21 Jan 2004 The Times

http://www.timesonline.co.uk/article/0,,482-971241,00.html

Track and train must be remarried, Darling

Simon Jenkins

On Monday the Transport Secretary, Alistair Darling, departed from his prepared text to give a mission statement for his rail policy. "Track and train," he declared, "do need to be closely aligned." Passengers sighed with relief.

Having disposed of the engineering, Mr Darling turned to his business ideology. Despite his alignment of wheels and rails, he asserted that "they do not necessarily need to be owned by the same people". He did not explain why. Martians wishing to study modern British government could choose from a rich array. They could look at the management of hospitals and prisons, the supply of flak jackets or adjudicating cot deaths. But nothing since Oscar Wilde's "fall of the rupee" is more sensational than railway policy over the past decade.

Mr Darling announced yet another inquiry to propose yet another upheaval in the rail industry, this time "by July". In doing so he asserted things that were not true. He said there had been "decades of underinvestment" in the railway. There have not, only over five years in the early 1990s due to privatisation. He implied that the railways were formerly not "on a sound financial footing". They were, until privatisation. In the 1980s, British Rail was Europe's best-performing operator in cost per passenger mile. It was twice as punctual as Mr Darling's railway.

I sometimes ask old BR managers what they think of the present shambles. Their eyes mist over. "Give me the economic boom," they say, "with 25 per cent more passengers and today's tripled subsidy and we would have supplied the best gold-plated railway in the world. Instead they have blown it."

Privatisation was introduced because it was thought that only the private sector could fund growth and control costs. I believed it then and still do, in theory. But it depended on the right sort of privatisation. Leadership and commercial coherence had to be safeguarded. Franchises had to be structured to equate with markets, essentially the regional routes out of London.

These maxims were ignored in what was the stupidest act of John Major's Government. Under what was known as the Robson plan, the industry was vertically sliced and dismembered. Management was disciplined by tiers of contracts. Leadership was supplanted by regulation. Catastrophe ensued. Investment planning collapsed and had to be resumed by the Treasury. When the boom in demand came in the 1990s, the network could not cope. When accidents happened, as they do, there was no experienced management to keep its nerve. Talented executives, key to cost control, had fled the system. Contractors doubled prices.

So awful was the Robson plan that it has had to be refashioned three times since 1993. It still does not work. Subsidy has soared to three times in real terms what it was under nationalisation. If anyone wants to know why air travel is now cheaper then rail, they need only look at 14 tiers of authority between a rail passenger and destination.

Mr Darling says that "renationalisation" is not an option. He clearly does not speak English. The railway is nationalised. He rightly behaves as if he runs it. Ask any rail executive for whom he feels he works and he will say, as sub-contractor to government. Mr Darling's minions fix fares, schedules, track charges, investment and rate of return. Network Rail, which owns the track and generates most of the railway's costs, is a creature of government. Whitehall involvement in the railway is greater than ever since wartime. Forty people in Whitehall oversaw rail policy in 1990. There are more than 900 today, including the Strategic Rail Authority's 600 staff, plus a mystifying 350 million-worth of "consultants", equivalent to another 1,000.

Two months ago I was told that Downing Street was so fed up with feuding between the SRA's Stephen Bowker, the Rail Regulator, Tom Winsor, and John Armitt of Network Rail that it wanted to hear no more of them. Yet Mr Darling is the Paul Bremer of the railway. He is charged with delivering his boss "peace by election time", despite being largely ignorant of the empire over which he rules. He therefore merely craves control.

On Monday Mr Darling declared that the command structure fashioned by his predecessor, Stephen Byers, was "fragmented, complicated and dysfunctional". Mr Byers thought the same of what John Prescott left him. It is an open secret that Mr Darling wants to bring rail policy completely in-house. He has summoned a Home Office apparatchik, Vivien Bodnar, to be "Director of Rail Performance". The title clearly supplants Mr Bowker and his SRA. Meanwhile, the Treasury and the Cabinet Office are both said to be "beefing up" their rail policy teams. After Mr Byers' renationalisation we are getting Mr Darling's re-fragmentation. At least we should have a better class of feud.

A Senate Foreign Relations Committee chairman once said he would never travel abroad lest it "bias his judgment". Mr Darling might say the same. His new industry structure is being designed by people with no knowledge of trains. I am told that they may not consider "joint ownership of track and trains", though a junior minister, Kim Howells, yesterday added to confusion by implying the opposite. If "vertical integration " is indeed on the agenda that is good news.

Let me write it yet again, vertical integration of railway management is vital. If someone running a train service cannot manage his track, signalling, timekeeping, platform lengths, train sizes or the bulk of his fixed costs, he will milk the service for short-term profit and pass the buck for failure to someone else. The same will be true of the manager of the infrastructure. He will subcontract track inspection at Hatfield and points inspection at Potters Bar. He will spatter the system with 20 per cent "profit uplifts" and pass the cost to the regulator. If anyone complains, he will shout "health and safety". That is why repairing a mile of track under Robson's plan is, according to Modern Railways magazine, three times more costly than it was under BR.

The only sensible way to structure a business is from the bottom up. It is ironic that since privatisation, the 25 or so operators have gradually coalesced towards the pre-BR groups, continued as BR regions. The big boys are West Coast (Virgin), East Coast (GNER), East Anglia (National Express) and Western (First Great Western). Even Southern is again three distinct companies working out of Victoria, Waterloo and London Bridge.

Nor are the operators alone as they stagger bloodstained from a decade of government trial and error. Network Rail is doing likewise. Its command structure too has reverted to that of BR's regions. Its director of operations has Scottish, East Coast, West Coast, Western, Anglia and even three southern divisions. Has Mr Darling not noticed this organic change?

There is no reason except Whitehall pigheadedness for not reintegrating the passenger railway on a regional basis. Freight will need to negotiate pathways. Smaller operators such as Thameslink will need contractual deals. But the bulk of the railway will be under a coherent local management, solely responsible for its assets and accountable for its performance.

By the end of the 1980s it was planned that the railways would soon need no subsidy. Had it not been for the 1993 Rail Act and privatisation, BR would now be coining money from intercity services and commuters, and financing its own investment. Fragmentation and over-regulation were what sent costs through the roof. It was the collapse of leadership that led to Hatfield and "hypersafety". The taxpayer now offers the railway 333 billion in investment.

This fantastic sum not only makes a mockery of privatisation, it is also inequitable. Why should a minority transport mode get such huge subsidies?

Central government incompetence has brought a great industry to its knees. If he had any guts, Mr Darling would hand Network Rail's infrastructure divisions over to the private train operators, Virgin, GNER and the rest, on long-lease contracts. The terms, together with any subsequent regulation, should emanate from a single arm's length body. Mr Darling's sole job should be to fix its subsidy, as did his predecessors in the days of BR. He might even invent a name for that body. He might call it the British Railways Board.