Going Vertical on rail

Paul Salveson’s Points and Crossings in 284


There are signs that Chris Grayling, the new Transport Secretary, is flexing his political muscles and moving away from the cautious approach adopted by his predecessor Patrick McLoughlin. That’s not necessarily a bad thing. He wants each rail franchise to be run by joint management teams, including representatives from both the train operating company and Network Rail. In his recent announcement he said “I intend to start bringing back together the operation of track and train on our railways.” He continued “We need to change the relationship between the tracks and the trains on the railway… passengers don’t understand the division between the two. They just want someone to be in charge. They want their train to work. I agree with them,” he added. I agree with him. He suggested that the pilot for this new approach will be the Oxford – Cambridge line, a victim of the Beeching cuts and a route which is gradually coming back to life. On December 12th, Chiltern Railways began operating from Oxford via Bicester into London. The projected new line would continue eastwards on to Cambridge. The market for the new route is massive.


The idea of a vertically-integrated organisation for the proposed East-West Rail line from Oxford to Cambridge makes a lot of sense. It will be small enough to have real focus, but big enough to have benefits of scale. Appropriate size and focussed management is actually more important than whether it’s public or private. And the idea that future franchises will have much greater integration between Network Rail and the franchise operator makes sense as long as there are ways of harmonising the relatively short-term horizons of a franchisee.  I’m against franchises because they don’t engender the long-term commitment and loyalty that a permanent business has (again, whether public or private). Could long-term concessions that are vertically integrated be the way forward? It should be tried, with a clear remit from Government to extract maximum social and economic benefit from the concession and a strong degree of commercial freedom for the operator to develop new services and products.


It’s seldom recognised on the left, but the Government’s Department for Transport has been pursuing a radical agenda towards new franchises, insisting that bidders bring tangible ‘external’ benefits to the operation and also pursue enlightened HR policies internally – including doing something about rail’s traditionally poor record on diversity. This may not be something that you would expect from a Conservative Government, but it is happening and it is forcing train companies to see ‘corporate social responsibility’ as more than the occasional charitable grant.


Grayling is clearly moving away from the separation of operations and infrastructure which was a hallmark of the original privatisation model in the 1990s. It hasn’t worked and there is huge unhappiness within the rail industry about the slow delivery of infrastructure enhancements. The latest fiasco with Great Western electrification, with several routes falling off the programme, is just one example. Some talented managers within Network Rail feel frustrated about the situation but are powerless within this large (state-owned) bureaucracy to effect change.


The next two franchises will be interesting tests of the Government’s willingness to force more radical change and begin steps towards vertical integration. The Wales and Borders franchise will be let by the Welsh Government, which has aspirations for a publicly-owned railway, whilst East Midlands will be the responsibility of the Department for Transport. I suspect both will end up with broadly similar approaches, with greater vertical integration between the train operator and Network Rail, and clear requirements to ensure positive impacts in terms of employment policies and community benefit.


What should a ‘left’ response be? We need to drop this childish attachment to ‘bringing back British Rail’ and recognise that smaller units of management are needed, whether public or private. Cooperative models need to be explored and encouraged. Both Wales and Borders and East Midlands make sense as management units, though more could be done to devolve responsibility to the local level. In the short term, why not try an integrated approach for an existing line or local network which would be low-risk, probably on a regional group of lines. Given that we’re leaving the EU one benefit is that we won’t be tied by EU laws on operations/infrastructure separation so we might as well get some benefit from the Brexit shambles.


An intelligent ‘left’ approach would be to push the franchising authorities (Welsh Government and DfT) towards further positive social, economic and environmental outcomes. This should include much greater emphasis on bus-rail integration and encouragement to operate integrated services. The unhelpful attitude of the Competition and Mergers Authority needs to be challenged.


People want to use railways. We are, at last, making the right moves to encourage that and the left needs to engage positively and imaginatively – and not be stuck with out-dated solutions.


This article appears in CHARTIST 284 and Paul Salveson’s Points and Crossings  column is a regular in every one


  1. Just one little point. When the railway was originally privatized, and infrastructure management and train operations were separated, Wall Street looked at the possibility of doing the same to the great North American Class 1 railroads, in order to boost shareholder value, but it very soon became clear to them, from the quickly unfolding disaster of Railtrack, that the idea was unacceptable from a commercial point of view, at both operational and legal levels, and was quickly dropped.

Leave a comment...

This site uses Akismet to reduce spam. Learn how your comment data is processed.