THE UK RAIL RIP-OFF: PART 2 – PRIVATISATION PROFITEERS RIDE THE RAILS (AT YOUR EXPENSE)

Rail privatisation was implemented in a way that made no economic sense whatsoever, but satisfied the Tory dogma of state equals bad; private equals good.

In last week’s UK Rail Rip-Off:Coming off the Rails,

ANDY FLEMING looked at how our once great national railway system that was the envy of the world, was butchered by politicians obsessed with imposing free market disciplines on a strategic national monopoly. In this post he takes a look at the Tories' half baked, inefficient, horrendously expensive and disastrous privatisation experiment with our railways.

You can always detect a political zealot. They are just like religious zealots and fundamentalists. The very last thing any of them can be bothered to do is learn any facts about the particular area they rant about. And I don't mind, I'm all for freedom of speech, just so long as they don't wreck our industries and economy or blow up aeroplanes. But that's just what's been happening to the British economy over the last four or five decades.

It has of course been an agenda dominated by right wing libertarian politics that has espoused an age old doctrine first propounded by Adam Smith and his "hidden hand" in his tome The Wealth of Nations. Like a hydra that keeps having its tentacles amputated, its philosophies of deregulation, "rolling back the state", and the wholesale privatisation of strategic state natural monopolistic industries just keep growing back.

The same old tired policies practiced right up to 1945 keep getting trotted out in every new generation of right wing politicians. They regard them as panaceas to every conceivable societal ill. It took an 'Old Labour' government led by Clement Attlee to civilise Britain, to legislate against children being sent up chimneys or down mines or becoming illiterate adults. Centuries of Adam Smith's free markets had failed to provide even a meagre standard of living for the majority of the population. The whole ideology was and still is just an excuse for individual greed masquerading as a political and economic ideology.

In just a few a few short years following VE day thanks to collective state intervention, Britain gained a socialised health care and education system, a Welfare State, socialised housing and the nationalisation of decrepit and rundown yet vital and strategic monopolistic industries including steel, coal and the railways. Such is the nature of global capitalism however, that even in the fifties a civilised society meant a society in which wage, safety and environmental protection costs were higher. Corporations and international capital always on the lookout for a workforce and a nation to exploit started to relocate their sweat shops run with slave labour to places such as Hong Kong and Japan.

It wasn’t long before the worsening balance of payments and trade deficits were being blamed on workforce laziness, unionisation, wages, infact everything under the sun as long as that didn’t include archaic British management practices or an early sixties Macmillan government led by a bunch of politicians like Profumo who epitomised the word sleaze.

Nationalised industries bore brunt of much of the blame and especially Britain’s railways. Nationalised in 1948 out of desperation resulting from decades of private company neglect, the “Big Four” railway companies (London Midland Scottish, Great Western Railway, London and North Eastern Railway and Southern Railways) became united and nationalised as British Railways.

It's April,1964 and even before Beeching swung his infamous axe, secondary but still important routes were being axed. Here is 34085 '501 Squadron' having to take a new route following the closure of the Somerset and Dorset Joint Railway near Sway.

At the time, the railways were faced with special problems. Before the Second World War both goods and passenger traffic was being lost due to the private motor car and lorry, both of which offered flexibility, no intermodal changes during a journey, and freedom in days long before traffic congestion. Prestigious expresses and high speed steam trains with romantic names were instigated such as the Coronation Scot, the Pines Express and the Flying Scotsman were instigated to lure passengers back thanks to their luxurious accommodation and futuristic looking motive power.

By 1945, after six long years of war and starved of funds, Britain’s railways were literally falling to bits. There had been a handful of things that ensured Britain had not been invaded by Nazi Germany, and most people will be able to name the well-known ones: the RAF in the Battle of Britain, the USA’s hand being forced at Pearl Harbour, and the carnage inflicted on the Soviet forces and people in defending Stalingrad. Well also add our railways and railwaymen. Because without them the mass movement of goods and people for D-Day, the evacuation or for the war effort generally would not have been possible.

The very last steam locomotive of them all, and the peak of UK steam rail engineering. British Railways Class 9F 92220 Evening Star on the Settle to Carlisle railway in 1984. Built in 1960, withdrawn in 1967, Evening Star had a design lifespan of at least half a century and was only one small part of the hideous waste of taxpayers money inflicted by politicians and rail managers on BR in the 1960s.

As Britain entered the 1950s the British Transport Commission overseen by Parliament announced a huge investment in British Railways.  But, as so often is the case with politicians, on the face of it the Plan sounded great, but it was investment in the wrong place. The Modernisation Plan of 1955 promised that new rolling stock and infrastructure were to be procured, limited electrification was announced as too was a massive investment in new locomotives to completely replace the tens of thousands of inefficient and labour intensive steam engines. In continental Europe such huge post war investment was being used to replace steam with electric traction and electrification across entire networks. In the UK virtually all of the funds went towards cheaper dieselisation.

It was a typically British penny-pinching short sighted political fudge. Steam was withdrawn completely in 1968 and yet the Evening Star, the very last steam locomotive of them all with a predicted lifespan of fifty years came in to service in 1960, only to be withdrawn a couple of years later. Such was the extravagance, waste, lack of planning and political ineptitude.

If all of this wasn’t bad enough the railways were losing money hand over fist. As discussed last week the Beeching Report called for mass line closures, and mass closures there were. Wagonload traffic more or less disappeared and was lost to road haulage. Most goods stations were closed, and what was left of local services were hauled by diesel multiple unit usually on track-singled and unmanned branch lines with unstaffed stations operating on a one engine in service principle.

Ex-ICI supremo Dr Richard Beeching in 1963 promoting a copy of his new report that would decimate Britain's rail network: The Re-Shaping of British Railways.

Richard Beeching didn’t stop the losses but they were reduced; in many respects because route mileage was reduced per se. But neither, despite his still loathed name was he just a crude economic butcher. He was an archetypal technocrat. Some of his proposals were unexpectedly of great benefit to British Railways. For example, the introduction of the Inter-City brand stopped the haemorrhaging of long distance traffic on main lines. Freightliner was introduced, where whole container trains travelling between two terminals (one often a port) for forward distribution to businesses via lorry. However, whole areas of the country and some quite large towns were left without any rail transport at all, and strategic rail arteries such as the Waverley Line from Edinburgh to Carlisle via Jedbergh were lost.

In all of this talk of huge losses, line closures and ‘bustitution’ of rural rail services, there was no mention of the economic or environmental benefits of rail services. For some unknown and quite peculiarly individualistic British political reason no official explanation was ever given as to why rail transport was expected to make a profit, while billions of pounds of public money were poured into the burgeoning motorway network, directly subsidising one of the greatest purveyors of social inequality yet to be invented: the private motor car.

One can only assume that the dual political and economic standards were due in no small part to lobbying and corruption by politicians, the motor trade, the petrochemicals industry and the construction industry (remember from last week that the Minister of Transport Ernest Marples in the early sixties was a director of Marples-Ridgeway Construction). And motoring and road transport were particularly appealing to right wing politicians as they signalled freedom, independence, flexibility and best of all were free of powerful unions such as ASLEF.

By the mid-seventies British Railways, whose name had been shortened to British Rail (BR) had, with little investment transformed Inter City travel with new coaches, liveries and marketing. The introduction of the High Speed Train (HST) or Inter City 125, first on Brunel’s Great Western Main Line from Paddington to Bristol and then cascaded on to the East Coast Main Line (ECML) from Kings Cross to Edinburgh was another stunning victory for British engineering ingenuity on a relative shoestring. It was quite simply, the fastest diesel train anywhere in the world. Period. And that’s why Chairman (later Sir) Peter Parker commissioned those “This is the Age of the Train” television commercials. The keyword here of course again was diesel.

The rest of Europe was meanwhile investing in new purpose built higher speed electrified intercity main lines, something that BR wanted to do, but being starved of cash by the Treasury (that was trying to pay off the UK’s emergency International Monetary Fund loan of 1976) it simply couldn’t.

While Inter City travel, especially for business people and the middle class was starting to look increasingly more at least plane if not space age, suburban and rural branch lines were still lost in time between the Age of the Railway Children and the 1950s. Clapped out diesel electric multiple units which in many respects had saved much of the remaining network from closure, still plied their trade along unappealing and unstaffed branch lines. Towns and villages with still lucky enough to have a rail service found that their ticket offices had been closed in favour of paying the guard on the train, the so-called ‘Pay Train’

Enter Margaret Thatcher, a woman who truly hated railways. And despite successes with HST and Freightliner there were many good reasons why the corrupt politicians and quangos who had mis-managed them on our behalf should have been hated (but not the industry per se). In what should be the most civilised form of mass transit yet to be invented, billions of pounds had been squandered since the Modernisation Plan of 1955 on inadequate diesel hydraulic transmission locomotive designs ordered in a rush without proper prototype testing. Infact, whole classes of locomotives had to be withdrawn such as the Class 52 “Westerns” on the Paddington route. By luck, rather than good management the HST had just become ready for introduction.

And then there were the huge wagon load marshalling yards, built in the mid-sixties, only a few short years before Beeching’s recommendation that BR should surrender wagon load traffic to road haulage, instead concentrating on profitable train load such as Merry-go-Round coal traffic direct from pit head to power station. Further embarrassment came for BR when the eighties revealed a certain wrong type of snow and leaf that didn’t like railways. Then there was the debacle of the public debut of the tilting electric Advanced Passenger Train (APT) on the West Coast Main Line from Preston to Glasgow. Ironically, once again this train was a triumph of British engineering in a nationalised railway systematically starved of funds.

A full fifteen years before Virgin Trains introduced the Fiat Pendolino based on the same

technology, BR had come up with both an electric train for the twenty first century and one that would work on antique Victorian infrastructure with tight curves and yet still manage a top speed of 150mph. Unfortunately, unlike HST, BR did quite get the tilting or the marketing right for its debut performance. A right wing government and right wing press desperate to denounce the railways as an inefficient nationalised Victorian anachronism wasting billions of pounds, were ecstatic at the sight of dignitaries and reporters leaving the APT at Glasgow, either queasy or actually being sick as a result of the prototype tilting mechanism, that could have easily been corrected. But the damage had been done. Nobody had faith in the APT and it would be towed off to reside at York’s National Railway Museum until the political dinosaurs were full of remorse when hindsight, Fiat and Richard Branson revealed their folly and ignorance. Another British invention ahead of its time with no support from gutless politicians.

Despite the recommendations of the Serpell Report of 1982 and the proposed closure of the Midland main line between Carlisle and Settle (both discussed last week) and the closure of a couple of freight and branch lines, BR survived the eighties surprisingly well. Infact despite the Thatcher government’s hatred of nationalised industries and railways in particular there had been far more investment than during the mismanagement, political duplicity and strife of the Heath and Callaghan governments of the seventies. The reasons for this boost in investment would become clear by the early nineties.

A whole new generation of both electric and diesel multiple units had been introduced including the Pacer (a bus vehicle on a rail chassis, that although cheap with gearbox problems and presenting terrible ride qualities had been the saviour of many branch lines), Sprinter, SuperSprinters and south east Networkers. A plethora of heavy duty Class 58, 59 and 60 freight locomotives had been introduced for the railway’s bread and butter work of Merry go Round coal trains. And the real icing on the cake was the wholesale electrification of the ECML from Kings Cross to Edinburgh complete with brand new Inter City 225 push-pull locomotives and train sets.

Finally, and particularly at the insistence of the French government (with the proviso that one day a road tunnel would be built to appease Margaret Thatcher), the new Channel Tunnel was to be rail and not road. Built by TransManche Link (TML), this vital freight and passenger artery to Europe was opened by the Queen and France’s President Mitterrand in 1994. This remarkable feat of engineering carries high-speed Eurostar passenger trains, the Eurotunnel Shuttle for automobiles and other road vehicles, and international rail freight trains. The tunnel connects end-to-end with the LGV Nord and High Speed 1 high-speed railway lines through Kent (which itself was years behind the French (LGV)).

Political short sightedness, ignorance and ineptitude in the UK again reared its ugly head. Many people have forgotten that a direct railway link from Scotland and the north of England to the continent had been planned. This was shelved however, once again on cost grounds by John Major’s Tory government. The idea was for regional electric Eurostar trains to depart from Glasgow, Edinburgh, Manchester or Newcastle and avoid central London on their way to Paris and Brussels. Even the regional Eurostar sets were manufactured and bought, only to hideously languish in sidings for a decade, eventually finding a role on the ECML, augmenting 225 services from York to London for GNER.

If BR couldn’t be butchered, pruned or even better closed, then it surely could be; you guessed it – privatised. Now this really was privatisation for privatisation’s sake on the part of Major’s government. Margaret Thatcher had dreamt up some draconian and deranged policies such as the Community Charge or Poll Tax, but even she hadn’t really contemplated the wholesale privatisation of BR. Because it was fully baked right wing ideology and political fundamentalism, it had to work regardless of the cost to the taxpayer. In this perverse Alice in Wonderland world, the Mad Hatter was the Fat Controller and if the tax payer couldn’t save any more money on the nation’s railway then the Tories friends in low places could certainly benefit from another state industry giveaway.  Bear in mind that you and I had already paid a massive amount of hard earned tax for the early nineties investment in new rolling stock, train sets and the ECML electrification scheme. There weren’t too many goodies left to sell off to the Tory Party’s patrons. The majority of yours and my assets had already been squandered and stripped, but this particular family silver in the form of our railways had certainly been well polished and primed ready for privatisation.

In advance of privatisation, an internal market had been created within BR and the organisation had been internally divided into sectors in both the passenger and freight sectors. Under this process, post privatisation the government could establish the subsidy level required, if any, for each future franchisee holder, prior to sell-off.  The passenger side was broken down into Inter City, Provincial and Regional Railways. Likewise, the freight sector was divided into, metals, coal, petrochemicals etc.

The privatisation of British Rail was set in motion with the Major government’s British Coal and British Rail (Transfer Proposals) Act 1993. This enabled the relevant Secretary of State to issue directions as to the disposal of holdings to the relevant Board. This was necessary since (in the case of the British Railways Board) they had to act, at all times, within the rules established by various Transport and Railways Acts, none of which would have allowed the Board to 'sell-off' any of its assets. The subsequent direction from the Secretary of State forced the creation of Railtrack PLC. This then paved the way for the Railways Act 1993, and the operations of the British Railways Board (BRB) were broken up and sold off.

Gerald Corbett, Chairperson of the hated and not missed track authority, Railtrack. Corbett resigned after the Hatfield rail disaster where cost-cutting on maintenance was identified as a key cause of an avoidable disaster on what should be the safest form of land transport. As an aside, Corbett is now chairperson of Betfair!

Railtrack took over ownership of all track, signalling and stations. Railtrack let out most of the 2,509 stations to the franchised passenger train operators, managing only a handful of the largest city termini itself; maintenance and renewal of the infrastructure was also contracted out to British Rail Infrastructure Services, leaving Railtrack's directly-employed staff consisting mostly of signallers. In the original privatisation plan, Railtrack would have been the last part of British Rail to be sold, but with the approach of a general election in 1997 at which the Conservatives faced almost certain defeat, Railtrack was hastily privatised in May 1996 in an attempt to ensure that the new structure could not be reversed.

The Office of the Rail Regulator was established to regulate the monopoly and dominant elements of the railway industry, and to police certain consumer protection conditions of operators' licences. He did this through his powers to supervise and control the consumption of capacity of railway facilities (his approval was needed before an access contract for the use of track, stations or certain maintenance facilities could be valid), to enforce domestic competition law, to issue, modify and enforce operating licences and to supervise the development of certain industry-wide codes, the most important of which is the network code.

Probably the Rail Regulator's most significant power was the establishment, usually every five years, of the financial framework in which Railtrack (now Network Rail) operates, through the carrying out of access charges reviews. This settled the structure and level of access charges which the infrastructure provider is entitled to charge train operators for the operation, maintenance, renewal and enhancement of the national railway network. ORR's role only covered economic regulation; safety regulation remained the responsibility of the Health and Safety Executive, but that position changed in 2005 when safety regulation was transferred to ORR. The first Rail Regulator was John Swift QC.

The Director of Passenger Rail Franchising took responsibility for organising the franchising process to transfer the twenty five passenger train operators (known as Shadow Franchises) to the private sector and then develop the refranchising programme for the future. The first round of franchising was based solely on the lowest cost bidder wins. The first Director of Passenger Rail Franchising was Roger Salmon.

Twenty-five passenger train operating units (TOUs), converted to train operating companies (TOCs) shortly before each was privatised, split by geographical area and service type. This meant that, for example, a major city terminus would be served by an ex-InterCity TOC and one or more local commuter TOCs, with consequent competition for train paths into and out of the stations, which had to be resolved by Railtrack and the Rail Regulator. The first batch of TOCs to be established (be privately operated) were SouthWest Trains, Great Western in February 1996, and C2C in May 1996. TOCs own fewer assets, hiring most of the assets (trains, tracks and stations) required from Railtrack and the ROSCOs and contracting suppliers to undertake heavy maintenance on the trains or provide on-board catering.

There were three rolling stock leasing companies (ROSCOs): Angel Trains, Porterbrook Leasing and Eversholt Leasing, later HSBC Rail. These were allocated all BR's passenger coaches, locomotives, and multiple units. Freight locomotives and wagons were owned by the freight train operators.

If this wasn’t complicated enough there were six freight operating companies (FOCs) including Mainline Freight in the south-east, Load-Haul in the north-east, Trans-Rail in the west, Railfreight Distribution, international and wagonload trains, Freightliner (UK), container-carrying trains, Rail Express Systems, parcels and mail trains and Infrastructure maintenance and renewal trains.

There would also be a whole range of companies providing infrastructure services to Railtrack, along with companies providing other specialist services including European Passenger Services (to operate the UK part of the Eurostar service) and Union Railways (to implement the High Speed 1 construction project).

This monstrosity of a fragmented railway system resembled some sort of hideous Smorgasbord where diet had gone out of the window. However, it wasn’t calories that were going to be notched up big time. It would be yours and mine hard earned taxes. It would account for why after privatisation, far from being more economical and efficient our railways would become the most expensive in Europe for both fare paying passenger and taxpayer alike. Shamefully, in Major and Blair’s topsy-turvy world, our railways were going to end up costing six times more in private rather than public hands. And that would be acceptable to corrupt politicians leading an economically ignorant public.

Remember that old cliché of private good, private bad? Well this is demonstrably not so in the case of railways where arbitrary political interference in a natural monopoly would never lead to a free market. We may be going to talk more about railways again next week, rather than a competitor mode of transport, but to quote the title of arch free marketer Friedrich von Hayek’s 1944 yarn, this form of deranged economics applied to strategic state industries is truly a Road to Serfdom.

Nexttime: Part 3 – Negative Redistribution Rides the Rails: The Privatisation of Profit and the Nationalisation of Losses

Bibliography

Beeching R., The Reshaping of British Railways, 1963, British Railways Board, HMSO.
Henshaw, D., 1994, The Great Railway Conspiracy.

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