All change

It was probably always bound to happen; it was only a matter of time. After weeks of speculation and rumour, First Group this afternoon confirmed that Alison Forster, Managing Director of First Great Western since early 2004, is to move to a new position within the group.

It is all too easy to associate the problems of FGW with Alison Forster; after all, many of them did occur on her watch. But to do so is both disingenuous and represents a misreading of the truth.

Ms Forster was neither the architect of, nor an advocate for, so many of the issues Great Western passengers face today. And neither did she possess the full range of powers to resolve them. As has been written on this site so many times before, the shape and design of the franchise – which was determined by the Department for Transport – is simply not configured to deliver what the passenger wants. That is something that was always wholly out of Ms Forster’s hands.

Certainly Ms Forster and her team, by their own admission, did make some errors of judgement. But where they did, they took responsibility for them and promised to put things right. As inadequate as this may be, it is refreshingly honest.

If frankness is one hallmark of Ms Forster, experience is another. Having worked on the Great Western network, in one capacity or another, since 1980 she has an intricate knowledge of the region and its rail operation. She also has a solid track record of competence and dedication. It was Alison Forster who, no less than three times, wrote to Railtrack before the Ladbroke Grove rail disaster to warn them that Signal 109 was repeatedly being passed on red and that it posed a threat to rail safety. Her warnings were ignored. Had they been followed up, the Ladbroke Grove crash would probably never have happened.

Ms Forster has also been an extremely visible Managing Director. She corresponds with members of the public over their concerns; she regularly travels on her own trains; and, when out and about, she wears her badge at all times so passengers can come and talk – or complain – to her. Despite the sometimes hostile reception she subjected herself to, she has never been afraid to stick her head above the parapet.

Ms Forster’s move deprives First Great Western of this talent. It will also dismay many staff who, despite the troubles, genuinely admire Ms Forster for the competent railway professional she is.

It would be wrong of anyone to think that Ms Forster’s removal as MD will, of itself, solve the problems of FGW. It won’t. While it is almost certain that things will start to get better – if only because lessons have been learned and planned capacity and infrastructure improvements will begin to come on stream – these are things that would have happened with, or without Ms Forster’s departure. If the move has little to do with improvement, it has everything to do with good public relations.

Lamenting the loss of Ms Forster as head of FGW is not to discredit the incoming MD, if that is indeed to be his title, Andrew Haines. He is, according to those who have worked with him, a safe pair of hands with an excellent track record. It is important that the media and passengers give him a fair chance before judging him. The railway is a long term game and even with the best will in the world, Mr Haines will not be able to sort out every issue within his control on day one.

Change, JFK once said, is the law of life. And so it is. There is no reason, emotional nor rational, why a managing director of company should remain in their post for life. People move on and things evolve.

Nevertheless, on a personal note, I can’t help but feel a twinge of sadness at the departure of Alison Forster as head of the FGW railway. I liked her quiet optimism; I liked her can do attitude; I liked her willingness to engage; I liked her professionalism. And I will miss her when she’s gone.

Lies, damn lies and newspaper stories

This morning’s Times story about overcrowding on First Great Western’s trains will resonate with many passengers. Capacity problems are one of the most significant issues on the rail network and one of the things that angers travellers the most. Unfortunately, despite its relevance the story provides, at best, a partial picture and, at worst, is downright misleading.

The essence of the story comes from a Freedom of Information release made by the Department of Transport in which they detail the most overcrowded rail services in 2006. The most overcrowded service is, apparently, the 06.35 First Great Western train from Bedwyn to London Paddington. The word apparently is important: during the whole of 2006 there was no 06.35 from Bedwyn – indeed, that service has not run since the days of Thames Trains. It is likely that the Department for Transport means the 06.42 from Bedwyn, but there is no way to be certain. If the DfT are incapable of even recording the times of the trains correctly, it says very little for the accuracy of their passenger count figures. Their numbers are, of course, at odds with other overcrowding statistics – although there is no way of actually assessing their validity because, rather carelessly, the Department has not revealed its methodological or sampling details.

The Times cannot be blamed for this error; that is down to the usual incompetence at the Department for Transport. However, where the Times is culpable is in making a spurious link between the overcrowded Bedwyn service and the cutting of stock on the Great Western network. It is true that the new franchise saw stock cuts, and those cuts, as the article identifies, were expressly agreed with the government. However, the cuts were made to the ex-Wessex fleet not to the local fleet which runs the services to and from Bedwyn. Moreover, the cuts were made as part of the December 2006 timetable change and so will have had no impact whatsoever on the published 2006 overcrowding figures. In actuality, the December 2006 timetable change introduced greater capacity between Bedwyn and Paddington and so, if anything, will have helped to ease overcrowding.

None of this is to say that stock cuts won’t cause, or aren’t causing, problems; they may well be. The thrust of the article is accurate inasmuch as it identifies a growing railway needs greater levels of capacity to cope with demand; the reasons why supply isn’t matching that demand is discussed elsewhere on this blog. One thing First Great Western are doing, however, is to remodel their high speed trains to introduce greater capacity, yet this is the very thing the Times article takes a swipe at. The Times needs to make up its mind: either it wants increased capacity, or it doesn’t. If it does want an increase there has to be a realisation that some tables on HSTs have to be sacrificed to make more space for seating – and that sacrifice is the equivalent of over 3 million additional seats on the FGW network across a year.

If we are to build a better railway for the future, one thing that is critically needed is an informed debate about the future of the rail network. Newspapers can play an important part in that debate – but only if they steer clear of sensationalist headlines and report an accurate and balanced picture of the true state of play. By that standard, today’s Times article falls well short of the mark.

The franchising farce

The nature of the franchising system is probably the primary barrier to the growth of the rail network. The central issue with franchises is the short time periods for which they are granted: the majority of franchises are given to Train Operating Companies for periods of 7 to 10 years, with the final years usually being conditional on meeting certain performance criteria.

Clearly, no company can make significant levels of capital investment over such period as there is an insufficient window of time in which they can generate a realistic return. The result is that most TOCs can only commit to relatively minor levels of capital expenditure. This stifles investment in the rail network and means that government is still the only real investment vehicle for most major capital projects.

This situation is exacerbated by the long gestation period for many development initiatives. For a ten year franchise, it is not unrealistic that the development of new trains, stations or track – even were these things to be under the purview of Train Operating Companies – could take up at least half, if not more, of the franchise period. This is an unattractive option which, again, stifles development.

As well as stifling investment, the franchise system also means that the network is run on a short term basis. Franchisees have little concern for what happens after their period of operation is over because there is no guarantee that they will win the next franchise agreement. While this approach is understandable, it means there is virtually no incentive for long term strategic planning and necessary structural adjustments are simply overlooked.

The franchising system, as currently configured, is also hugely wasteful. Companies spend millions and millions putting together franchise bids and devote significant management time and attention to the activity with only the winner of the franchise race having any chance of recouping this expenditure. The government itself also faces significant expenditure in assessing the various bids and managing the franchising system. While such efforts are, to a degree, necessary in any tendering process, the fact that the franchises come up for renewal so regularly makes the system excessively expensive. This is money that could, and probably should, be invested in the rail network.

Changing the franchising system is not an overnight task, but until and unless it is addressed the rail system will not deliver as much as it should for all of its stakeholders. As such, when it comes to railway policy, it is an issue that should be high on the agenda of the new Secretary of State.

A helping hand

One thing my blog really isn’t, is a collection of anecdotal tales of my travels around the First Great Western network. This is quite deliberate: when I started writing I wanted to focus on some of the higher level strategic issues facing the railways and in particular the Greater Western franchise, rather than deal with the minutiae of my personal travel experiences.

Tonight however, I will make an exception to my rule.

This evening lightning struck some track side equipment in the Southall area. Chaos ensued as some of the lines between Reading and Paddington were closed and trains were cancelled, delayed and everything was generally disrupted. I, along with countless other travellers, faced the grim prospect of trying to wend my weary way home.

Fortunately, I managed to make it to Reading fairly easily by catching the first HST I could find that was leaving Paddington. I then proceeded to wait on a rather crowded, and particularly dull, Platform 4 at Reading Station. At around 20.08 a newly refurbished HST heading for Bristol Temple Meads pulled into the station. I looked through the windows to be greeted by the sight of Alison Forster, the Managing Director of First Great Western, wheeling a catering trolley through the train, chatting to passengers.

At a time of crisis, Ms Forster hadn’t shied away from the front line: she was there with her sleeves rolled up helping people and trying to make whatever difference she could. She deserves credit for efforts. Ms Forster probably wouldn’t think she was doing anything exceptional, she’d just see it as part of her job and of her responsibility. And maybe it is – but what a stark comparison to the simpering bureaucrats at the Department for Transport who, despite making passengers' lives a misery, hide in the shadows of their Ministry in Whitehall and would never dream of putting themselves in the line of fire and dealing with everyday travellers.

It is, of course, very easy to criticise First Great Western for problems and for people to be, maybe unjustifiably, scathing about its management, but one accusation that simply isn’t true is that Ms Forster and her team don’t care. I think they do. As I saw in Ms Forster’s actions this evening, I think they care very much indeed.

Notwork Snail

A few months ago, rumours abounded that Network Rail wanted to play a greater role in the running of the rail network. Suggestions were made, and subsequently denied, that the company would like to take control of non-London stations, possibly act as a rolling stock company and even take over the jobs of train operating companies.

In the words of Margaret Thatcher: no, no, no!

If Network Rail were allowed to extend its powers in this way the result would be re-nationalisation by the back door. It would mean the nation’s rail services were put into the hands of what is essentially a government organisation that is neither particularly efficient nor particularly responsive to customer needs. Network Rail’s own record testifies to both these facts.

Private train operating companies have, over time, reduced the amount of subsidy they need to run their operations; indeed, many now pay money back to the government. First Great Western is a good case in point: back in 1996/7, Greater Western as a whole received a subsidy of over £190m to run trains, over the next ten years First Group will pay the government over £1bn. Such a transformation has only been possible by making the operation significantly more efficient and by growing revenues. Contrast this to Network Rail which receives an annual subsidy of more than £5bn, over three times what its predecessor – the equally ineffective Railtrack – received, and has its £18bn of debts guaranteed by the taxpayer.

The results of this lucrative position have not been particularly stunning. Last year the overall amount of delays attributed to train operation companies fell sharply; those attributed to Network Rail increased. Indeed, the train operators are now so frustrated with what they see as Network Rail’s poor performance that the Association of Train Operating Companies (ATOC) has tabled a resolution at Network Rail’s AGM later this month to the effect that operators “are concerned that in the fundamental matter of punctuality the delays for which the company is responsible are substantially higher than in 1999/2000”.

While Network Rail is clearly unable to discharge its present responsibilities either efficiently or effectively the idea that it should be given control of extra areas of the rail network is little more than ludicrous.

There is a great deal of truth in the argument that the separation of track and train, brought about under the Conservative’s ‘privatisation’ programme, was a fundamental policy error. It is obvious that without track and other fixed infrastructure trains cannot run, and without trains there is no need for any infrastructure. The point is that the two are an integrated whole; they go hand in glove. As such, a successful railway operation relies on the two being closely integrated and aligned. Separation hampers this.

The way to remedy this is not by giving more power to Network Rail – one of the more inefficient parts of the complex rail system. The proper way to solve the problem of a lack of vertical integration is to give train operating companies (TOCs) far more control over their essential infrastructure. A TOC could own the infrastructure outright; it could lease it as part of the franchise agreement; or, it could neither own nor lease it but exert a much tighter degree of control over the operation. All of this said, the integration of track and train has to be a longer term objective. It should not be the first, or the overriding objective of future rail policy. Indeed, its successful implementation relies on other changes being made to the structure of the rail system: for example, it would be imprudent to give TOCs control over infrastructure without first lengthening the terms of their franchises.

The bottom line, however, is clear. You do not make the railway network better by giving control to that part of it which is the least customer responsive, the least financially efficient and the most subject to political interference. That’s not a plan for a better future, it’s a recipe for disaster.

Lack of conviction

Holding a position because you genuinely believe something to be true is admirable. Advocating something simply because it will secure you a modicum of publicity is both cheap and cynical. It is into this latter category that London TravelWatch’s recent call for First Great Western to lose its franchise falls.

In actuality, London TravelWatch stopped short of recommending that First Great Western be stripped of its franchise. That would have been too definitive and too decisive a statement. Rather, in a carefully worded comment, it said: “we believe now is possibly the time for the government to consider firm action on the future of the franchise.” Such ambiguity is cowardly. It is also very deliberate: it allows the media and public to interpret the statement as being tough with First Great Western but is sufficiently vague as to absolve London TravelWatch from the responsibility of actually having said anything definite at all.

In addition to saying very little, it is clear that London TravelWatch has no opinion of its own regarding Greater Western. It makes no recommendation as to what it believes the future of the franchise should be, but merely passes the buck to the government who it claims should ‘possibly’ (that’s a maybe!) look into the matter. Herein is a further problem. While London TravelWatch is keen to point to First Great Western’s failures, it does very little to address any government failings - many of which are central to the problems with today's railways.

Despite what London TravelWatch say, or don’t quite say, the franchise will not be removed from First Great Western. For a start, the terms of the agreement have not been broken. For another, the situation on the ground is improving. Even the irascible MP for Maidenhead, Theresa May, recognised this when she told the Maidenhead Advertiser that she was “keen to give them [FGW] another chance first before bringing the axe down.” The bottom line is that from a purely practical point of view, removing the franchise now would bring nothing but disruption and uncertainly and would do virtually nothing for passengers – the very passengers that LTW claims to represent.

London TravelWatch has generated some good publicity from its vapid press release. Unfortunately, it has come at the very expense of an attribute desperately needed by organisations of its kind: credibility. A Pyrrhic victory indeed.

All change

“That's it. The end.” Tony Blair’s final words to the House of Commons yesterday may well have been true for his premiership, but for the government, and indeed the rest of the country, life continues to go on as normal. No one will be more acutely aware of this than Gordon Brown, who has, this morning, announced his new Cabinet.

Among the many changes, the transport brief has passed from the less than competent hands of Douglas Alexander to the, well, less than competent hands of Ruth Kelly. While it is unfair to judge Ms Kelly in advance of her tenure at transport, from her past performance as Secretary of State for Communities it is safe to say she is not renowned for her capability. The farcical introduction, then withdrawal then re-introduction of Home Information Packs (HIPs) is a testament to this fact. Ms Kelly presided over, but never quite accepted responsibility for, this dismal mess of a policy.

It is an error she must not repeat at the DfT, and especially not with the railways. The railways need three main things from politicians – vision, stability and honesty – and these must be Ms Kelly’s immediate priorities.

The vision part has nothing to do with spin. It is, in fact, a highly practical task of deciding how best our railways should be organised to deliver for the consumer and all of the other various industry stakeholders. Such a task is not easy, but it is desperately needed. A fundamental reappraisal of how the railways are structured and run is the one real change that would give, over the longer term, a much more responsive and successful railway network. As the holders of much of the power on the railways, such a reappraisal can only come from politicians and it is here than Ms Kelly must take the lead.

The stability part of the equation is less to do with long term strategic plans and more about leaving private train operating companies like First Great Western alone so that they can get on with delivering their franchise commitments. Under Douglas Alexander, the DfT not only set the terms of franchises agreements but also engaged itself in day-to-day activities such as setting timetables. The department has no business being involved in such tasks and is, in any case, notoriously bad at undertaking them. Ms Kelly must change this culture of micro-management at the DfT.

Honesty is an obvious one. The Department for Transport is a great stretcher of the truth: it makes decisions that cause problems on the railway network and then lets others, like First Great Western, take the blame while pretending it has nothing to do with situation on the ground. Not only is that dishonest, but it is unacceptable. Ms Kelly must ensure that the Department is transparent in its aims and objectives and that it takes full responsibility for its own actions. This is clearly something that Ms Kelly found difficult as Communities Secretary, but at Transport she has an ideal opportunity to make up for her past mistakes.

Standing outside Number Ten yesterday, Gordon Brown said, “…change cannot be met by the old politics.” Nowhere is this truer than at the Department for Transport: a better railway requires a new approach. Whether Ruth Kelly is the best person to deliver it is a question only time can answer.

Foolish consistency

If Bob Crow, General Secretary of the RMT union, were to be granted one ‘political’ wish he would probably opt to see the railways renationalised. Ever since the rail system was ‘privatised’ Mr Crow has been of the opinion that private companies have no right to be involved in the running of the rail network. It is easy to admire someone who sticks to their beliefs but, as Ralph Waldo Emerson once so sagely noted, foolish consistency is the hobgoblin of little minds. And Mr Crow’s consistency on this issue is extremely foolish indeed.

Some of the points Mr Crow makes in relation to the state of the rail network are actually valid. For example, he identifies that the franchising system is a mess. Indeed it is: as has been discussed elsewhere on this blog, the franchising system is at the root of many problems. However, Mr Crow’s assertion that re-nationalisation is required because of these problems is logically flawed. First and foremost, the government is in charge of the franchising system and it is fully responsible for the state of that process. To suggest that control of the railways should be handed back to the very people who are incapable of designing and running a sensible franchising process is a highly specious argument. What is actually required is a better franchising system based around principles that will enable the railways to deliver for passengers in the way that most other private companies deliver on the needs of their consumers.

Mr Crow also bemoans the fact that private train operators like First Great Western make a profit. This is an old argument which is based on nothing more than sloppy thinking and narrow-minded bias. Of course, what Mr Crow and his ilk rarely mention is the fact that the government takes far more money from franchises like Greater Western than the private companies take in profit. But even if this were not the case, Mr Crow is guilty of a double standard: it is perfectly alright for him to campaign for his own members to receive higher salaries; but it is wrong for train companies to work hard to make more profit. Where exactly does Mr Crow think salary increases come from? They can only come from companies making a profit – a company making a loss is hardly in a position to increase the salaries of its staff.

In a recent press release, Mr Crow casually commented: “when passengers are expected to endure overcrowding, service cuts and inflation-busting fares hikes and rail staff are left to pick up the pieces, First Group’s profits are simply obscene.” What he fails to mention is that overcrowding, service cuts and fare rises have very little to do with First Group’s (or First Great Western’s) profits. They are all functions of government interference in the network: the very same government that Mr Crow wants to control our trains.

The simple truth is that the call for re-nationalisation is not a call for a better railway. It is an ideological position that both ignores the real cause of the problems on today’s railways and all of the very real benefits that private involvement, in whatever its form, has brought over the past ten years.

Unfair dismissal

In my opinion, David Drew the Member of Parliament for Stroud does a dreadful job. Quite frankly, I don’t think he is fully capable of discharging the duties of an MP and, in all honesty, he should be removed from his post forthwith.

These are not really my views. Neither are they necessarily true. For all I know, Mr Drew probably does a very good job of representing his constituents. Statements of the type above are extremely easy to make and they are excellent ways, for those in positions of responsibility, to capture a piece of the limelight. Yet they are both ill considered and thoughtless.

For one thing, unless he does something completely illegal, Mr Drew has, through his election, a contract with his constituents. The majority voting for him agreed to elect him for a full term of office. You don’t have to agree with his election, of course, but the way the electoral system is structured is such that Mr Drew has an absolute right to serve for a full term, as does any Member of Parliament.

I am sure that Mr Drew would agree entirely with the above logic, which is why it is a pity he is unable to apply it to the commercial world. For those not aware, Mr Drew is the latest MP to call for First Great Western to lose its franchise. Such a manoeuvre – which could be known as 'doing a May' (after the ever disagreeable Theresa May, the first to employ the strategy) – is highly cynical.

Unless it breaches the terms of its contract, which it hasn’t, First Great Western can’t simply be ‘sacked’ from the Greater Western franchise; just as Mr Drew can’t be removed from office. Mr Drew should be well aware of this fact, and if he isn’t then he clearly isn’t qualified to make comments on this matter and should keep his views to himself. The likelihood is, of course, that Mr Drew is aware and that, despite this, he is trying to score some cheap political points to curry favour with the electorate of Stroud. This is nothing more than the politics of irresponsibility and it's one of the reasons MPs are held in such low esteem.

This is not to say that Mr Drew can’t, or shouldn’t, criticise First Great Western. With just cause, he has every right to. But he should be open and honest with the electorate and not call for things he knows are impossible.

If Mr Drew sincerely wanted a better service his time would be better spent applying pressure to the Department for Transport to ensure that First Great Western is able to keep the class 180 Adelante trains and that the Department stops its meddling in the rail system which is making life a misery for passengers.

These things may not be dramatic and exciting headline grabbers, but they represent a far more realistic and honest approach to the debate over the future of the Greater Western rail franchise.

One variant of Dives and Lazarus

Over the next ten years the Department for Transport will receive over £1bn from First Great Western in franchise premium payments. That money can come from only once place: your pocket.

The payment is approximately the equivalent of a 15% tax on every ticket sale. If your season ticket costs £3,500 then £525 of it will go to the government; if your ticket for a weekend away costs £85 then £12.75 of it will go to the government. The question every customer of First Great Western should be asking is: what value am I getting from this charge?

So how will the money be used? No one but the Department for Transport knows; there is next to no transparency in how the government intends to use your money.

One thing it could be used for is to fund additional capacity. The Department has made much of its announcement of 1,000 additional carriages. But it has not detailed where these will be going or exactly when they will be introduced; and, it is quite possible that Greater Western will receive none of this new rolling stock. The point is that, at the moment, this is a promise with no credibility. It’s jam tomorrow.

Yet, the Department could, if it wanted, take action right now. It could set aside some of that £1bn and use it to allow First Great Western to keep its fleet of Adelante (class 180) trains. These are due to be withdrawn from service on Greater Western in December 2007 when additional capacity has been introduced through a combination of the HST fleet modernisation programme and additional HSTs entering service.

Keeping the 180s would help to reduce overcrowding even further than the planned capacity increases. It may also permit a cascading of rolling stock which would mean some of the older carriages in the former Wessex region could be replaced by newer trains – possibly class 165s from the Thames Valley routes. Having more stock to play with would also act as a buffer against disruption from train failures. All regions, from Maidenhead to Menheniot would feel the benefit.

This is a real and feasible solution to an increasingly frustrating problem and, most importantly, it is something that can be implemented by the end of this year – not at some unspecified point in the dim and distant future.

However, it is a solution that only the government can provide. But to ensure that the government gets the message it will take the commitment of passengers: each and every fare paying customer who funds the £1bn pouring into the government’s coffers needs to write and demand that their money is used to help provide a better service for the Great Western region and to keep the class 180s. They must make it clear that their suffering can no longer be ignored.

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You can contact the Department for Transport by emailing the following people:

douglas.alexander@dft.gsi.gov.uk (Secretary of State)
tomharrismp@parliament.uk (Undersecretary of State)
mike.mitchell@dft.gsi.gov.uk (Director General DfT Rail Group)
peter.west@dft.gsi.gov.uk (Franchise Manager)

Do be polite in your communication but do not be afraid to express your views; remember Civil Servants and Ministers are there to serve the public and are funded by the taxes you pay!

Building the model railway

Download the Building the Model Railway booklet by clicking on this link. It works best if you right click and than use the ‘Save As’ option rather then left clicking on the links. Alternatively, you can request a copy by emailing fgwtruth@gmail.com and a copy will be sent to you by return

The way some sections of the media portray it, you would think that Britain’s railways were in an awful state. In reality, they aren’t. The picture is actually a lot more mixed. Yes, some parts of the railway are dreadful but other bits are actually pretty good. What does hold true across the network, however, is that our railways could be a great deal better.

With so many economic and social forces favourable to rail travel, the era in which we live should be the new age of the train. At a time of increasing environmental consciousness, trains are an eco-friendly way of moving both passengers and freight. At a time of increasing house prices, trains allow people to live further out from expensive urban locations and still easily reach their places of work. And, at a time when people are looking to simplify their lives and strike that elusive ‘work-life’ balance, trains provide method of getting from A to B which, unlike driving, requires very little effort from the passenger and should, in theory at least, be relaxing.

Yet, this is not the golden age of the train. This is the age of cynicism about rail travel. Why? Part of the answer lies in the fact that the railways have actually been successful. The socioeconomic factors mentioned above have resulted in an upswing in demand: more and more people are now travelling by train. Unfortunately, supply has not kept pace with this demand and, as a result, conditions have been created which have both annoyed and frustrated passengers. The reports of overcrowding, lack of seats, timetable anomalies and so forth, all neatly demonstrate this fact.

The laws of supply and demand are fundamental; they are the only laws which cannot be repealed! So, when supply doesn’t keep pace with demand there has to be some reason as to why the economic mechanism is prevented from working. In the case of rail, the reason is the restrictive system or parameters within which the network has to operate. The system is not a natural one found in most functioning market systems; it is an artificial creation which hinders progress and development. The designer, implementer and enforcer of this system: the government.

Talking about the system in this way is not an excuse; it is not about absolving First Great Western, or any other train operator, from any blame. It is actually about trying to find proper and lasting solutions to the issues which face the railways. The challenge is to let the forces of supply and demand bring about what everyone in the industry, and everyone who travels, wants to see: an efficient, effective, successful and admired railway.

The booklet published today details three key changes which are required if the system is to be made more responsive and if rail travel is to significantly improve over the longer term. They are the cornerstones of policy. They are not the only solutions and nor are they fully fledged plans. What they are is a start. They are the first steps that need to be taken if we are to build, for our future, a model railway.

Too high a price?

Even in a capitally intense industry such as rail, a billion pounds is a lot of money. It’s not, therefore, surprising that eyebrows were raised when it was announced that First Great Western would pay the government a £1.1bn premium for running the Greater Western franchise for ten years.

Can First Great Western meet their financial obligations to the government? The broad answer is: yes, they can. From an external perspective, the financials do stack up. Admittedly, they are not easily attainable: the business model relies on consistently high levels of revenue growth, say 5-7% per annum, and a tight management of operating costs. Nevertheless, the bottom line is that they are within the realms of feasibility.

That’s all well and good, but asking whether First Great Western can meet its obligations is actually the wrong question to ask. The thing the commentators should be asking is: what value are travellers going to get from the £1.1bn being paid to the government? And let’s be clear on one thing: the £1.1bn will come directly from the pockets of travellers; it is the equivalent of a 15% tax on ticket sales.

One of the problems with the current rail system is that it simply isn’t transparent. Most people don’t realise that a large part of their travel costs go directly to the government’s coffers. As such, they don’t hold the government to account as they do when it comes to discussions of how more visible forms of taxation, such as income tax, are spent. Yet, First Great Western customers, especially regular travellers and commuters, should hold the government accountable. They should ask questions. And they should demand that part of the ‘travel tax’ they pay is spent to improve their travel experience.

Over the past ten years, and over the next ten, the Greater Western franchise region has been, and will continue to be, financially transformed. Back in 1996/7 when rail was first privatised all constituent parts of what is now Greater Western received an operating subsidy. Great Western mainline services were given £61.9m a year; Thames Trains received £43.7m a year; and, Wessex, received a subsidy of £84.6m. By the end of the last franchise which ended in 2006, both FGW mainline services and FGW Link services were paying the government a premium. Wessex still received a subsidy, albeit one that was much reduced. All of this is testament to the private involvement of the train operating companies which dramatically improved efficiency.

Over the next ten years, the amalgamated franchise will more than pay its way. Even including the former Wessex operation, it will be a net donor to the government. It is, therefore, right that travellers should expect something back for the money they pay. Exactly what they should get is a matter for debate, but extra capacity would be a good starting point. What wouldn’t be fair is for the premium payment to be used exclusively for the benefit of other projects or franchise regions. At the very least, the government should be honest and let people know how they are intending to spend the money and how much of it will benefit Greater Western.

In reality, of course, the whole system is completely the wrong way around. The government, which has instilled and explicitly built into the franchising system a culture of high premium paying tenders, should actually have done something else entirely. They should have created a system where bidders were encouraged to maximise investment into their own operations, not the amount they pay to government. That way, money would find its way directly into front line benefits without being eroded away by Whitehall bureaucracy.

The point, then, is not whether the price of the franchise is too high; the point is whether or not the price will, ultimately, be of any real benefit to Greater Western customers.

Credit where credit is due

It is easy for politicians to promise anything when they’re in opposition; the hard part comes when – or if – they have to deliver. To be fair, David Cameron has so far, not promised an awful lot, preferring instead to bide his time until nearer the election. A closer examination of the party’s communications does reveal, however, certain key themes emerging: one of them being an increasing concern about the state of Britain’s railways.

Earlier this week, Mr Cameron said that tackling overcrowding on trains would be an urgent priority for any future Conservative administration. There will be no new government money but, rather, Mr Cameron said funding should come from the premium payments the government will receive from the new franchises like First Great Western’s.

His idea makes sense. First Great Western is due to pay well in excess of £1bn in premium payments to the government over the next ten years: more than enough money to replace FGW’s entire HST fleet with cash to spare. Indeed, if only a tenth of this payment were invested in new rolling stock, it would add significant capacity to the Greater Western network.

Quite what the government actually has the £1bn earmarked for is anyone’s guess; it probably hasn’t calculated it’s budgets that far ahead. But releasing only a tenth of the premium for future investment in rolling stock – which will in turn most likely lead to higher levels of demand and a subsequent increase in income to the fare box – isn’t beyond the realms of economic feasibility. It’s fair too. The money paid in premium can come from only one place: First Great Western’s passengers. In effect, it is an indirect tax levied on everyone who travels on Great Western’s trains. Well, passengers want part of this ‘tax’ to be used for their benefit – not just for the benefit of other franchises or for the myriad of hapless schemes the Department for Transport happens to have in mind.

The response from the government was typically dismissive. Commenting on the Tory proposals, the Transport Minister, Stephen Ladyman, said: “you can't just wave a magic wand and make these things happen instantly. It takes time.” Yes it does. But your government has had ten years, Mr Ladyman – ten years and precious little to show for it.

So, while Mr Cameron’s latest rail idea remains sketchy – and is not a panacea as it fails to deal with any of the structural problems of rail – it is, undoubtedly, a step in the right direction.

An open letter to the Secretary of State

Dear Mr Secretary

Almost five years ago your predecessor, Alastair Darling, spoke at the Railway Forum. In his speech he said: “…the Department will always be open to new ideas and approaches. Not just from industry but user groups and the wider public. If there's a case for change or a new approach, let's discuss it.” I hope, Mr Secretary, that you share his opinion because there has never been such a compelling case for change as the situation we find ourselves in today.

Over the past ten years we have witnessed unprecedented growth in rail travel. I know your department is aware of this, not least because it regularly boasts of this trend as some sort of government achievement. Whether this pride is justified is a matter for debate, not least because despite the success of rising passenger numbers, all is not well on our railways. The crux of the problem: supply is not meeting demand.

At the most basic level, there are not enough carriages to properly service the number of passengers the railway is currently carrying, and will have to carry over the medium term. But the problems are not just confined to this issue; supply and demand are mismatched in other areas too. Timetables are not responsive to the needs of local people; some lines experiencing passenger growth have seen a decline in the frequency of services; and, fares are going up while customers feel they are getting a worse, rather than better, travel experience.

These things may seem like a disparate mix of problems with no connection between them. The reality is that they all stem from the same root: a system which is fundamentally flawed. Now I know this system was not authored by your administration, but is a system over which your government has had stewardship for the past ten years. Ten years is a long time. It affords ample opportunity to design and implement something better; something that actually works to the advantage of travellers. Unfortunately, for all their fine sentiments and words, none of your predecessors had the courage to seize this opportunity. Maybe your tenure will eventually prove to be the exception, but from what I have seen to date all you are currently offering is ‘more of the same’. To continue like this would be a shame, so here are some constructive suggestions for your consideration.

First, remove yourself and your armies of civil servants from interfering in the day to day running of the railways. Frankly, Mr Secretary, it’s not something you are terribly good at – although, if it is of any comfort, it’s something no government department has yet mastered. For example, when you set First Great Western’s December timetable – which, despite your claims to the contrary, you did via the SLC2 specification – you completely messed up what was, previously, a perfectly viable service. You did this because you were meddling in something you had very little knowledge of: timetable setting is a practical matter, not some theoretical exercise that can be managed from a dusty room in Whitehall. You may have noticed that many parts of our economy run perfectly well without micromanagement from the state; indeed, they are generally far more successful than those parts under central control. Nota bene!

Second, sort out the franchising system. There are lots of practical things you can do, but the current mechanism just doesn’t work to the advantage of anyone. You could, if you had the political courage, issue long term franchises – say 25 years plus. This would give train operating companies a real chance to develop strategic visions for their areas rather than being a hostage to the short-termism imposed on them by their contracts. They would also be much more willing to invest in new rolling stock to aid with capacity problems. In short, longer franchises equal more private investment.

Third, when you issue franchise specifications you need to make sure your calculations stack up and that you take a holistic approach to passenger growth. What do I mean by this? Well, Mr Secretary, take the First Great Western franchise as a case in point. Your department was certainly beguiled by First Great Western’s growth projections – which were higher than your own (probably because they are more sensitive to market reality than your planners) – and you were keen to extract the financial premium that such growth would allow. However, you didn’t really think about the flip side to this: how that demand would be met. You didn’t, for example, build in much of a provision for new rolling stock. In fact, truth be known, other than accepting First Great Western’s refresh programme which will introduce more seats on the HST services, you didn’t build in a provision for ANY new rolling stock. That’s hardly integrated thinking.

Fourth, and this is most important, you need to be open and honest about your approach. You are the sole guardian of rail strategy. The government sets the parameters of the system and determines the way in which it will be run. You, and only you, have the power to issue and rescind franchises. You have all the power but it seems that you want none of the responsibility that comes along with it. On the December timetable issue you blamed First Great Western for the incompetence of your own planners. When the GNER franchise collapsed you blamed the company’s management, even though your own department should have recognised the financial shortcomings in their bid. Quite simply, Mr Secretary, it’s not good enough and you have got to do better. If you want to make unpopular decisions because you think they are right then have the courage of your conviction and explain to people what you’re doing and why. If you make mistakes you should admit to them and move on, not try to shift the blame to save your own skins.

There is, of course, much more advice I could give you but implementing these first four steps would represent a very good start.

In closing, I do not seek to claim that all the failings on today’s railways are down to your department. I do believe, however, that whether deliberately or accidentally, government policy has exerted a negative influence and held back the railways for far too long. So my message to you is quite simple: get off the track, Mr Secretary, you’re delaying progress.

Yours sincerely

CJ Harrison

Who does what?

Passengers travelling to and from Swansea are, rightfully, outraged. Engineering work which was supposed to be completed after the Easter break is taking an extra week and, as a result, there are no services either in to or out of Swansea. Massive disruption has ensued.

Meanwhile, Mr Pedersen of Maidenhead is annoyed with what he sees as ‘yet another’ points failure which has caused him difficulties. In protest he has written a strongly worded letter to the Maidenhead Advertiser. In his letter he asks a pertinent question: so are Network Rail or FGW to blame for the failure to properly repair this set of points outside Maidenhead?

The answer to his question is that Network Rail is fully responsible for the maintenance of all network infrastructure: they look after signals, tracks, points and all other ‘bits’ the trains run on. They also manage all engineering and renewal work – which means that they, and they alone, are responsible for the current problems in Wales.

First Great Western has no responsibility for these areas: it is completely at the mercy of Network Rail. That, for better or for worse, is the system we currently have. It is a much misunderstood system but let’s be clear on one point: anyone who blames FGW for infrastructure problems is either ignorant of the facts or is simply evading the truth.

More questions than answers

The government’s announcement of 1,000 extra carriages to alleviate overcrowding isn’t so much of a policy as a glib soundbite designed to take some of the heat off an increasingly pressured Department for Transport. Indeed, the whole matter raises far more questions than it answers.

Question one: where will these new carriages go? The Department has already answered this – it doesn’t know or hasn’t yet made a decision! Such a position demonstrates the ad hoc nature of the announcement and the complete lack of planning and foresight within the government’s rail division. Surely capacity increases should be demand driven. In other words, the number of additional carriages should be determined by examining exactly what is needed on the network, where it is required and what it is financially viable to deliver. Requirements certainly shouldn’t be determined by plucking a rounded number out of the air, which is precisely what seems to have happened here.

Question two: how will current franchises benefit from the additional capacity? This applies especially to First Great Western’s franchise, but it is also applicable to others. According to the government’s rather sketchy timetable, additional capacity will start to enter service well within the existing leasing terms of many current franchises. Since the scope and financials for these franchises have already been determined, how will they benefit from additional capacity? Is the government planning to provide the carriages free or for a discounted price? If it isn’t, does it intend to force – by some mechanism – franchisees to pay for additional capacity that wasn’t part of the original franchise specification?

Question three: how much will the new carriages cost? No one knows exactly. Some figures have been bandied around by the Department but none of them are fixed, they are merely rough estimates. It is notable that the Secretary of State for Transport was very careful in his announcement to include the phrase “if the price is right”. In other words, he does not want to fully commit himself to additional carriages without knowing the price. A sensible policy but one that suggests that the announcement was somewhat premature and ill thought through.

Question four: are the additional carriages part of an integrated policy? It is all very well providing more rolling stock but unless it is matched with increases in platform length and other necessary changes in fixed infrastructure then its impact will be somewhat muted. Network Rail recently announced its business plan, but since the government can’t say where the rolling stock is going, it appears highly likely that this plan isn’t fully aligned with the Department’s intentions.

These questions are not academic curiosities: they are critical factors to which there should be answers. It is worrying that the Department for Transport – which is supposed to be the guardian of rail strategy – is not able to provide clarity over any of these points. Can you imagine a private sector business being run in this way? It would be like First Group going out and buying 1,000 new buses without determining where they are to be run; or, British Airways ordering 50 new aeroplanes without having any idea of how they are going to use them.

This current muddle, which is supposed to constitute a strategic vision, is little more than an absurdity – and one which is entirely symptomatic of the lack of focus the government has when it comes to rail policy.

The pound in their pocket

The profit motive – the idea of making surplus cash out of dealings with customers – is one of the most misunderstood concepts of corporate Britain. The public generally don’t object to companies making a little money, but are quick to pronounce a negative verdict on those they see as making ‘too much’ - although no one has yet come up with a robust definition of exactly how much constitutes ‘too much’. They also readily denounce the profits of those organisations they see as making money out of an inferior product. These indictments were the subject of a recent letter to the Maidenhead Advertiser from Anu Sharma. The topic of her correspondence: First Great Western.

It is not the job of this blog to defend the profit motive per se. Although, as has been said before, the role of profit on the railways works as it does elsewhere in the economy: to provide capital for future investment and expansion, both of which ultimately benefit consumers. Profit should not, therefore, be too much maligned. But are Ms Sharma’s specific charges against First Great Western justified?

First and foremost, it is obvious that First Great Western is going to make a profit from the running of the franchise. They wouldn’t have bid if they weren’t. And nor would any other company. But are they making too much? The best way to find out is to examine how each pound of income to FGW over the course of the franchise will be distributed. From the outset it is important to understand that this is not an exact science: to get the final numbers a large degree of estimating and forecasting is required (see note below). However, that caveat mentioned, each pound of income is distributed as follows:

Operational costs: 77 pence
Payment for the franchise: 15 pence
Capital investment: 3 pence
Operating profit: 5 pence

The operating margin (5 pence in every pound) is modest compared to other leading companies: Tesco makes around 6 pence in the pound in operating profit; Marks & Spencer, 11 pence; British Airways, 8 pence; and, Vodafone 24 pence). There are, of course, companies that do make lower margins, but not all that many. So, while the charge that First Great Western is profiteering makes for a good headline, or letter to the editor, it isn’t one which stacks up against the available evidence.

What is notable is the amount the government is taking in premium payments. This is the money First Great Western have to hand over for the privilege of running the franchise. Around 15 pence of every pound spent goes to the government’s coffers: triple the amount made in profit. Theoretically some of this money will be reinvested in the rail network; but not before a significant proportion of it is wasted on Whitehall bureaucracy. Moreover, not all of it will find its way into the Greater Western region; much will be diverted to other regions and even to subsidise other train operators. This should be of much more concern to Greater Western passengers than FGW’s profits.

The fact that the government wants to use the Greater Western franchise as a cash cow is a major factor contributing to some of today’s problems. It is natural that a franchise that once attracted £11.5m in annual subsidy (£56m paid to Wessex minus the surplus payments of First Great Western and First Great Western Link) is going to be squeezed when that subsidy is taken away and a massive premium payment put in its place. The government knew this when it demanded bidders for the franchise submit premium-paying tenders; and it knew it when it engineered service and timetable cuts to make such a financial transformation feasible.

Against this backdrop, Ms Sharma’s suggestion of fining First Great Western its profits makes no sense at all. If anything, the public should be demanding that the government surrender a large proportion of the premium payment and use it directly to improve rail services in the Great Western region.

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Note: the calculations are based on the following assumptions: 6 percent annual growth for every year of the ten year franchise; an average annual increase of 2.6% in operating costs; synergy savings of £15m from Wessex following the merger with the other parts of the franchise; £200m investment in carriage refurbishment and new engines as stated by FGW; £1.13bn premium payment to the government as stated in the franchise agreement.

On the sunny side of the street

It’s very easy to fall into the trap of negativity; complaining about things and analysing what’s gone wrong, makes for far more compelling blog entries and media stories than highlighting what’s going right. So, while there are many legitimate problems with rail travel, we shouldn’t forget that there are some positives too.

Alison Forster, the Managing Director of First Great Western, has highlighted many of these plus points in her most recent letter to customers. This comes on top of yesterday’s announcement by Network Rail of a significant future investment in network infrastructure – some of which will be spent on projects in the Greater Western region.

Needless to say, all of these things will take time to be implemented. Unfortunately rail is not an industry where changes can be made overnight – even if and when capital is readily available to spend. But, in sum, these positive measures will, over the longer term, make life easier for the travelling public. As Ms Forster notes in her message: “individually, each one of our changes does not make a headline, but taken together they are like a barometer that is moving from stormy to change and on to fair”.

None of this negates the fact that there are still serious structural problems in the rail industry. Nor does it alter the difficulties that such a structure will continue to create for those companies trying to deliver a service to customers. Nevertheless, it’s always good to appreciate that, on an otherwise shady street, there is still some sun to be had.

Fat Controller

If proof were ever needed of how divorced from reality the Department Transport is, then one need look no further than the latest edition of Rail Professional magazine . Nestling among the various articles about track, signalling and rolling-stock is an interview [opens in PDF] with the Transport Minister, Tom Harris.

In a single throwaway line, Mr Harris reveals almost everything that is wrong with the government’s understanding of rail. On the structure of the industry he says: “It’s a logical, private industry specified by government. Don’t blame the structure for failures”.

First and foremost, it is a ludicrous contradiction to pretend that an industry tightly controlled and ‘specified’ by the government is a private one. No other private industry operates in this way: since when was Tesco told where to open stores, what to sell and what prices to charge? Moreover, how is Network Rail, the manager and guardian of all fixed railway infrastructure, a private company? It isn’t; it’s an organ of the state.

This, probably deliberate, misunderstanding by Mr Harris, is much more than a semantic argument. It is mechanism by which the government maintains power over the railways but evades any of the responsibility that comes with it. It’s the trick by which they are able to push all of the blame for recent problems onto First Great Western – which Mr Harris does elsewhere in the same interview – while pretending that their own policies and decisions had nothing to do with the issues; the old mantra of, “it’s nothing to do with the Department – rail is privately run, blame the operators”.

The fact that Mr Harris thinks the current system is logical is extremely worrying. Many words have been used to describe the privatised rail industry but ‘logical’ is seldom, if ever, among them. The present system is actually completely illogical. Just think about it. We have a system where many different companies run the trains people travel on; another group of companies rent them the trains; a further organisation runs the track and signalling; this same organisation ultimately owns the stations but, in most cases, leases them back to the same people who run the trains so they can manage them; there are several regulatory bodies which tightly control safety; some more bodies who collect data and information on rail performance; a smattering of passenger and interest groups; and, on top of all this presides the government trying to direct and coordinate all of the various elements. This, of course, is before the complex rules and regulations governing the relationships between these various agencies is taken into account. It doesn’t even sound logical in theory and, in practice, it is a recipe for mismanagement, bureaucracy and a completely disjointed approach to policy making.

That Mr Harris goes on to state that the structure shouldn’t be blamed for failures serves only to demonstrate his naïveté. No one, not even politicians, disputes the fact that there are problems on today’s rail network, but if it isn’t the system that’s at fault, then who – or what – is to blame? Mr Harris does not say, but the reality is that the system is entirely at fault: it brings few of the advantages of true private involvement while maintaining all of the problems of state intervention. The end result is that the present system delivers neither good value for the taxpayer or good service for the travelling public. Mr Harris’ failure to understand this – and by implication the Department of Transport’s lack of will to deal with the problem – does not bode well for the future of the rail network.

Throughout the interview, Mr Harris keenly emphasises how much he enjoys his job. He may well indeed, but that does not make him, or the Department he works for, qualified for the job of running Britain’s railways: that’s a role for real, commercially focused railway professionals like Alison Forster or Mary Dickson.

Investment

If you rent a house on a short to medium term basis, it stands to reason that you’re not going to invest in it very much. You might paint the odd wall to make your surroundings more pleasant but you’re not going to lay acres of new carpet, replaster walls or undertake major structural work.

The same type of argument applies to train operating companies like First Great Western. If they don’t own a franchise but merely ‘lease’ it from the government they’re not going to inject huge amounts of cash. Sure, they will put in some money here and there – the railway equivalent of paining a wall – but it just doesn’t make sound business sense to do anything over and above this.

To get more private investment in the railways we need to give train operating companies more of a reason to invest and to do that we need to give them more of a sense of ownership over their franchises. This may be longer agreement terms or it may something more permanent; but whatever it is, something clearly needs to be done.

When it comes to investment, ownership – whether an individual’s possession of a home or a train operating company’s long term secured tenure over a franchise – is a wonderful motivator.

Non est mea culpa

It is increasingly commonplace for First Great Western to be blamed for all manner of ills which are completely outside of their control – but blaming the company for overcrowding on another operator’s service is simply nonsensical. Nevertheless, that’s exactly what Councillor David Unwin of Bridgend Council has done in a letter to Alison Forster.

Mr Unwin complains that the removal of a First Great Western train has created severe pressure on at least one of Arriva Trains Wales’ services. While there may well be some truth in the statement, Mr Unwin fails to see the matter in context and his analysis of the situation is intellectually pitiful.

First of all, FGW does not have complete control over its timetable and any cuts to services will have been mandated, or at least rubber stamped, by the Department for Transport. But that’s not the real issue here: the real issue is the unequal relationship between Arriva Trains Wales and First Great Western.

Compare the two.

Arriva is subsidised by the Welsh Assembly Government; it is able to run unprofitable services without concern for its overall financial stability. First Great Western is a commercial entity that receives no subsidy from the Assembly or, over the course of the franchise, from the UK government – indeed, it has to pay back over £1bn in premium payments.

Arriva is paid by the Welsh government to run a service for Welsh passengers: this duty of service, regardless of commerciality, is a condition of it accepting subsidy. First Great Western, while it wants to provide a good service, has no such duty: it cannot be expected to run unprofitable services just because councillors – or Arriva – want them to.

Arriva, by receiving subsidy, is able to distort the market. It takes a share of passenger income from the Welsh Market which, under normal commercial conditions, it would not be able to profitably service. First Great Western is deprived of at least some of this income and this, in turn, makes it less attractive for them to add services or capacity.

Yet, despite all of these considerations, when it comes to the issue of overcrowding on Arriva’s trains it is First Great Western – the private company running without government assistance – that is blamed. A double standard is clearly in operation.

Why do Councillor Unwin and his friends expect First Great Western, at their own expense, to provide services without regard to their commercial feasibility when they do not expect the same thing of Arriva? Why do Councillor Unwin and his friends not direct criticism at Arriva which is, after all, paid by the state to provide a good service to passengers? Why do Councillor Unwin and his friends not look to the Welsh Assembly government to sort out the anomalies in subsidy payments given to train services in Wales?

The answer is simple: for intellectually lazy politicians, it is easier to grab a headline by blaming First Great Western than it is to properly analyse the situation and report the truth.

The fallacy of renationalisation

Remove the franchise from First Great Western! Renationalise the railways! It’s the only way to provide a half decent service! How often have you heard such calls? And how tempted are you to believe that there is a degree of truth in them? If you are tempted then stop for a moment, think about what you are advocating and consider the following.

The first question to ask yourself is whether the railway system, as it exists today, is actually a proper private entity in any meaningful sense of the term. Who owns the railway? Not the train operators, that’s for sure. If they did then they wouldn’t have to bid for the right to run train services. In actuality, it’s the government which holds the title deeds to the railways: it says who can, and who cannot, run services; it tells them what services to run and, increasingly, how to run them. If the contractors don’t meet the government’s requirements then their agreement is terminated and their services dispensed with – as the case of GNER neatly testifies. That’s hardly a private system: it’s a publicly, state owned system partly contracted out, on a short term basis, to private companies.

So, if the system isn’t properly private in the first place calls to renationalise it seem somewhat futile. But there is also a more important issue at stake: the fact that most people believe the system is private leads them to arrive at sweeping and erroneous conclusions. These often take the form of blaming private train operating companies for most, if not all, of the railway's current ills. Yet…

…are cuts in services made by greedy private companies seeking to make a fast buck? No, they are actually driven by government actively reducing service specifications.

…are fare increases implemented by fat cats in boardrooms wanting to boost their profit figures? No, most fare increases are mandated by the government seeking to increase the amount of money coming from passengers.

…is the lack of new rolling stock and capacity due to corporations trying to save money by squeezing more and more passengers onto already overcrowded trains? No, it is caused by government-created franchise specifications which are restrictive and make no provision for rising passenger numbers.

See the pattern? At the bottom of most of the problems is the government, not private companies. Calling for yet more government involvement through ‘renationalisation’ is simply prescribing more of the same poison which is damaging the system in the first place. It will result in an even greater array of problems and a further deterioration in service quality.

Private companies don’t, of course, always get it right but they are, in general, far more efficient at running things than the government; and this is as true in rail as it is elsewhere. But in order for them to be effective they require a degree of operational freedom which just isn’t present on today’s rail network. However, while most people would, at least grudgingly, accept that private entities are efficient, the public is more sceptical about the profit motive of private firms. They think that profit can only be provided at the expense of a good service and that the mission of a private company is to ‘rip them off’. Nothing could be further from the truth.

There is nothing whatsoever wrong with making a profit. Indeed, it is profit that creates funds for future investment, for staff salary increases and for shareholders and investors. And neither is there anything wrong with providing a return for investors. The railways need capital; without it there can be no future development. And that capital will only come if rail companies are able to provide a good return for investors. No profit, no investors, no capital, no development, no new carriages, no new capacity, no new anything. And then we’re back to precisely the situation we had under British Rail where the railways were constantly starved of cash causing a backlog of investment which still haunts us to this day. Profit is an essential part of the functioning of a market economy and it works in everyone’s interests – rail passengers included.

It is also a mistaken belief to hold that private companies are only out to rip everyone off. Unlike the government’s power to tax, no private company, train operators included, is able to force consumers to deal with it. The only way for them to get money from people is by offering a positive: a service in return for payment. But train companies are a special case because they’re a monopoly provider, people will argue: they can subject us to horrendous conditions and extortionate charges and we still have to use them. But these conditions already exist on the rail network and they are caused, not by private business, but by government interventions. As such, it is a completely unconvincing argument to accuse private train operators of something they may do in theory when government involvement is already causing the very same problems in practice. In reality, while a truly private system may not be completely perfect, it would be more sensitive to consumers needs and would seek to grow its market share – and profits – by attracting non-rail users to the service: something it could only do by providing high service standards at reasonable prices; not by 'ripping people off'.

So, the state of today’s railway isn’t the fault of ‘privatisation’ at all and what the railways need today isn’t renationalisation. What the railways need today is privatisation proper.

Sardine Man

Transport 2000 has, today, launched its report into the most overcrowded rail journeys in Britain. Many of those coming in for fire are on regional routes rather than on commuter services such as First Great Western trains in the Thames Valley. Although, as the report fully recognises, capacity is now a very serious issue across the entire network.

The report contains some interesting analysis which supports many of the things this blog has been saying. Not least among them, the fact that the way franchises are structured by the government results in stock-underutilisation because of high leasing costs which, in turn, exacerbates overcrowding.

Julia Thomas, Transport 2000’s public transport campaigner, said: “It’s very easy to blame rail operators for overcrowding problems, but actually a lot of it is down to the Government’s rail policy – they have issued ‘no growth’ franchises for the past 10 years and they’ve been promoting a policy of fares hikes to get people to travel off-peak, but passengers really don’t have that much flexibility. In addition, the very short time periods covered by franchise agreements does not encourage any infrastructure investment by the rail operators.”

Amen to that.

You can see more about Transport 2000s campaign, and follow their mascot – Sardine Man – via the following links:

Sardine Man Blog
News release

Guilty, by their own admission

In a previous blog entry we mentioned that we were seeking, under the Freedom of Information Act, proof that First Great Western could not change services without express permission from the Department for Transport. Today, this proof has been provided.

The derogations against the changes to Oxford services announced on 9 January 2007, offer categorical evidence that First Great Western cannot change the timetable without authorisation from the Secretary of State. This is at odds with the Department’s past assertions that train companies are free to run additional trains: they are clearly not free unless the Department agrees with, and rubber stamps, their plans.

However, the information released also reveals something else which is highly significant.

It shows how the December 2006 version of SLC2 (Service Level Commitment 2) was changed by the government to significantly worsen the services provided to passengers. Route D2, where previously three additional services were required from Oxford, was changed to require just two additional services. Route C1, which is also mentioned, also suffered from such a reduction in service. In other words, the government built in the reduction in service into SLC2 (which drives the timetable) thereby causing the problems with capacity and frequency. Of course, these are just two of the very many reductions the Department will have prescribed.

The issue remains that the government exerts too much control over the railways. It is interfering and meddling in areas where it has no business to be and, in so doing, it is making life difficult for the travelling public and train companies alike.

A victim of circumstance?

First Great Western: villain or victim of circumstance?

Find out by reading The Truth About First Great Western. Now available for download in PDF format. Either use the link to the right or this link to download it. It works best if you right click and than use the ‘Save As’ option rather then left clicking on the links. Alternatively, you can request a copy by emailing fgwtruth@gmail.com and a copy will be sent to you by return

Sticking plaster

While the government’s announcement of 1,000 additional train carriages by 2014 is to be welcomed, the commitment represents the metaphorical equivalent of applying a sticking plaster to a patient who is haemorrhaging over the floor of the operating theatre. Furthermore, the plaster is being applied by the very same people who inflicted the wounds in the first place and, before taking this action, they stood watching for quite a while as the blood drained away and the patient descended into a medical crisis. Maybe that’s stretching the metaphor a bit too far, but you get the general idea: it’s too little, too late and does nothing to solve the, underlying, political problems of the rail system.

While the solution may be questionable, the government’s timing is prudent. The issue of rail overcrowding is a growing problem which is angering travellers well beyond the First Great Western franchise; in some areas passengers are in open revolt and are demanding action. But to anyone with any degree of knowledge about the railways this should come as no surprise. Passenger numbers have been rising for over a decade: by the Transport Secretary’s own admission by 40% since 1996. Yet capacity has been increasing at nowhere near the same rate and very little has been done to address this disparity between supply and demand. The current crunch, squeeze, crush or whatever other descriptive term you wish to apply to it, is the inevitable result.

That the government, which is the ultimate controller of the system, has sat on its hands for ten years is bad enough but, in some instances, it has actively exacerbated the problem of overcrowding. Take, for example the December 2006 timetable for First Great Western’s trains. Quite what objectives the Department for Transport’s planners had in mind when they designed this is unclear, but maximising capacity certainly wasn’t one of them. Indeed, their meddling has actually reduced capacity from busy commuter stations making trains even more crowded than ever before. If the government were serious about the solving the problem of overcrowding it would allow train operating companies, who know much more about the requirements of their customers, to at draw up timetables – or, at the very least, to have a much greater say in their creation. But the reality is, the present administration just doesn’t trust professionals to make decisions – they’d rather have decision making centralised in Whitehall.

So what of the train operating companies like First Great Western? Surely they could have added capacity? That would, of course be the ideal and, in theory, it’s what should happen. Train operating companies should see that passenger numbers are increasing as part of a long term trend and, in response, they should invest in new rolling stock to meet this demand and to attract further customers. That’s the theory. But under the current system, it isn’t – and will never be – the practice. Buying new trains is an expensive business. This in itself isn’t a huge problem: capital will always flow to any venture where it can make a return so, provided there is a demand for them, finding the money for new trains is perfectly feasible. But, there is the matter of the time taken for a return to be made. With franchise terms of seven to ten years, no train operating company is going to invest significant amounts in rolling stock quite simply because there is no time for them to get their money back. Until the lengths of franchises are made significantly longer, using train operating companies as a route to increased capacity simply isn’t feasible. And with the subsidy profile for many franchises being phased out, this is more the case now than ever before.

So, that leaves the government as one of the only sources of capital investment. But while government is financially profligate, it has many demands on its expenditure and can never be guaranteed to give rail the priority it needs. Moreover, government by its nature is short-term in its outlook. So even where a long term return can be made, why should a government today spend money only for a different administration to reap the rewards tomorrow? That’s part of the reason the announcement of increased capacity – which should have come ten years ago – has only just arrived and it’s also the reason why by the time the increase capacity is with commuters there will be a whole set of different problems that then have to be addressed, yet again caused by a misallocation of supply to demand.

Yet, even under this crazy system there is a simpler way. Over the next ten years the government is set to take huge amounts from franchises such as First Great Western’s where a premium of over £1bn is set to be paid. While part of this can be used to fund new trains by the Department, if the government were serious about alleviating overcrowding it could call up First Great Western and ask them in return for a reduction in the premium to keep the Class 180s Adelantes – assuming they have not now been assigned elsewhere – and use them, as well as the additional and refurbished HSTs to help improve capacity. That they haven’t done this shows their lack of commitment to making life easier for rail travellers.

So for the time being it’s jam tomorrow – both figuratively, and for long suffering commuters, quite literally

The Truth About First Great Western

The Truth About First Great Western booklet is now available for download in PDF format. Either use the link to the right or this link to download it. It works best if you right click and than use the ‘Save As’ option rather then left clicking on the links. Alternatively, you can request a copy by emailing fgwtruth@gmail.com and a copy will be sent to you by return.

Happy reading!

Coming soon…

The purpose of this blog is to discuss the issues surrounding the Greater Western franchise and to try and get to the truth behind many of the problems that face today’s rail network.

Despite the title, its purpose is not, and never was, to blindly defend First Great Western but, rather, to show how it is unfair and wrong to blame First Great Western for circumstances which are not of its making.

This weekend the ‘Truth About First Great Western’ booklet will be published to this site. As well as showcasing some of the articles from this blog, the document provides a more balanced and structured discussion of the root causes of the issues and where responsibility begins and ends for many of the activities on the Great Western railway.

Profit and service: perfect bedfellows

There is a much repeated fallacy that it is impossible for a private rail company to provide a good service. First Great Western has often been a victim of this allegation with a view that they have put profit before service.

The truth is that it isn’t impossible for a private company with shareholders to run a good railway service.

Over the longer term, a private company has got to deliver a steady and continuous growth in profits to satisfy both shareholders and the City. It is only possible to delivery such growth by satisfying customers. Cutting costs to the detriment of customer service certainly delivers a short term profits boost, but it doesn’t deliver sustainable growth – if only because existing customers eventually desert the service and it becomes increasingly difficulty to attract new ones because of a poor reputation. The ultimate consequence of such a position is that it becomes very hard to grow the top line (or revenues) and having already undertaken a cost cutting exercise the company has nowhere to turn to grow the bottom line or profits. And that is precisely why no sensible private company looks after shareholders to the detriment of customers.

When properly managed, cost cutting does, of course, have a part to play. And so it should: it makes things cheaper for customers and provides more money for future investment as well as allowing a better return for shareholders who, incidentally, are one of the sources for future capital investment. But it isn't the engine of growth of most private organisations.

I accept that today’s railway is run on a short term basis and this is, indeed, one of the central causes of many of the current problems. But the short term nature is not a problem caused by private businesses like First Great Western - it is a political problem brought about by an unsound franchising structure and a government that refuses to provide any long term strategic direction.

Ultimate responsibility

Consider the following scenario. You want to have a new home constructed and employ a builder to do the job for you. You give the builder some basic plans and let him know your budget. Based on this he then comes back with a detailed specification and costs. You discuss these between you, making some adjustments here and there, and then agree on final plans. The builder constructs the house according to the agreed specifications, finishes the job and presents you with the key. At this stage you invite your family to view the new property. They dislike every aspect of the home from the layout to the architectural design and refuse to move there. Who, in this instance, is to blame?

Most people who possess any degree of logic will answer that you are to blame, simply because you are the ultimate decision maker: you signed off the plans and you agreed the specification with the builder; in this case probably doing so without adequately consulting your family. Clearly, so long as the builder has followed the agreement he or she cannot be assigned any of the blame.

Now consider the following scenario. The Department for Transport want to create a new rail franchise and want to have someone run it for them. They provide bidders with a basic specification based on their budget. The bidders then come back to them with detailed plans, and from these the Department picks someone to undertake the running for them. They enter in to some further discussions making adjustments here and there before the plans are finalised. The contractor – let’s call them First Great Western – then starts running the service as per the agreement entered into. However, customers do not like the new service and start complaining. Who, in this instance is to blame?

For most people who are broadly ignorant of the way the system works – and why indeed should they be concerned with it – the blame is assigned to First Great Western as it is the part of the operation most visible to them. Yet, the principles that hold true for the first scenario still hold here. The Department for Transport is the ultimate contract manager: it, and it alone, dictates the type of service it wants and then enters into an agreement with a third party to run that service.

To blame a train operating company like First Great Western for running a service, no matter how inadequate, specified by the Department of Transport is as illogical as blaming a builder who constructed a home based on detailed plans given to him. Certainly, there are areas where First Great Western does need to take responsibility – such as the maintenance of its train fleet – but the overall structure and nature of the franchise is the ultimate responsibility of the government.

Better late than never

Some of the fiercest critics of First Great Western have been Conservative MPs: Teresa May, Ed Vaizey and Boris Johnson have, in particular, been scathing with their criticism. It is, of course, understandable that these MPs should be concerned about the service that is provided to their constituents. It is equally understandable that they want to appear ‘tough’ to the electorate and that the issues surrounding the Greater Western franchise have provided them with an ideal platform for the flexing of their muscles.

Nevertheless, in placing the blame at First Great Western’s door, the MPs have let the Department for Transport off the hook. It is, after all, the department’s absurd micromanagement – or micro mismanagement – of the rail network which has created so many of the problems that now exist. This is a lamentable failure on the part of the Conservatives – for if opposition MPs can’t, or won’t, hold the government to account, then who will?

It was notable, therefore, that the Shadow Transport Secretary, Chris Grayling, in a recent speech seemed to recognise that the fundamental problem with today’s railways lies not with the train operating companies but with the way it is run and controlled by the government.

Mr Grayling identified two barriers to the future success of Britain’s railways. The first of which is too much political interference: “Douglas Alexander is inheriting a Department that has more operational involvement in our railways than ever the Government did when British Rail was around. I think it makes no sense at all to have railway timetables written by Government officials”, he said. And he is right: as this blog has stated before, it makes absolutely no sense whatsoever for a remote government department to do a job that seasoned professionals could do so much better.

The second barrier is the way in which the industry is structured, involving the separation of track and train. This of course was a Conservative failure in the way the system was privatised – so it is a significant admission on Mr Grayling’s behalf. However, this recognition of failure must be warmly welcomed for, indeed, the lack of control the train operating companies have over their essential infrastructure is a root cause of many of today’s problems. Integrating the network would make for a much more customer responsive system that works for rail operators and passengers, rather than – as it so often does now – against them.

The Conservatives will, no doubt, be formalising their rail policy over the next year or so. As a start, however, it is encouraging that they have quickly identified so many of the root problems. What they need to do, however, is to stop the appalling attacks on a private company by their Members of Parliament and start directing the criticism where it belongs – with the Department for Transport.

Parallel universe

In a parallel universe, not dissimilar to our own, Alison Forster the Managing Director of First Great Western, runs train services. Miss Forster has complete control over all aspects of her operation: she is not coerced by government, she is not answerable to politicians and she calls all the shots.

Because Miss Forster knows that her company owns rail the operation outright and that it cannot, without the consent of shareholders, be taken away she is able to make long term decisions. She can, for example, borrow money for capital projects such as buying new rolling stock or improving stations. Investors, because they know the company has a long term future, are willing to lend the money; Miss Forster, because she knows she has time to see that money work for the company and generate a return, is prepared to borrow it and pay interest on the credit she has been extended. Miss Forster has recently purchased a lot of brand new trains because she knows that passenger numbers are rising and she can make money out of running more services.

Miss Forster also has control over the infrastructure her trains run on. If she doesn’t like the way maintenance is being undertaken, she can sack the contractors. If she believes maintenance work is getting in the way of providing a good customer service, she can reschedule it to a time which is more convenient for her passengers. She is also able to direct funding to where it is most needed:: Miss Forster has recently had new signaling put in at key pinch-points on her network to alleviate congestion, reduce journey times and to allow more of her new trains to run without having to build new lines.

Miss Forster and her staff are also responsible for the timetable. They decide what runs, where it runs and when it runs. Fortunately, the First Great Western team is expert at rail operations – many of them have been in the industry for years, so they know exactly what they’re doing. Miss Forster sets her timetable to help her make a good profit. This means she provides services to satisfy the maximum number of people. True, there is a trade off between maximizing profit and the number of services run, but Miss Forster knows she has to provide a decent level of provision otherwise the First Great Western brand becomes tarnished and it becomes more difficult to persuade customers to travel which harms long term growth prospects.

The lesson from the parallel universe is that systems run under a free market perform far better than those controlled or run by the government. They are more responsive to passengers, more efficient at allocating resources and more effective at taking longer term decisions. If you doubt it, just examine today’s economy. Those areas run or heavily controlled by the state, including rail, are riddled with problems; those run by private industry are, by comparison, paragons of efficiency.

The first step to a better rail service is the complete removal of the government influence which has, for too long, held back an industry desperately in need of free market forces.

Rhetoric or reality?

There is, in logic, a fallacy known as the argumentum ad misericordiam: in English, it means an emotional appeal ignoring pertinent facts. It is this exact fallacy that Aslef, the train drivers’ trade union, relies upon in its recent criticism of First Great Western.

Aslef claims that the reusing of partly worn brake pads on First Great Western’s Class 180 trains is a reprehensible practice which is putting the public at risk. Yet, the organisation fails to produce one shred of evidence to back its claim; nowhere is proof provided to demonstrate that the reuse of brake pads reduces the effectiveness of a train's braking system. Instead, Aslef is relying on emotion. By using rhetoric like ‘putting lives in danger’ Aslef is cynically playing on public fears, which are especially heightened so soon after the Cumbria rail crash. But rhetoric is not a replacement for evidence, and Aslef’s comments should be readily dismissed.

If public safety isn’t at risk then what is Aslef’s real motive in raising this issue? The answer to that is simple: the unions never have, and never will, support a privatised or semi-privatised rail network. Their broad aim is for the rail industry to be returned to government control where they can wield more influence and power. It is, therefore, within Aslef’s interest to discredit the private sector at every given opportunity.

That, and that alone, is the real reason Aslef raised the issue and why it worked so hard to publicise it through the media.

Time to change ... our politicians

Recent calls by politicians of all parties for First Great Western to be stripped of its franchise serve only to demonstrate two things: the hypocrisy of today’s political class and their complete lack of commercial understanding.

They show hypocrisy because many of the problems, especially in relation to the new timetable, are the direct consequence of political meddling. Rather than letting First Great Western get on with running the railway, the Labour government and its Department for Transport has decided to micromanage almost every aspect of the system. The result has been disastrous both for First Great Western and for its customers. The Conservatives, represented most vocally by the increasingly sanctimonious Theresa May, are little better: it was, after all, the Conservative Party that presided over the botched privatisation of British Rail. Many of the mistakes made during the privatisation process – like the short nature franchising system – still haunt the railway today and are the root causes of some of the issues faced by passengers.

They show a lack of commercial understanding because if private train operating companies could actually have their contracts terminated at the caprice of politicians it would do immense harm to the rail industry. No companies would be willing to go to the expense of bidding for a franchise that they could lose in the blink of an eye: investment would dry up and passengers would suffer.

We actually don’t need a new train operating company. What we need are new politicians: ones who actually admit to the mistakes they’ve made rather than hiding behind private companies; and ones who look for long term solutions to the problems rail faces rather than spending their times uttering meaningless headline grabbing soundbites to make them sound impressive to their constituents.