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A quagmire of quangos

31 March 2014

A never-ending cycle of re-organisations has seen functions moved in and out of direct government control every few years. Here, Christian Wolmar asks whether these changes address the real problems our railways face?


The railways seem to be reorganised as often as the National Health Service. There are changes afoot yet again. In a move that caused laughter amongst the older hands who remember the Office of Rail Passenger Franchising (ORPAF), the Department for Transport has just announced that in the autumn a new body called the Office of Rail Passenger Services will be created.

It would be comic if it were not such a sad waste of people’s time and taxpayers’ money. 20 years after the start of the privatisation process it seems we have now gone full circle. When the railways were first franchised, OPRAF, which was an effective and quite lean body, managed to let all the franchises in the space of around 18 months. So even though I think the whole franchise process is daft and a huge waste of money, at least it was done efficiently. Then Labour created the Strategic Rail Authority in 2001, which became a hugely bloated organisation and as the joke went, should have been called just ‘Rail’ as it had neither strategy nor authority. Therefore when Labour reviewed the structure of the industry, the SRA was abolished – which actually was a mistake since it should have been reformed – and its functions spread between different players.

Responsibility for franchises then passed to the Department for Transport, which managed the operators and was often accused of micromanagement, though in fact it often failed to keep proper tabs on what was going on. Then came the fiasco over the allocation of the West Coast contract in 2012 which led to two rapid reviews on franchising. Though the system was clearly flawed, neither review looked at alternatives but instead were limited to suggestions about making the existing system better.

Therefore we now have a system of letting short term franchises to the incumbents without competition. How this can be presented as an improvement, given that ‘competition’ was supposed to be the main benefit of the whole system, beggars belief. A wider ranging review was undertaken and now the government intends to create a Rail Executive which will be responsible for major projects, strategy and sorting out franchises – although the latter will pass to the new ORPF in the autumn.

All this is supposed to be with the aim of improving the efficiency of the industry. Remember that three years ago a hard- hitting report was produced for the government by Sir Roy McNulty, which advocated a stiff target of cutting costs by 30 per cent by 2020. Again, while it blamed the fragmentation of the industry for the increase in costs, it failed to make the obvious suggestion that the industry should be brought back together again.

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The  West Coast scandal resulted in two reviews of franchising - neither of which considered any alternative to the system.

Instead McNulty suggested further fragmentation and a series of cuts. This prompted fears at the time – and indeed subsequently – that there would be major cutbacks and widespread redundancies in the industry. In fact, there has been very little sign of such cuts and the McNulty report seems to have been largely consigned to the proverbial dustbin.

This is well demonstrated by the fate of the Rail Delivery Group. The creation of a group linking different parts of the industry in order to deliver savings was a key part of the McNulty recommendations. The RDG was duly formed soon after the publication of the report, but after a flurry of early activity it seems to have become little more than an internal talking shop with no powers to actually make any decisions. This must have come to ministers’ attention, as late last year it was decided that the RDG should merge with the Association of Train Operating Companies.

This was a very strange marriage which seems to have weakened both organisations. The very name RDG is completely incomprehensible to the general public and the remit of the organisation is very confusing. It lacks the powers to make railway companies do anything and, oddly, it does not even have the aim of implementing McNulty’s recommendations. Suggestions of the mass closure of ticket offices (apart from on London Underground which of course is completely separate) seem to have been quietly forgotten and the railway companies realise that with increasing numbers of passengers, staff cuts would affect performance and therefore their income.

Its membership, too, is limited to organisations which have a turnover of more than £100m. Even then it only includes passenger and freight operators plus Network Rail – a total of a dozen firms. It excludes engineering and rolling stock companies, which means that the very people who are actually investing private money into the industry have no say in the RDG. There is, therefore, considerable anger within the industry about this structure and therefore the RDG – and with it the McNulty report – seem to have become an irrelevance.

Are all the fears about major cuts in the industry unfounded? It seems so. Certainly Network Rail will continue to make savings under the new Control Period which is just starting, but these are related to the oversight by the Office of Rail Regulation, rather than McNulty. And the investment programme promised for the next five years, with a £37bn budget, represents a considerable increase on the previous Control Period that ended in March, which had a spend of around £31bn.

Let me end on a neat irony. The Rail Executive is being created with the idea of eventually hiving it off from the Department – and confusingly it will be called the Rail Delivery Authority – with the intention of creating some sort of separate body, like the Highways Agency. One advantage of this, from the point of view of the Department, is that it will be able to hire people on salaries matching those of the people they negotiate franchises with. At the moment the train operators are often able to run rings round the civil servants because they can afford to hire the best brains – indeed, many of whom are former Department officials.

On the other hand, Network Rail is effectively being nationalised in September when its massive £30bn plus debt becomes part of general government borrowing. Ministers have already made clear that they intend to use their greater leverage over Network Rail to rein back on the huge bonuses which it pays to its executives. So we have one part of the railway governance structure being opened up so that higher salaries can be paid, while another part is coming under greater government control in order to ensure that executives do not earn what ministers consider are excessive amounts. You could not make it up.


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