11/06/2022 – By Frédéric de Kemmeter – Railway signalling and freelance copywriter – Suscribe my blog
(Version en français)
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For the past twenty years, the British rail network has been managed by a direct government agency called Network Rail. In the future, a new body is expected to take over, but the network remains an entity managed by the government.
In the beginning
The Railways Act 1993 provided the legal framework for the privatisation of British Rail and the introduction of a new structure for the rail industry. The Act received Royal Assent in November 1993 and many of the principal changes were brought into effect on 1 April 1994.
A separate Government-owned company called Railtrack was set up to look after the track and was sold to the private sector in May 1996.
So it was John Major’s government, not Margareth Thatcher’s, that implemented this very radical policy when Europe was only asking for accounting separation, which did not mean de facto privatisation.
Political consensus?
This concept of the track separated from its trains quickly provoked an outcry in the railway world, and particularly on the left of the political spectrum. Not really for technical reasons but rather for social and political reasons.
At that time, Tories seemed intoxicated by the new global financial theory and by a redefinition of the role of the state in public affairs. No European country has followed the British railway model in terms of the status of their railway network. Those countries that have separated the railways into two entities, such as Belgium, Spain and Sweden, have de facto conceived of these new companies as state enterprises, whatever the legal formulas adopted.
Those who thought that the arrival of Tony Blair’s Labour at the helm of Britain in 1997 would change everything were soon disappointed.
Significantly, the first Labour’s manifesto does not commit itself to a « publicly owned, publicly accountable » railway, which John Prescott and others had called for before the election. Instead, the document stated: « Our task will be to improve the situation as we find it, not as we would wish it to be. » More vaguely, the manifesto calls for better « connections, through ticketing and accurate travel information ». In 2001, Labour’s manifesto for a second term doesn’t mention any plans to take Railtrack back into public control.
End of an illusion
Following numerous accidents and clear failings in the management of the UK rail network, the then Secretary of State for Transport, Stephen Byers, applied for Railtrack on 7 October 2001 to be put into administration. It came out of administration on 3 October 2002 when Network Rail (NR) was established as a company limited by guarantee (CLG). The utopia of a privately managed railway network was definitively buried, but the government’s control became obvious, without interfering in the internal management.
Network Rail (NR) took over the assets and liabilities of Railtrack plc and its role as network operator. The company was ‘not for profit’, which did not mean it could not make a profit but that to do so was not its primary aim. Any operating surplus would be reinvested in the rail network.
Contrary to what we still read in many current writings – sometimes even academic -, it has therefore been 20 years that Railtrack no longer exists and that the rail network is owned by the British government.
In December 2013, the Office for National Statistics announced its intention to reclassify Network Rail as a Central Government Body in the UK National Accounts and Public Sector Finances with effect from 1 September 2014. This was a statistical change driven by new guidance in the European System of National Accounts 2010 (ESA10).
However, this posed a problem. One of the positive features of privatisation was to free the railway from the curse of dependency on the Treasury’s annual budget, ensuring financial stability. When Network Rail was reclassified as a state body in 2014, it was no longer able to fund enhancements through borrowing on the money markets. Instead, funding was through Treasury loans. In fact it was that DfT determines which enhancements would be funded, which is a clear indication that the government has the upper hand in rail policy. The new governance will not change this political dependency.
A new project
Today, the Great British Rail (GBR) project is under construction. Not many people yet know exactly what the future of British rail will be. The « nationalisation » of rail services in Scotland and Wales does not mean that railways were reunited as in the good old days of British Rail. The network remains separate entity in all parts of Great-Britain.
As mentioned above, this new governance does not plan to invest more in rail, despite the promises of decarbonisation and the COP 26 in Glasgow. Instead, British rail has to take into account a new, unfavourable context. There are fewer people on the trains than before 2020 and in political circles it is made clear that rail was well supported during the pandemic with « a shower of billions ». The subliminal message is that public money is not limitless…
In 2019 the Department for Transport (DfT) announced that Network Rail would be required to make “efficiencies” of £3.5bn over the following 5-year funding period. In 2021, NR raised the bar a little higher, projecting savings of £4 billion over the same period.
It is already known that the new GBR is set to make nearly £1.5 billion of operational savings per year in its first 5 years. For those inspired by nationalisation…
Decentralising
So far, Network Rail is still an entity covering the whole of Great Britain, through five regions, including Scotland and Wales. This tentative decentralisation was a strong demand from the regional public entities, which ask more respons to local demands, particularly in terms of funding and timing of works. This decentralisation of Network Rail is the challenge of the coming years.
That means that Scotland and Wales are still dependent on the national government for the quality of their rail network. This quality of network, and its resilience, is essential for the train service, whether it is ‘nationalised’, contracted or open access. Without good infrastructures, there can be no good rail services.
In the future, GBR will own the infrastructure, collect fare revenue, run trains and plan the network and set most fares and timetables.
The GBR is therefore not a single train operator in Britain, but a complete infrastructure and services manager. It will therefore also act as a Transport Organising Authority to set fares and traffic volumes. It remains to be seen how the risk sharing between the operators and the GBR will be achieved.
This is a bit like the model found, with legal varieties, in Continental Europe.
Legislation leading to the formal creation of GBR is expected to pass through Parliament during 2022 and 2023 with the aim of making GBR operational by 2024.
11/06/2022 – By Frédéric de Kemmeter – Railway signalling
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