Memorandum by Scott Hallewell & Co
THE RELATIONSHIP BETWEEN RAILTRACK'S SUCCESSOR
TO THE TRAIN OPERATING COMPANIES AND RELATED MATTERS
1. Long before placing Railtrack into Administration
it was apparent that the present organisational arrangements within
the railway industry, and relationships with the Government, were
not working satisfactorily. Much discussion has taken place, particularly
over the past year, following the Hatfield accident, as to whether
changes to the railway industry should be wholesale and fundamental
or more evolutionary. Having experienced numerous organisational
changes in my lifetime in public transport I preferred an evolutionary
approach. I came to this view because it appeared to be that the
rail industry was trying hard to "get its house in order"
and that wholesale restructuring would further delay the improvement
of rail services that are so urgently wanted by all parties.
2. However, following Railtrack being placed
in Administration there is an opportunity to restructure the rail
industry in such a manner that the better elements of the present
structure are retained, whilst the other elements are simplified
and rationalised. This approach is the basis of my submission.
3. There are three fundamental weaknesses
in the present organisation of the railways:
Firstly: the separation of the wheel-rail interface
whereby the train operators and the infrastructure providers are
separated horizontally rather than being integrated vertically.
Secondly: the key playerRailtrackhas
no direct relationship or interface with the customersthe
passengers and freight forwarders.
Thirdly: there are too many "players"
in the present rail industry and any future organisation must
produce a simpler framework.
Each of these weaknesses is addressed in subsequent
4. Of all modes of transport the unique
feature of railways is the interface between the wheels of the
rolling stock and the profile of the rails and tracks upon which
they run. This close relationship exists in no other mode. This
relationship, which is measured in millimetres, affects:
the safety of operation;
the reliability of service;
the life expectancy of the assets;
All of these features were highlighted in the
Hatfield accident and the aftermath.
5. This interface must be under the direct
control and responsibility of one organisation. This is a technical,
engineering-led, issue and not one that can be allowed to rest
on contractual relationships. Legal, financial and risk considerations
must be devised around the correct technical and operational solution,
not the other way round.
6. A fundamental tenet of any organisation
is that the customer must have a direct interface with the person
who provides the service or sells the goods. Only by such an arrangement
can you ensure:
(a) that the users of the service get the
(b) that the provider of the service is aware
of what the customers want.
This relationship does not exist in the present
organisation of the rail industry.
7. Where this relationship exists, eg between
passengers and the TOCs, and the freight industry and the rail
freight operators, traffics have seen spectacular growth. Railtrack
are remote from the actual users who pay their transport requirements.
Railtrack's only customers are the TOCs and freight train operators.
This has shown itself to be unsatisfactory in terms of:
scheduling of major works;
scheduling of large maintenance projects;
developing the network (hence the
creation of the SRA).
8. The main "players" in the rail
industry at the present time are:
The Government through DLGR and the Treasury.
The duplication of effort and the cost of this
"organisation" is incredibly high. The industry is "held
together" (if that is the correct expression) by legal agreements,
which are themselves long, complex and costly to produce and manage.
Each organisation adds its own profit margins or service charges.
There are penalty clauses and termination payments at every juncture.
The whole arrangement needs monitoring and managing, not to run
a safe, reliable cost-effective railway, but to self-satisfy a
complex and bureaucratic regime.
9. Whether in public or private ownership
the Government has a role in the railway industry. Its job is
(a) provide the appropriate legal framework
for the railway industry to operate in;
(b) ensure the safety of that system;
(c) provide funds by way of capital grants
and revenue subsidies within the objects established in (a) above.
10. The industry itself then needs:
(a) Railway Companies to:
secure the maintenance of their
maintain the infrastructure;
provide and maintain the rolling
11. Such an arrangement needs an overall
body which can take a strategic view of railways. I have called
it the Rail Co-ordinating Council (to differentiate it from the
Its principal tasks would be to:
produce a Strategic Plan for the
railway, developed "bottom up" from the needs and requirements
of the operators;
represent the rail industry to Government;
award network operating franchises
to train companies;
carry out the role of the former
Railway Clearing House or ATOC in the allocation of revenues;
to oversee "Running Powers"
(see para 15);
to be the arbitrator for disputes
in the industry;
establishing common technical and
12. The Rail Co-ordinating Council would
have representatives from all train operators and would be, essentially,
an operator's organisation. It is clear that the SRA "set
off on the wrong foot" and has failed to work with the TOCs.
It also failed in its relationship with the Government. ATOC has
failed to develop any industry-wide "stature" and shown
13. The top priority, outwith the span of
this Submission, is to ensure a continuing safe railway during
this period of uncertainty (inter-regnum) and to establish financial
control. Thereafter the key thing is to transition the present
TOCs into fully-fledged railway companies. To do this the TOC
franchises need to be consolidated into some regional or area
structure that reflects service provision and operating geography.
14. In this context it makes sense to consider
sub-contracting operations to smaller, locally based organisations
(mini-franchises, as has been done so effectively in Germany,
Switzerland and Japan and, on the freight side, in North America).
Such arrangements would also permit the involvement of local stakeholders,
eg PTEs, County Councils or Regional bodies.
15. Typical companies, and their subdivisions,
are set out in an Appendix to this Submission. In the context
of railway organisation two issues have to be addressed:
(a) Running Powers: Railway companies would
own and operate the track, but other operators (passenger and
freight) would want to run over them to reach common traffic objectives,
eg York or Birmingham or access other areas, eg the Trans-Pennine
routes. The owning railway would provide "Running Powers"
to such companies (as happened pre-Nationalisation).
(b) Penetrating Lines: Wherever boundaries
are drawn in any railway organisation, there will always be the
issue of major traffic or operating locations or routes being
outside the area drawn, or lines from one area coming into another
area. This cannot be avoided, but adoption of running powers or
jointly owned lines can ease the situation.
16. The "drivers" in the proposed
structure of the railway would be the new railway companies. Having
been awarded a franchise to operate the network they now own,
they would be responsible for everything. They would be expected
to operate on commercial lines but to receive recompense for providing
economic or socially necessary services required by national,
local or regional government or PTEs.
17. There is no doubt that some TOCs eg
GNER, are keen to be responsible for their own infrastructure.
There are others, eg National Express Group, who are less keen.
Clearly much development work, including risk analysis and funding,
is necessary to evaluate these matters. The crucial point is that
both the TOCs and freight operators have shown an ability to grow
the market. This is crucial to the achievement of the Government's
10 Year Plan and the Local Transport Plans.
D Scott Hellewell
Independent Transport Consultant
25 October 2001