Private Island: Why Britian Now Belongs to Someone Else (10 page)

The Booz Allen consultants came to another conclusion which, in retrospect, seems extraordinary. Even though they knew what the privatised railways would look like, with Railtrack owning the infrastructure, a horde of private train operators running services, and dozens of other private outfits all taking a cut and all trying not to step on each other's contracts, they based their estimates of how much the WCML modernisation would cost on British Rail history – the bargain-basement modernisation of the east coast main line, and the development of a new type of conventional signalling twenty years earlier. It was as if a western oil company based its cost forecasts in Putin's Russia on the pricing practices of the Soviet Union.

‘What I hadn't understood,' admitted Arthur, ‘was that the restructuring of the railway was going to bring a complexity beyond my wildest dreams.' Nor could the consultants have anticipated that the bosses of Railtrack would go on to cherry-pick their conclusions.

Railtrack was led to privatisation by two men, its chief executive, John Edmonds, and its chairman, the late Robert Horton. Edmonds was a former senior British Rail executive, Horton the former chairman of BP. Yet it was Edmonds, the former public-sector boss, who was the private-sector firebrand. Far from being loyal to BR's way of doing things, his experience on the state railways had inspired in him a scepticism towards in-house engineers and safety experts bordering on contempt. They were, he considered, overcautious, conservative, stuck in the mud. It was this that led him, at Railtrack, to shed its nucleus of in-house expertise, leaving the company unable to understand what its myriad specialist contractors were up to.

Edmonds declined to be quoted for this chapter. A senior rail manager said of him: ‘He was the one who got rid of operations managers and engineers because he didn't believe in them. He thought it could all be contracted out and commercialised. He had a desire to break the mould and change. He was always opposed to the traditional railway. He believed there was a golden panacea in the private world where you just free people up and new technology comes in and the markets come in and it all happens. The railway doesn't work like that. You're not manufacturing baked beans.'

Like Edmonds, Horton was an advocate of privatising Railtrack. But although Horton was happy to play the role of swashbuckling private-enterprise shaker-upper, he was no entrepreneurial start-up king. Though he'd studied engineering in the 1950s he was no engineering wizard, either. He was, essentially, a highly paid private bureaucrat who made his reputation in the offices of a post-imperial semi-state oil company. He did not make BP; BP made him. It was already a vast, sprawling corporation when he arrived in 1957, and it was still a vast, sprawling corporation when he was sacked in 1992, no matter how much he changed it. He did, at least, know about the oil business. But he didn't know much about trains.

‘He wasn't close enough to the railway to know what was going wrong,' said one rail industry source. ‘So he was great at privatising, great with the City, good at getting private investment into industry. He didn't understand that he'd lost all his key operators, lost all his key engineers, and was chasing technology that wouldn't work.' Horton, who died in 2011, also declined to be interviewed. In a brief email, he told me: ‘I think it is important to understand that the scope of the project changed enormously over time as did the decisions on the technology to be used.'

In 1994, Edmonds, Horton and the latest in a blurry succession of Conservative transport secretaries, Brian Mawhinney, all wanted to hear from the consultants that the WCML could
be modernised with privately raised money, by a private railway company. Yet there was still an opportunity for someone to persuade them that the risk they were taking was unacceptably high.

The key expert standing between Railtrack and the catastrophic decision to go for moving block was Rod Muttram, the firm's new director of electrical engineering. But he too knew little about the railways: he'd been headhunted from the arms industry, where he'd been involved in developing weapons systems, including a new type of artillery rocket. He believed moving block could work, in theory. As to whether it could work in practice, on such a complex rail network, he was dependent on what the consultants told him. (Muttram declined to make a public statement to me.)

Yet British Rail still existed in 1994 and 1995, and its board thought the consultants' ideas were far-fetched. John Welsby, then chairman of BR, told me: ‘I did have grave concerns about the attempt to integrate a type of technology that had no testing in real, active life in what, in fact, was the most complex railway in the country.'

Welsby wasn't exaggerating his wisdom after the event. A senior Railtrack figure, one of the key men liaising between Railtrack and the consultants, recalled: ‘There were huge rows at the time with the British Rail board, who were completely unsupportive of the project. John Welsby, then chairman of BR, was the most vociferous opponent. He said [moving block] could never be done on a railway like this.'

Welsby and his BR colleagues were unable to get the message through to their private sector successors. ‘You have to remember that we were all, at that stage, unbelievably busy,' he said. ‘All my lads had about three jobs. Firstly, they were running a railway. Secondly, they were breaking it up for sale. Thirdly, they were often preparing a management buyout at the same time. People were working seven-day weeks, twelve-hour days. Our advice was passed across but then it was up to Railtrack to take
that advice or not, as they wished … of course they would have resented it anyway. The climate has to be remembered: we were big, bad BR, being broken up and done away with, because we were anathema to the government, so the new order was not necessarily going to look very favourably on us.'

Another warning came almost as soon as the consultants handed in their report. It came from Europe. The consultants' report – a copy of which I obtained through the Freedom of Information Act – makes little mention of the European dimension. None of the consultants was from mainland Europe. Yet it was clear from speaking to Arthur that they'd assumed other European railways were preparing to introduce the new technology as well, and that Britain, relying heavily on European research, would merely be the first to apply it.

But in January 1995, most of Europe's state-owned railways – nineteen of them – came to the joint conclusion that moving block was not ready to be used in the real world, and a simpler, transitional form of technology should be the next step. Again, Railtrack ignored the warning. In fact, Railtrack may never have heard it: at this time the firm had barely any contact with Europe. It was an extraordinary situation, of which the public was ignorant: a group of Anglo-American consultants and executives took for granted European support to develop a technology which those same Europeans openly declared to be premature.

In March 1995, Railtrack and the government went public with their plans for the west coast main line. Despite the warnings, they endorsed, with few reservations, the consultants' recommendations to make moving block central to the modernisation. John Watts, the Tory rail minister, spoke of an ‘innovative signalling and control system' which would be ‘at the heart of the proposals' for the WCML. (Interviewed by phone, Watts said he couldn't remember details of this period.)

The consultants' report remained secret. On 22 March Railtrack released what it said was a summary of the report.
By and large, it was. But there were important changes and omissions in what the public was told compared to what the consultants had said. The consultants warned, for instance, that if moving block turned out not to work, and conventional signals had to be used, any attempt to try to get trains to run faster than 125 mph – always Railtrack's intention – would incur ‘exceptionally high costs'. This fateful warning, one of the keys to Railtrack's eventual demise, was omitted from the public summary.

At the beginning of March, signalling-company bosses had told MPs that they might –
might
– be able to have moving block working and installed within ten years. In their secret report, the consultants talked, with optimism, of ‘a five-year programme' for the development and fitting of moving block. Yet this is what Railtrack told the public: ‘The development programme is anticipated to take between three and four years.'

Most surprisingly, Railtrack inserted a line into the public summary that had never appeared in the consultants' report. ‘Most of the hardware for this train control system already exists,' it read, ‘the technology required being relatively mature.'

I read that line out to Arthur when I met him. He said: ‘Mm. That's interesting.'

Did he find it misleading? Arthur paused for a long time. Eventually he said: ‘I don't think there's any doubt, sitting here now, that it was not as far developed as we thought it was … I'm surprised by those words, I really am … I am amazed at that statement. Because I don't know where they had any proof of that.'

Neither Horton nor Edmonds would comment on the discrepancies. I asked another senior industry figure, with close knowledge of the subsequent attempt to make moving block work, what he thought. ‘To say the technology is mature – yes, I think that was a bit adventurous, certainly in 1995.'

What happened? The consultants' report never mentioned it, but there was one other factor in the back of the minds of Railtrack and the Tories. In 1994 there had been a painful strike
by railway signalling workers. Bringing in the new technology would be another step towards ending the unions' leverage, by getting rid of thousands of signalling staff.

Some in the rail industry are inclined to give Horton, Edmonds and their colleagues the benefit of the doubt. ‘I think dishonesty does matter, but my suspicion is that it wasn't a question of dishonesty, it was more a question of misjudgment,' Michael Beswick, the regulator's director of rail policy until he retired in 2013, told me. ‘It was assumed that technology would move very quickly, but it doesn't. That was the problem. That is a bit of an indictment of the calibre of the people running the show at that time in Railtrack.'

Another senior rail industry figure said: ‘John Edmonds was keen to get the company privatised and wanted to say things that would encourage people to believe it was bold and dynamic. It was all about creating confidence, which requires bold statements, sometimes.'

Before I knew I would get to see the consultants' report, I spoke to a former senior Railtrack executive. He didn't have a copy of the report, and was trying to remember its conclusions. As I found out later, his memory didn't quite reflect the report; rather, perhaps, it reflected the real back-room conversations going on in Railtrack at the time. ‘The basic conclusion was that it was impossible to upgrade the west coast at any sensible cost if you went for conventional signalling,' he said. ‘And the only way forward – whether it was feasible or not – was to bring in twenty-first-century signalling technology.'
Feasible or not
: the decision was made, and Railtrack began unconsciously to weave its downfall.

The consultants weren't reckless. They never imagined that Railtrack would manage and finance the WCML modernisation itself. In some detail, they outlined a scheme whereby Railtrack would get a big, experienced civil-engineering consortium to raise money for and manage the project, thereby assuming most of the risk. But when Norman Broadhurst, then
Railtrack's finance director, studied the numbers, he thought the returns looked too juicy to be given away. He thought Railtrack should do it, and talked his colleagues round. One member of the board described how he'd argued against the proposal. ‘I said at the time Railtrack did not have the management capability to bring that in house,' he said. He was proved right. No sooner had Railtrack committed itself to moving block than it began to waste time bringing it about. In mid-1995, its rump signalling team had dwindled to the extent that it was possible for it to move office in a single taxi. The following year, a move to Birmingham caused further losses of personnel. One senior Railtrack figure at the time said: ‘In resources terms, two years were lost.' It wasn't until March 1996, just a few months before Railtrack was privatised, that the firm picked two consortia of engineering multinationals to develop alternate prototypes of the moving-block system. Soon the consequences of Edmonds' determination to gut Railtrack of its in-house engineering and project-management expertise became apparent. ‘What Railtrack did in 1996 was quite exceptional, which was to take a really high-calibre engineering team on the BR system and destroy it,' said Chris Green.

Railtrack had assumed that the two signalling consortia would develop similar types of moving-block technology. It assumed their work could then be pooled to provide the foundation for a system that actually worked. But it didn't happen that way. The consortia saw each other as rivals.

‘Not unexpectedly, their work tended to diverge rather than converge,' said a senior figure in the signalling industry at the time. This wouldn't have mattered so much, except that while the moving-block research was meandering, Railtrack made a catastrophic decision. It invited Richard Branson to hold a gun to the company's head.

In February 1997, Richard Branson's Virgin Trains had won the franchise to run fast inter-city services on the WCML. In
October, after the newly elected Labour government backed away from its commitment to renationalise the railways, Branson and Railtrack announced how the WCML project was going to be financed. They painted a wonderful picture for inter-city travellers. Railtrack would spend £1.5 billion to restore the worn-out railway to basic reliability, and, in exchange for a slice of Virgin's profits, would lay out another £600 million to install moving block and other improvements to create a high-speed line. By 2002, new Virgin tilting trains would travel the line at 125 mph; in 2005, they would accelerate to 140 mph. London and Manchester would be only an hour and forty-five minutes apart, London and Glasgow less than four hours. Suddenly, Railtrack found itself locked in a contract with Virgin to deliver a non-existent signalling system on the entire west coast main line by a firm date – 2005 – with crippling financial penalties if it failed to do so.