating community. A lot of them have said they struggle under the current rules, but that also means we are pretty much aligned when it comes to the future.
“There are some big programmes. The fares, ticketing and retail change programme is funded at £360m, largely with our help. Leadership from within GBRTT, with Stuart Fox-Mills seconded from Abellio, a big hitter from that group. We have a clear pathway to achieving the things laid out in the White Paper around inconsistent retail experiences, out-of-date magnetic stripe tickets in a digital world. And extension of pay-as-you-go, not just in London, but also in the North.
“There is no reason at all why that should not go full steam ahead, subject to a business case for the individual components. And it benefits from our leadership.”
John Smith warns: “I am very worried that the change in industrial relations will put back any culture change by five or ten years.
“There is true hatred out there. I’ve talked with passenger railway staff who despise their leadership. People who you might expect to be middle-of-the-road are saying they would be willing to strike for a month. Whatever your personal perspective, that is a very bad state of affairs.
“We’ve spent 22 years creating an environment where our staff feel loyalty towards the business, where they know that their pay and the welfare of their families depends on the success of how we all work together. For me, and my relationship with Network Rail, I very much worry that the day job is being messed up.”
From the passenger side of the divide, Alistair Lees agrees: “The industry has to deliver reliability because that’s what gets people through the door. That means solving the industrial relations problems. And making Sunday a normal working day is part of that. Some of the solution will be politically unpalatable because it involves compromise and it costs more money, but no other business would survive being run the way ours is.”
There’s more trouble ahead, with a deep recession forecast. Deep-sea freight is usually one of the first indicators… and the peak arrival period for Christmas stock is September and October.
“We are seeing half-full container trains,” says Smith. “There’s not a lot coming out of the docks at the moment. The current drop-off is because the warehouses are full. People aren’t buying discretionary goods. They’re buying the loaf of bread, but not the barbecue. A lot of goods are sitting in warehouses beside the M1 motorway.”
“Getting the strategy clear, including decarbonisation and a strategy for freight growth, are all building blocks to getting John and his shareholders feeling comfortable,” responds Rufus Boyd.
“It’s the absence of a strategic purpose that worries people. If we could turn on a sixpence and sort everything, then we could also turn on a sixpence and change our mind.
“The ‘noises off’ that he needs to be comfortable about are that the legislation will create something he can live with.”
Managed decline?
Are we in managed decline? Plenty of train operators think that is the situation in 2022.
“We are not in managed decline,” quipped one industry leader. “We are already in unmanaged decline.”
Train operators are cutting costs, as ordered by the Department for Transport. In the case of South Western Railway, that means not attempting a return to the 2019 timetable, because peak commuter numbers do not justify it and because it currently has insufficient rolling stock. The fleet of 90 new Class 701 Arterios are three years late and still not fit for duty.
Network Rail’s union-challenged reforms are also substantially about cutting the cost and inefficiency of maintenance.
“I don’t think we are in managed decline,” says Andy Bagnall. “But the railway stands at a fork in the tracks. If we take the wrong fork, then managed decline is absolutely a possibility. We could face cost pressures that prevent us from re-growing the patronage in the way we all want to. We could be in a position where the only way to balance the books is through service cuts, which in turn make the railway less attractive.
“We are not there yet. If we take the right decisions about the cultural ethos of GBR, decisions about the right contractual model, and take short-term decisions that will make the railway attractive right now, we can still get back.
“The Government is facing a choice. And the members I represent are seeking to persuade it towards the right choice.”
Alistair Lees : “We are in danger of managed decline. We have not quite entered it yet, but reduced frequency makes many journeys less attractive. Connections become longer. Strikes make people drive instead. Lose them, and it is hard to win them back.
“Electric cars are the next existential threat, after COVID. While rail is really slow, electric cars are coming at pace.
“No one in the car industry has sat around waiting for the rules to change. Electric cars will turn up and eat the industry’s lunch. Because once you’ve swallowed the purchase cost, they are really cheap to run, so you run them more. For a family of four to go from London to Edinburgh and back again works out at about £10 a person in electricity.
“That’s why I worry about all this GBRTT inward-looking contemplation. We have a real need for speed.”
“It is unhelpful to have multiple voices,” says GBRTT’s Rufus Boyd. “That just plays into the line that the rail sector cannot manage its own business.
“The Government has to play a bad hand. You would not want the hand it has been dealt. It has distracted from rail. But however difficult it is for GBRTT, we must not give up on it. The commentariat are starting to despair a little. This is about resilience, about keeping going, keeping everyone as closely aligned to the programme as possible.
“For us, the inflation problem has bled into industrial relations. That is the hot issue. Can it blow us off course? I don’t think so. But it is not a good use of our efforts to have a long-running dispute. It just makes everything difficult.
“It also makes the case for GBR. The Secretary of State should not be digging into the detail. It needs people it can trust to do that. That is why I think GBR is attractive in all circumstances.”
Bagnall says that the key test comes this autumn: “It has been difficult for decisions to be taken, right across Government, over the summer and while new people settle into new roles.
“I think if we get to Christmas without a response to the market engagement, without the next stage in the legislative process, then you could say progress has stalled.
“At this point, I can tell you there has been some progress, given the unexpected impact of external events. But this autumn is the critical period.”
“I am in favour of GBR,” says Alistair Lees. “My beef is not with the concept, but with the speed of it, and its failure to look outwards. It doesn’t involve suppliers at all, really. GBRTT doesn’t have a monopoly on knowledge, but it’s behaving as if it does.
“This isn’t how I want to feel. I feel like I am being listened to politely, but nothing more: suppliers and innovators are not being taken seriously. There are 200 people in GBRTT. There are 150,000 people in this industry who are not in GBRTT. They want to deliver every day, whether they are drivers, conductors, train operating company managers or suppliers. They don’t all agree with each other, but the one thing they all have in common is that they are frustrated.”
Lees concludes: “It feels like 2022 is a fight for the soul of the railway. Workers versus managers. Treasury versus professionals. Centralise or decentralise? Different groups are in conflict. And it doesn’t feel like any of them are thinking of the customers anymore.” ■
