Chris Grayling’s rail plans are remarkably timid

The reality of Transport Secretary Chris Grayling’s announcement on Tuesday on the structure of the railways did not justify the headlines suggesting major reform.

Through selected briefing, Grayling cleverly managed to create the impression that the railways were in for the biggest shake-up since privatisation two decades ago. The implication was that this would include a big dose of further privatisation, which so angered the unions that they staged a mini-demonstration outside the Policy Exchange think tank where he gave his much-trailed speech on Tuesday night.

In fact, the changes proposed are pretty minor and, despite Grayling’s emphasis on putting the passenger at the heart of the railway, will have little impact on the commuters and other travellers who have been flocking to Britain’s railways in ever larger numbers. To be fair, Grayling has identified the key mistake of privatisation, which is that the railways was broken up into two main components, operations and infrastructure, a division that is responsible for most of the present-day problems with British rail travel.

When he was shadow minister for transport in the mid-2000s, Grayling floated the idea of re-creating an integrated railway, bringing together Railtrack (or Network Rail as it became after Railtrack’s collapse) and the train operators to form a sole railway entity.

His basic premise was right. This has been the traditional structure of nearly all railways across the world for the past 180 years. Railways function best as an integrated industry because the trains run on tracks that are controlled by signalling, so separation leads to a complex web of contractual arrangements which has proved expensive and inefficient.

The most obvious example of the divergent incentives this creates is that when Network Rail carries out maintenance and closes a line, the operators are compensated for the disruption, massively pushing up the cost of engineering works. This means that the operator is compensated for work carried out to improve its own services—which is patently ridiculous.

The separation was prompted for ideological reasons by Treasury officials in a forlorn and unsuccessful attempt to stimulate on-rail competition. But given the limited number of paths and the desire of passengers not to be restricted to certain trains (as happens in the bus industry outside London, where people cannot use services with another company’s tickets), this idea was doomed to failure. There have been few instances of genuine competition on the railways, which means the whole expensive paraphernalia of separation has been a massive waste of resources and a distraction for those running the industry.

Grayling seems to have understood that railways function best in an integrated way but the measures he has set out, with the usual cliché of “evolution not revolution,” are remarkably timid.

First, East West Rail, the project to reopen the line between Oxford and Cambridge, will be undertaken by a body other than Network Rail. This was touted as breaking Network Rail’s monopoly, but it will merely ensure a small section of line is rebuilt by a private company which will then, as was the case with High Speed One, probably simply contract the maintenance back to Network Rail because it will be the cheapest option.

The other part of the announcement focussed on future franchising deals. He wants them to be let as integrated operations with the winning bidder taking over both operations and track. The exact arrangement however is unclear. An “alliance” arrangement involving South West Trains and Network Rail existed for several years but this foundered on the difficulties of merging a public sector organisation with a private firm, Stagecoach, and it eventually collapsed. How the new arrangement will work is therefore unclear.

The obvious solution would be to create a totally merged organisation but here Grayling comes up against his ideological constraints. He could not possibly countenance such an organisation being in the public sector—but privatising Network Rail and breaking it up is unpalatable to a public that remembers the disaster of Railtrack, which was a quoted company on the stock exchange. Moreover, the sheer complexity of the structure of the railways, created by privatisation, is another barrier to major reform since it would need primary legislation. Hence Grayling’s offerings are thin gruel.

The most significant part of Grayling’s announcement was the one he wanted buried. There had long been an understanding that Transport for London, under the control of the London mayor, would take over several lines currently run by private operators which operate wholly—or mostly—in London, and run them under the very successful London Overground regime. The previous mayor Boris Johnson and the previous transport secretary Patrick McLoughlin had agreed to this transfer.

Yet Grayling has now put a stop to it, claiming that this is because it would be undemocratic for services to, say, Guildford to be run by the mayor of London. In fact, as revealed in a letter leaked to the Evening Standard, Grayling had long opposed the idea of handing over private services to—shock horror—a Labour mayor. He is nothing if not ideological: remember, he was the man who stopped books being sent to prisoners, claiming it was because of security concerns, when was a petty piece of politicking.

So is this. The Tory-controlled councils involved were happy for the transfer to be made, as were several Tory London MPs.

Grayling’s “reforms” will not address the fundamental problem of the railway, which is the cost of projects and maintenance. That is a legacy of the denuding of Railtrack of any engineering skills combined with the obsession to outsource as much as possible. It is not privatisation or competition that will bring about change, but the beefing-up of Network Rail’s skills and its ability to control projects while keeping costs down.

Oddly, Labour’s emphasis on “renationalisation” is also misplaced unless other structural changes are made. The key is integration, which the more militant trade unions oppose because they see it as a vehicle for privatisation; that, and the recreation of an organisation like British Rail which had the capacity both to run the trains and maintain the network. Sadly, this remains a far-off dream.