RAIL 933 - Williams-Shapps: the acid test

Publication of The Williams-Shapps Plan for Rail on May 20 was followed by the usual round of press conferences, with chairman Keith Williams, then by a tsunami of punditry in which, of course, RAIL sallied forth.

That continues, not only here but elsewhere (including Wolmar, pages 38-39). And not for the first time (no surprise to RAIL regulars!) Christian and I find ourselves in disagreement! I’ll just comment here on a couple of issues that Christian raises, which I agree are priorities, but where our ‘take’… differs.

Wolmar suggests that Williams-Shapps are guilty of ‘doublespeak’, in that while claiming to “keep the best elements of the private sector” they then “suggest a much diminished role” by taking away the revenue risk that incentivises boosting passenger numbers. Further, that squeezing savings from their modest 2% fees will create a drive to “cut costs rather than provide a good service”.

I have covered that latter point many times but I’m happy to say it again: if we end up with concessions, where operators earn a fee to operate good-quality services, then the contracts MUST include a proxy for the missing revenue risk which incentivises operators to grow passenger volumes. So that’s (relatively) easily solved.

Where I disagree most strongly with Christian is his view that taking revenue risk away from private operators is sensible - and that this is an intentionally diminished role. I disagree. I reckon Government would like nothing more than to transfer risk to the private sector - it has plenty of form on this.

The inescapable reality, however, is that risk transfer isn’t currently an option - for two reasons. Firstly, post-pandemic risks are so great that even the biggest private players are incapable of taking them. With the passenger service decimated by 95% and recovering only slowly (but steadily - LNER, for example, is now at 55% of pre-COVID levels), no transport operator is going to take significant risk amid such weakness and volatility. So, the DfT has no choice but to shoulder that risk.

DfT cannot even consider transferring risk until fundamental (long overdue) radical reforms are implemented in fares, ticketing, customer service (‘the retail offer’) and working practice reforms. It’s worrying, but the latter will likely involve a clash with trade unions whose rhetoric about how “the privateers” are  “loot-ing” the public purse makes their feelings clear.

Claiming that these ‘privateers’ have made £88 million in six months from “emergency COVID-19 taxpayers funding, around half of which will go overseas” is both misleading and inflammatory. It’s possible that the big three unions might have misread their members’ moods, too - I’ve noted recent social media comment from RMT members in particular, indicating that they feel they’ve been well looked after in the pandemic and are very uncomfortable at the prospect of striking in return. I also sense there would be little public support for strikes by railwaymen who may well be seen as being both well paid already and who have been protected during the pandemic. Time will tell.

Once stability returns to passenger figures, at whatever level it settles (my gut feel is still that it will be around 80% of pre-COVID levels), then both Government and the private sector will be better placed to calculate the real level of revenue risk and what incentives can be put around private operators taking those risks and growing volumes further.

The requirement then will be for GBR to set passenger service contract costs at a level which ensures a reasonable (but not excessive) living for the private operator, but which still costs the taxpayer less than it would cost Government to do the same job on their behalf. This is entirely do-able. You can then forget all the inflammatory claims about ‘privateers’ and ‘looting’, because provided the new deals operate the railway safely and effectively for everyone, but at lower cost than the DfT running it directly, taxpayers (and passengers) will be big winners.

Once stability returns and rail’s retail offer is radically changed, in an environment of transformed working practices (which does not inevitably mean major job losses, by the way), then risk transfer and a bigger role for the private sector will almost certainly return. But only when those conditions are met.

What needs to happen now is that the interim changes strongly hinted at by Williams (see pages 6-7) need to be quickly implemented. The immediate interim priorities must be made clear and tackled with vigour. That means reforming ticketing and fares, and drafting a strategic industry plan. Soon.

This summer will therefore be the acid test of Government sincerity in the many positive and welcome aspects of its Williams-Shapps Plan. The cold reality is that those urgent radical improvements to rail’s retail offer (fares, ticketing, customer service) will be not merely implausible, but doomed if they are overseen and controlled by the DfT and Treasury.  They simply will not happen - and yet nothing can change until they do happen.

So, Government’s sincerity in saying it wants Wiliams-Shapps to be implemented will very soon be laid bare. We are all watching, because this will be a fundamental indication of whether this review (sorry, Plan) gets beyond the glitz of its press conference launch and starts actually changing things. What happened to the previous 30 reviews since 2006 is that they gathered dust and are largely forgotten.

There are two major differences this time. Firstly, SoS Grant Shapps has attached his name to the Plan. If it’s a success, he can take the credit. If the DfT or Treasury scupper HIS plan, then its very public failure will be HIS failure specifically - even if he’s been reshuffled somewhere else.

Secondly, during RAIL’s Williams-Shapps Plan webinar on May 27 (which attracted 2,400 registrations), Keith Williams made an unexp-ected and quite extraordinary commitment, regarding his membership of the interim group set up to start implementing his plan, this summer. He said: “I was very keen to participate in that . Having spent three years writing a review, I wanted to make sure it happens in practice. If it gets shelved, then look to me, because I will be agitating to make sure that everything in that review gets implemented. I see that as my role going forward.”

Never before has such an influential Government review independent chairman pledged so publicly to remain closely involved, to ensure that “everything in that review gets implemented”. Imagine if the DfT or Treasury does scupper the plan, and the chorus of critics about government failure is led by Williams, who wrote the plan to which Shapps appended his name… and his reputation.

That changes everything.