Private Island: Why Britian Now Belongs to Someone Else (11 page)

‘They thought, “Oh crumbs, we've just signed [the Virgin deal], we'd better get on with this.” There was a realisation the talking had to stop,' said the signalling source.

Yet Railtrack was locked in a catch-22 situation. It couldn't put a contract out to tender to develop a thing if it couldn't specify what the thing was. And it couldn't specify what the thing was until it had signed a contract for somebody to develop it. Meanwhile the two signalling consortia had made the technology look less, rather than more, certain. ‘Because we went on divergent routes, because we saw ourselves as rivals, it didn't enable Railtrack to say, “It's obvious, here's the specification,” ' said the signalling source. ‘What's at the core of this, I think, is that Railtrack did not have its own sufficiently strong in-house knowledge and expertise to be able to use industry for what it was good at, to gather their views in and make a judgment.'

Railtrack did have one ace in the hole. It had, in fact, long since recruited an expert in moving-block signalling. Way back in 1995, the then Conservative government had worried that Rod Muttram's lack of railway experience would put off City
investors. At the government's insistence, Railtrack appointed a champion of moving-block technology to be its engineering director. Brian Mellitt was a clever, experienced specialist who'd already supervised the early stage of introducing moving block on London Underground's Jubilee line extension, then under construction.

But in 1997, just when his expertise was most needed, Mellitt's pet project was suffering a horrible public failure. Quite simply, moving block on the Jubilee line didn't work. Computers that were supposed to talk to each other couldn't. Costs soared. Desperately trying to complete the project in time for the opening of the Millennium Dome, engineers had to come up with a crash programme for an old-style conventional signalling system. The number of trains an hour was slashed in half. Westinghouse, the key signalling company responsible, took much of the blame. John Mills, who in 1995 had told parliament that moving block on the west coast main line might be possible in ten years, was removed as chief executive.

Throughout 1998, as news of the problems on the Jubilee line began to emerge, the newly arrived Gerald Corbett – who took over from Edmonds in late 1997 – became increasingly uneasy about the moving-block plan he'd inherited for the west coast. He didn't get on with Mellitt. Corbett was, if anything, even more hostile towards the engineering profession than his predecessor. Railtrack didn't sign a contract to develop the system with the British-French company GEC-Alsthom (later Alstom) until July 1998, more than a year behind schedule. But even this wasn't a proper contract to deliver something; it was a nine-month contract to define the thing that should be delivered.

And the signalling was only part of the WCML modernisation. Much more needed to be done. Tracks needed to be relaid, tunnels modified, bridges altered. This work, too, was behind schedule and over budget. Plans changed constantly. At one point, Railtrack paid £10 million to a contractor to develop a new kind of transformer, only to abandon it later and go back
to the original type. With every passing day, contractors were finding out how much more seriously the line had deteriorated than Railtrack and the consultants had understood.

At the same time, because Railtrack had shed so much of its engineering and railway operations expertise, it had little ability to judge whether the prices its myriad contractors were charging were fair. ‘It is easy to understand why certain elements within the industry took advantage of that situation,' said one rail industry figure. ‘It would have been a great temptation.'

In one iteration of a recurring pattern, Railtrack turned to a US company for project management expertise, but managed to botch that, too. Railtrack hired Brown & Root, a subsidiary of the US engineering group Halliburton, then run by Dick Cheney. Whether Brown & Root, which had grown fat on Pentagon contracts from the Vietnam war and beyond, could have managed the job is unknown, but Railtrack never allowed it to try.

‘Railtrack was half in bed with them and half not,' said an executive who saw the process from the inside. ‘Brown & Root had a lot of experience in oil and gas contracts. Railtrack said, “Fine, show us how,” but they got cold feet and never signed up.'

Meanwhile, Corbett and his team were becoming horribly aware of the other set of baroque errors that had been made by their predecessors: the Virgin contract, presented to the new Railtrack boss on his accession as a fait accompli.

Despite Virgin Trains' initial reputation for lateness, there was a general fondness for the Railtrack-Virgin plan, not just in Railtrack, but among politicians, the media and the public. Tilting trains going at 140 mph; London to Glasgow in time for lunch; it sounded good. It sounded like progress. But there was a severe problem.

Again, the lay observer would think it was obvious: other trains needed to use the same line. And these other trains did not travel at 140 mph. Some of them, freight trains, for example, struggled to reach half that speed. In all, the WCML was used
by 120 trains a day. Two thousand different trains travelled up and down its various lines, and another 4,000 crossed it at some point. They were operated by fourteen private train operators, using at least nineteen kinds of locomotive, a mix of regional passenger services, local trains and freight – a contractual nightmare. But contracts had been signed. And, in the course of 1998, Railtrack began to come to the terrible realisation that it couldn't keep to its Virgin contract without breaching some of the others.

The introduction of faster, more frequent Virgin trains on the route meant that Railtrack was obliged to carry out extra work to guarantee the other, slower trains would still be able to do their job and earn their money. When Railtrack began to look more closely at the Virgin contract, and compared it with the work it had promised to do to the railway, it saw that it was unable to draw up future timetables without breaking at least one of its contractual commitments. Or rather, Railtrack looked, but it refused to see. It was the beginning of the end.

‘They had committed to the rail regulator and said that it would work, but everybody knew it was impossible,' said Stuart Baker of the SRA. ‘A 140 mph train still catches up with a 75 mph freight train or a 50 mph commuter train rather quickly. So it was a bit of an illusion. The capacity wasn't there for the contracted service without a new railway.'

The speed issue was not all. Railtrack was gambling its future on the highly risky maintenance philosophy that said components should be replaced only when they looked about to break, rather than at fixed intervals. When specialists looked into Railtrack's web of contracts with Virgin and other train operators on the WCML after the company collapsed, they were astonished to see that Railtrack had promised to build a railway that would not need any maintenance from 2005 to 2012.

‘I don't think anyone denies that the commitment made to [Virgin] was a terrible mistake,' said Michael Beswick. ‘It was one of the factors that brought the company down, ultimately.'

In 1999, the bubble burst. When Chris Green, who took over as head of Virgin Trains in February, went out and about to see how the epic west coast reconstruction project was going, he received a shock. ‘I was surprised at how little physical activity there was. There was nothing happening on the track. I was looking for the big yellow machines ripping up track and signals being replaced and wires being renewed, but everybody seemed to be in endless debate about the scope of the work. There's no doubt that two years were lost. I think as I arrived it was dawning on Railtrack that this was going to be an incredibly expensive and complicated project.'

He quickly found out about the timetabling crisis. ‘The basic railway skill ought to be train timetabling, oughtn't it? Railtrack ought to have been able to timetable it themselves and I'm sure they did. When they found it didn't work, they also found they were in a spectacularly tight contract, with massive penalty clauses, up to £250 million, with Virgin … every time they went round that situation they found they couldn't afford to break the contract. Which is why they had to implode.'

By the spring of 1999, even as Railtrack shares hit a high of more than £17, the project was in turmoil. Brown & Root was dropped and Railtrack drafted in a fresh team of consultants, the Nichols Group, to take stock. The rail regulator was hammering on Railtrack's door, demanding to know how it was going to make the west coast timetables work. Alstom's quest to try to make moving block work was going badly. Nine months of studies hadn't produced a clear design for the system, and amid the uncertainty even Railtrack was not about to give them the £750 million they sought to finish the job. In another blow to the technology, Mellitt quit.

‘With him gone, there was nobody championing moving block,' said an insider on the signalling contract, ‘and at this time, the Jubilee line was unravelling.'

On 9 December 1999, at a meeting code-named Black
Diamond Day, Railtrack finally took the decision it had avoided for so long. It accepted that moving block, the technology on which the company had staked so much, was a mirage. The Nichols Group report was painful in its clarity. There was no more than one chance in twenty that the system would be ready in time. The Jubilee line fiasco had shown the risks. Alstom had never been able to explain what would happen to a moving-block system in the event of an accident, or if there was a disruption of radio signals. One possibility was that the entire railway network between London and Glasgow would simply grind to a halt.

Nor had Railtrack ever fully grasped the enormous sums it would have to pay train operators for permission to take 2,000 locomotives out of service to fit the new equipment and retrain 4,000 drivers. The implications for Railtrack were catastrophic. They would now have to introduce a different, conventional signalling system, at vastly greater cost. Installing conventional signalling would mean stretches of railway being closed off, which meant huge compensation payments to the train companies. All Railtrack's contracts with train operators were predicated on moving block. The contracts would either have to be torn up – more huge compensation payments – or a costly extra programme of works set in motion to reconfigure the entire railway. Instead of the expected £2 billion, the new headline figure was a staggering £5.8 billion. It quickly turned out that this, too, was a wild underestimate. Without a massive taxpayer bail-out, Railtrack was doomed.

Five days later, on 14 December, Railtrack sent a letter to the rail regulator, Tom Winsor. It was five years almost to the day since those original consultants had explained to Railtrack what a marvellous system moving block was, and more than four and a half years since Railtrack had so misleadingly told the public that it was a ‘relatively mature' technology, ignoring the warnings of British Rail, MPs and rail journalists. Now Railtrack wrote: ‘No system comparable with [moving block] has been
implemented on a main-line mixed-traffic railway anywhere in the world … the underlying software has never been used previously for a safety critical purpose.' If moving block were installed, Railtrack said, there would be ‘a major risk of total disruption' to Britain's most important rail network. At least £65 million, and probably more, had been spent on trying to make moving block work, with nothing to show for it that was any use to Railtrack. The final acts of Railtrack's role in the WCML saga, played out until the company went into receivership in 2001, saw an increasingly isolated Corbett go head to head with Winsor, the regulator, confident in his contempt for Railtrack management. Confident, certainly, in his intimate knowledge of the contract Railtrack had signed with Virgin, because before Tom Winsor became the rail regulator, he was a rail contract lawyer. The central contract whose fulfilment Tom Winsor, government regulator, was insisting on had been drafted by Tom Winsor, commercial lawyer – one and the same man.

Winsor must have known he was contributing to Railtrack's downfall. But he also knew that the Blair government, the public and most of the train companies were fed up with the company, and the City was losing faith. Railtrack's only ally, Virgin Trains, was full of doubt. In the summer, after Railtrack confessed that the £600 million worth of Italian tilting trains he had ordered would not, as promised, be able to reach 140 mph on the new WCML, Richard Branson cheerily told an interviewer: ‘Do you know why we're changing the name of Virgin Trains? Cos they're fucked.'

Winsor has published word-for-word transcripts of two meetings with the Railtrack leadership at the rail regulator's offices in Holborn in the spring and autumn of 2000. Corbett, wordy, blustering, pleads for more money, and his company's continued existence.

Winsor and his colleagues sit in judgment, terse and sceptical, like magistrates. ‘It would have been incompetent if we had just pressed blindly ahead and tried to get moving block to work,'
the transcripts record Corbett saying desperately in May, trying to redefine Railtrack's belated recognition of its problems as a triumph of good management. Corbett goes on to plead for a relaxation of contracts with the other train operators to make way for Virgin. Winsor is not impressed. ‘Is it reasonable,' he asks Corbett, ‘that a party to a contract should expect to have that contract honoured?'

‘Yes,' says Corbett. ‘That is reasonable. In the real world' – he pauses for a moment, allowing himself a moment of regret – ‘in many senses, the railway is not the real world.'

In June, a fresh horde of consultants, commissioned by the regulator, delivered an indictment of Railtrack's handling of the west coast operation. Some parts of the project, the consultants said, had not been looked at afresh since the original report in 1994. All Corbett could do was choke on the irony that the consultants were from Booz Allen Hamilton – the same firm that provided the experts who, six years earlier, had recommended moving block to Railtrack as a splendid idea.