Fire and Steam (48 page)

The railways were no longer in retreat. All three new business sectors enjoyed significant increases and passenger traffic went up by a quarter between 1982 and 1989. Britain's railways were the most efficient in Europe and the least subsidized (though the downside was that fares were high compared with those on the Continent). In the best year, 1987/8, the subsidy to the railway was just £495m, which, as we see in
the next chapter, is far lower than anything achieved under privatization.

But the improved quality of the services could not protect British Rail against the recession that followed the 1980s boom. Railways are always highly dependent on the performance of the overall economy and with the sudden end of the rather artificial growth spurt created by Chancellor Nigel Lawson, passenger numbers slumped. The number of London commuters, a key market, fell by 100,000 to 350,000 in a three-year period and the level of subsidy increased sharply, partly due to the fact that property sales, which had been used to fund investment, dried up.

The railways also suffered another major disaster at that time – the type of accident that happens once in a decade or two. Most of the major accidents on the railway occur around London because of the capital's high concentration of busy lines. This time the scene was near Clapham Junction, the busiest station on the network, where, early on the morning of 12 December 1988, a train from Basingstoke that had stopped at a signal was rammed from behind by another from Poole and the wreckage hit a third one, fortunately empty, on the opposite track. Thirty-five people were killed in the accident, which had been caused by a signal showing green instead of red, the result of faulty wiring in an electrical box following poor maintenance by a signalling engineer. Sir Bob Reid immediately admitted that British Rail was at fault for failing to supervise the work properly and the subsequent inquiry led to greatly tighter safety standards: the hours of safety-critical staff were restricted and signal-testing procedures following maintenance were strengthened.

Overall, though, the safety record got better throughout BR's period of tenure. Each successive decade brought fewer passenger deaths than its predecessor. Safety for staff had improved remarkably too. In 1949, 209 railway employees were killed at work, compared with just thirty-six by 1977 and now the number most years is below ten. This could be attributed to a mixture of modern technology, greater productivity requiring fewer workers
⁴⁰
and a far more rigorous health and safety policy.

Organizationally, British Rail reached its apogee with the ‘Organization for Quality' reform, completed in 1992, which involved
devolving all the railway's functions to the sectors and dividing them into profit centres. The BR Board still set the overall objectives, but the powerful devolved sectors would be responsible for all aspects of their railways. This business-oriented structure proved to be highly efficient but also, ironically, paved the way for privatization. The mounting losses at BR, caused by the recession rather than anything under its control, gave the ideologues in the Treasury and the Conservative Party the opening they needed to press home their case for the privatization of the railways, which was then included in the Tory manifesto for the 1992 election.

During the privatization process, British Rail came in for a lot of criticism in order to justify the break-up and sale of the railways. In fact, its record was at worst patchy, but often, particularly in its final fifteen years, excellent. Even the frequently told story about its awful curly-edged sandwiches is not true, as British Rail actually developed the concept of shrink-wrapped sandwiches and towards the end of its existence commissioned celebrity chefs like Delia Smith and Clement Freud to improve its menus.

Even the most famous excuse supposedly given by British Rail for late-running trains is untrue: no one working for British Rail ever said that it was down to ‘the wrong type of snow'. In fact, after a bout of bad weather had caused delays in February 1991, Terry Worrall, at the time BR's Director of Operations, gave an interview on BBC's
Today
programme, saying, ‘It is not the volume of snow that has caused us problems but the type of snow, which is very dry and powdery.'
⁴¹
Worrall had a point as this particularly cold snow delayed trains throughout Europe, but it was an
Evening Standard
sub-editor who used the canny headline, ‘The wrong type of snow', which has been trotted out in almost every subsequent article on the ills of the railways.

One of the perennial problems for the railway is that the ministry dealing with transport has invariably been dominated by those more interested in building roads than in supporting the railway. BR became a ‘political shuttlecock'
⁴²
as Tory governments generally favoured a withdrawal of the state from the industry while Labour sought greater involvement. Overall British Rail was a success despite these difficulties and the constant changes of policy its leaders had to endure. As Terry
Gourvish, the official historian put it, ‘Once a rather unwieldy, monolithic structure, British Rail provided comparatively safe, improving services, began to revolutionize marketing and showed greater attention to customer care.'
⁴³
He cites successes such as the InterCity brand and the Network SouthEast livery, the Travellers Fare concept which greatly improved catering, and developments in collaboration with the private sector, such as Liverpool Street station. One memorable illustration that the BR managers were prepared to make hard commercial decisions was that at the start of the privatization process, BR had just 121,000 employees, fewer than a fifth of the total at nationalization.

The lack of a long tradition of public ownership of the railways in Britain contributed to the fraught nature of the relationship between government and the industry, whereas in other countries, where public ownership of the railways was long established, the relationship was more relaxed. Thus it was no coincidence that Britain would become the pioneer of rail privatization under John Major's government.

FIFTEEN

THE FUTURE IS RAIL

It now seems as if the railways have turned full circle. They are back in the private sector after fifty years of state ownership and they have strange entrepreneurial-sounding names, some with a traditional bent such as South West Trains or GNER (Great North Eastern Railway), others – such as C2C and ‘One' – showing all the signs of having been dreamt up by drunken marketing staff in a brainstorming exercise. In fact, the railways have a completely different structure from that of any other time in their history: British Rail was broken up and fragmented into over a hundred organizations linked through a series of contracts (J) and financial arrangements that are far too complicated to outline here.
¹
Moreover, far from solving the thorny issue of the relationship between the state and the railways, privatization has made it even more complex and, even more strangely, the requirement for government subsidy has been far greater than ever before.

The new names for the various lines are the products of a privatization that has been widely accepted as being ‘botched' – even by its supporters – but which strangely has been retained by a Labour Party which in opposition was against every detail. It was a tragedy that just as British Rail had entered something of a golden age, with a structure that was robust and commercially minded, the organization had to be broken up on the basis of false assumptions – that BR was inefficient and cost too much – and broken promises – that the railways would cost less in subsidy and be free from government interference. Just at this point, the rail network suffered the most violent upheaval of its history, greater than the amalgamation of 1923 and the nationalization a quarter of a century later. Politicians, as usual, were motivated
by ideology rather than a desire to improve the system and the result was years of chaos, including the worst ever disruption to the network in peacetime and a system that has proved both dysfunctional and expensive. An organization that had taken nearly half a century to start functioning properly was shattered on a whim in a process that cost hundreds of millions in consultancy and legal fees, and would eventually cost the taxpayer billions.

Yet the privatization of 1996–7 very nearly didn't happen. The Conservatives put the idea into their manifesto for the 1992 election but no one expected them to win it. The notion of selling off the railways had been kicking around Tory circles for some years but had been firmly rejected by Mrs Thatcher whose political antennae were too well attuned to take on such a controversial issue. She realized that the question of what to do about the subsidy and the strength of likely opposition, given the fondness of a significant section of the public for the railways, made it a far more difficult industry to privatize than others. However, she changed her mind just before her downfall, allowing rail privatization to be announced by her Transport Secretary, Cecil Parkinson, at the October 1990 party conference.

With Mrs Thatcher gone, the pace hotted up, driven by the Privatization Unit of the Treasury, led by Steve Robson, which had run out of things to privatize. Robson was an ideologue with a strong dislike of the public sector and he found that the new Prime Minister, John Major, was far more enthusiastic about privatization than his predecessor. However, Major's Transport Secretary, Malcolm Rifkind, was unclear about what model should be chosen and dithered, which meant that the eventual plan was cobbled together in great haste. While Rifkind himself was undecided, Major favoured a regional model, recreating a version of the Big Four which, having been born in 1943, he was not quite old enough to remember. A working group of ministers and civil servants was set up and here the crucial mistake that was to be so damaging to the railways was made: the Treasury rejected Major's idea and insisted that the track and infrastructure should be separated from the operations, splitting the crucial ‘wheel–rail' interface and, crucially, allowing on-rail competition.

At the time of the election, there was still precious little detail about
how the privatization would be carried out, although the manifesto did mention the separate management of the tracks and operations. Transport matters rarely pop up in election debates and rail privatization was no exception – despite the radical and unprecedented nature of what was being proposed, the issue did not feature in the hustings for the election held in April 1992. When the Tories woke up the day after to find John Major still in Downing Street with just enough of a majority to survive a full term, they realized that privatizing the railways within a single term of office would be a momentous task.

The manifesto was, in fact, misleading. It had intimated that British Rail would still exist, whereas the proposed new structure represented a complete abolition of the organization.
²
A White Paper,
New Opportunities for the Railways,
was hastily drawn up by the new Transport Secretary, John MacGregor. Published in July 1992, it was a sparse document of just twenty-one pages which set out for the first time the way that services were to be franchised to private operators: they were to be given a contract to run the train services on a particular set of lines, usually with a specified frequency and timings for the first and last train. They would either pay a premium or receive a subsidy, depending on the profitability of the line, and keep all the fare revenue, which was supposed to incentivize them to increase passenger numbers and keep their customers happy. They would own no assets, as trains would be leased from rolling stock companies, and they would pay a charge for track usage to the infrastructure provider (initially Railtrack and now Network Rail). The White Paper was desperately short on detail and important aspects, such as the number of franchises, their size and their length. Moreover, it suggested that the infrastructure company – which would become Railtrack – would not be privatized until the next term of Parliament, a decision that was later reversed, and there was even the suggestion that some lines might be privatized as integrated operations with their infrastructure.

The whole Byzantine system was a massive experiment – untried elsewhere before or since – foisted on a reasonably well-functioning industry for ideological reasons. Not surprisingly, the proposals were greeted with unanimous opposition and there was widespread scepticism about their workability from practically anyone who had
experience of railway operations. The opposition was wide-ranging, taking in large sections of the media, including traditionally Tory newspapers like the
Daily Telegraph,
as well as rail user groups, the trade unions and, of course, the Labour opposition. One of the most vociferous critics was Robert Adley, a Tory MP who was chairman of the Commons Transport Select Committee and author of several railway books. He dubbed the process ‘a poll tax on wheels' and had begun to muster opposition on the Conservative benches when he died suddenly of a heart attack in the summer of 1993. His death removed the last chance to moderate this ill-thought-out legislation as he was the one Tory backbench MP who had the knowledge and support to have pushed through changes to the Railways Bill which became law that autumn. Although there was some opposition in the House of Lords, the main opponent, Lord Peyton, who had been Transport Minister in the Heath government, was bought off with an amendment that allowed BR to bid for franchises. However, it was conditional on the permission of the franchising director, Roger Salmon, and when it came to the sales process, he banned BR bids, thus neutering the amendment.

There was an obvious contradiction at the heart of the new structure: the fundamental conflict between franchising out a whole area and allowing open-access operators. The Treasury had insisted on splitting the infrastructure and the operations precisely to ensure that new entrants to the rail market could compete with incumbents. They liked the idea of on-rail competition between different private sector operators, which might go faster or offer better meals. One minister, Roger Freeman, was even foolish enough to mention that privatized companies might offer ‘cheap and cheerful' services for secretaries while their bosses could take separate trains.
³
However, if companies were expected to take on franchises, with all the risk of possible falls in fare revenue, then they could hardly be expected to accept the idea that some upstart ‘open access' operator might cherry-pick their most valuable services by, for example, running a train five minutes earlier. In other words, the whole structure of the privatized industry was based on a theoretical idea that was unworkable in practice. Worse, the civil servants who had to flesh out the details of the plan knew it was a nonsense, as Patrick Brown, at the time the Permanent Secretary at
Transport, admitted a decade later: ‘I don't think any of us in the Department for Transport thought that open access, as described, could have any part in the privatization. But you couldn't say so.'
⁴
In the event, open access operators were effectively banned from most of the network as ministers realized that bidders would charge more for franchises that faced such competition and although one successful operator, Hull Trains,
⁵
did eventually emerge, it runs just ten trains per day, a tiny fraction of the 19,000 daily total.