Justine Greening, Secretary of State for Transport, has announced that the government plans to accept many of the recommendations of Sir Roy McNulty’s report on the railways and that she wants to see efficiency savings of £3.5 billion per annum. Much of the media coverage has been dominated by the proposed introduction of smart card ticketing and job cuts. Unions fear that 12,000 jobs may go.
There is clearly a problem. As McNulty puts it in the forward to the report,
“However, there is widespread recognition that the industry has problems in terms of efficiency and costs. Unit costs per passenger kilometer have not improved since the mid 1990s.”
Hmmm. The ‘mid 1990s’ was when the railways were privatised (progressively between 1994 and 1997 in fact). Yet a business with a high but fixed cost base should see efficiency soar when passenger numbers increase. And passenger numbers have gone through the roof as long-suffering travellers know - up by about two-thirds over the same period according to the report. Clearly something has gone badly wrong.
McNulty goes on to list some of the causes,
“The causes of GB rail’s excessively high costs are many and complex. The Study was asked to examine “barriers to efficiency” and we have identified that among the principal barriers are fragmentation of structures and interfaces, the ways in which the role of Government and industry have evolved , ineffective and misaligned incentives, a franchising system that does not encourage cost reductions sufficiently, management approaches that fall short of best-practice in a number of areas that are key cost drivers, and a railway culture which is not conductive to the partnership and continuous improvement approaches required for effective cost reduction”.
In other words its structure too fragmented and byzantine to work properly. Someone forgot the KISS rule.
On R4′s Today Sir Roy said that British passengers are paying about 30% more than their counterparts in other countries. John Humphrys suggested that the ‘big opportunity’ is to reunite the fragmented parts and rail expert Christian Wolmar agreed adding that since privatisation public subsidies have increased from about £1.5 billion to £4 billion in real terms – i.e. over and above inflation. Elsewhere, Bob Crow of RMT contributed the fascinating factoid that Network rail has 300 solicitors who spend their time suing the Train Operating Companies (TOCs) and the TOCs have another 300 who spend their time responding. It’s a hell of a way to run a railway.
So, the government’s solution is to ignore the elephant in the room – that the structure of the railways is all wrong – and go for a combination of fare increases (disguised as smart ticketing) and substantial job cuts (even allowing that the unions may be a scaremongering a little). Why would Ms Greening do that? She could just blame it all on Labour as usual.
The answer is that too many in government still believe the neoliberal nonsense that markets have god-like powers and magically always deliver optimal solutions despite massive evidence to the contrary and a theoretical base that can’t stand up to scrutiny. They are locked into a failed paradigm by bad theory and cemented in for good measure by the vested interests that are doing very nicely from the arrangement. That 30% excess of costs is someone’s income and is quite big enough for some to be spared for a generous contribution to party funds.
As for hopes that a re-structuring of incentives and the like within the existing structure will solve the railway’s problems – forget it. These are features of the system, not mere bugs. Like all centrally mandated targets they will always be gamed by the industry players for their own advantage; if the incentives are changed the game will simply continue under the new rules.