I am sure it all is, but I haven't read most of it, in common with the vast majority of people. Saying there is no excuse for not knowing things is quite a hurtful attack to make on someone who I hope is demonstrating a willingness to learn, and a reasonably open mind. I don't know what you do for a living, or how you know as much about all this stuff as you do, but my career is in a completely unrelated area, my degree is in chemistry, and my job is as a computer programmer for a research organization. My life is dominated by understanding how science is done, and how computers and databases can help in that. I read long legalese so that what I do is compliant with the laws that ensure that medical testing is reliable, and safe. I am understandably less than keen to spend my free time reading more of that sort of writings about something I am interested in for fun. I am however reading this forum, in an attempt to understand more, by interacting with others with the same interests, and I guess a large number of people within the industry. Ignorance is where everyone starts, and I try never to blame someone for being ignorant when they are trying to learn.
On top of all that, a lot of my thought these days is going into trying to understand what the hell is going on with Brexit. Now there's a complicated problem to solve.
Firstly, I apologise for a badly phrased rant. You referred to the general public not being informed or understanding the current situation - my comment was aimed at them. It is clear to me that you are interested in the identifying and seeking solutions to the current real and perceived problems which is why I have tried to explain the background as I understand it. I'm sorry it appeared as a personal attack - it wasn't intended.
I have been following the fortunes of the railways business since my early teens when a school friend persuaded me to come with him to Reading station to look at these modern, new-fangled diesels which were the first ‘Warships’, the D600s and D800s. For some reason I suddenly realised, at the age of 14, that I was present at the end of an age, an epoch, and the beginning of the next and this change fascinated me. I delved into the history of the railways, especially as 'my' bit was built by the great Isambard, and this interest has followed me ever since. I have never worked for the railways although school chums did (and we stayed in contact over the years) but pursued a career in science and then computer and telecoms engineering management which took me to the continent for over twenty years. But this interest in railways and other forms of transport led me along the paths of learning about the history of technology and the effects it has had on ‘society’ - and equally the effects ’society’ has had on the history of technology. What I think I know is the result of 60 years of observation - and some research - since my epiphany. I hope that one is never too old to learn, I have just finished reading George Dyson’s book ’Turing’s Cathedral - The origins of the Digital Universe’ and am halfway through George Holme’s ‘The Oxford History of Medieval Europe’; at the same time I belong to the IEEE and receive its monthly journal ’Spectrum’ to keep me up to date on things such as quantum computing. As a physicist I will happily admit to a certain uncertainty about most things - which is why some of the more political posters in the forum set my teeth on edge. Their comments border more on religious fervour rather than being the product of any deep thought.
As yorksrob has mentioned, there are cases in this country where the state has been more successful, and Highways England seems to be a reasonable example. The local road project for me, the A14 Huntingdon bypass, seems to be running well, and the Motorway network as a whole seems to be in reasonable shape, although there is always room for improvement. The idea that the Treasury cannot afford things seems to me to be political spin, the Treasury has access to the some of the cheapest borrowing possible, if anything they can afford it easier than private companies. How much the government should be taking responsibility for is the question.
Again, I was less clear than I intended. I draw a difference between building a piece of infrastructure - which is a one-off event - and being involved in the continuous day-to-day operation of a service. Governments can do the first - sometimes quite well - but attract the wrong sort of person to be able to do the second successfully.
In the case of the motorways and the A14 the DfT (in its earlier guises of the MoT and similar) contracted civil engineering companies for the construction having passed the various enabling Acts. The Government then had no direct involvement in the construction and roads do not need day-to-day operation by the Government. The Government sets the scene, the legal framework, the funding for construction, maintenance and policing, and then - as the vehicles are owned and run by individuals and companies - cannot be involved in day-to-day operation. An example of the second was the AEW3 Nimrod programme which was intended to use old Nimrod airframes to build a UK equivalent of the American’s AWACS (Boeing E-3). (I have to declare an interest - I worked on part of the AWACS programme for a sub-contractor to Boeing many years ago). The MoD tried to run the programme rather than sub-contracting the whole thing to a prime contractor and put too many constraints in the way. It was a disaster and eventually the MoD bought some Boeings…
This was one of the hopes for the privatisation of the railways - the Government wanted to avoid being in the firing line every time there was a complaint that the 7.39 from Little Snoozeborough to Hogsnorton Magna didn’t connect with the express last Tuesday at Muggleston. The model was the road system - the Government couldn’t be held to task for the performance of privately run vehicles (cars, coaches, buses or trains) even if the infrastructure, road or rail, was still in Government hands.
Government borrowing is another issue worthy of several books! My main problem with Government borrowing is that money is borrowed from the rich - people or banks or similar sources of wealth - and the interest on the borrowing is paid by raising taxes on the not so well off so the rich get richer. I can’t see how this is justified.
Quite apart from the fact that if the interest rates rise then the taxes on the not so well off have to go up as well. Higher interest rates benefit the rich more than they benefit the less well off.
I exclude from this borrowing for a purpose which returns a profit and allows the debt to be properly serviced. Borrowing to cover general expenditure - which has happened in the recent past and to a certain extent is still happening but to a reduced extent - simply piles up problems for future generations. I find this inexcusable.
This is my problem with privatization as a solution to all government problems. Publicly traded companies can legally only have one motive, and that is profit for shareholders, and private companies can have any number of motives, but they are private to the owners, and could be good for the country, but not necessarily. Cadbury had some good objectives(for its time, I think these days the level of control it tried to exert on its employees even outside of working hours would not be considered reasonable), but should we as a nation be beholden to the charity of private companies. A governments job is to hold society together, by forcing people more able to pay to help those less able. I think there are places where the profit motive cannot be trusted to give the best outcome for the community, and in those cases it must not be used. What you said about nationalized industries having to meet multiple targets is actually exactly what I want out of railways. I know sometimes they are mutually incompatible, but I think the arguments should be public and discussed, so we can choose the best way, not use that as an excuse to give up and fall back to the profit motive because it's too hard to get anything else done.
Strictly the Board of Directors have to follow the instructions of the shareholders, there being no legal requirement that the company makes a profit for them. Of course, if it doesn’t make a profit then once the capital has run out there will be no company!
It’s a bad historian who tries to analyse and judge the motives and actions of the past using the mores and assumptions of the present! I used Cadbury’s as an example, not, in todays world, as a desirable goal!
I am not sure that I understand exactly what you mean by the charity of private companies. With modern accountancy and governance rules, the current national and international frameworks and competitive pressures within which companies can operate I would suggest that they, both private and public, are much more constrained in their actions than those of even 50 years ago. As the span of philanthropic, so to speak, activities of companies is reduced the need for other sources of welfare (in the broadest sense) to fill the gap increases. Some of this has to be picked up by Government.
In the case of the railways the debate is usually about the funding of ’socially necessary’ lines and stations and in this ‘green’ era about the types of fuel used and the role of the railway in reducing traffic congestion and road traffic generally.
The issue of the funding of socially necessary lines has essentially been solved. Since the concept was fixed into the 1968 Transport Act there has been no widespread programme of line and station closures. Those that have occurred were treated on a case-by-case basis. The concept of cross-subsidisation of loss-making services within a TOC is reflected in the net subsidy paid by (or premium paid to) the DfT. The DfT no longer has to concern itself with the performance of individual lines as was the case in the early days when long lists were published of the grant paid for each line.
There remains, as always, the debate about the overall level of subsidy that the socially necessary lines require - but that will continue and has to be answered by the political process and the Government’s overall spending levels.
There are bigger issues with building new, or reopening, railway lines which can be seen to be a social benefit. By definition the lines which carry the most traffic are already in existence, so additional lines will be those with lower traffic levels. As such a line is unlikely to be profitable (taking capital and operational expenditure together) and because of the large capital requirement to acquire and build the rights of way and formation (which is essentially independent of the traffic capacity of the finished railway since for a double track railway the width of the formation won’t change even if the alignment can) making a financial case is very difficult. Even if the Government wrote off the capital cost of the construction - which brings us back to borrowing again! - there is still the issue of the on-going operational costs. It is not a simple matter to allow for the perceived environmental benefits or social mobility and in the final analysis it comes back to affordability. This is a question which only Government can answer because essentially it is a political question lying outside the remit of private companies.
You wrote “where the profit motive cannot be trusted to give the best outcome for the community”. Many of the obvious desired outcomes for society of any activity and products or services resulting from these activities are enshrined in Common or Statute Law. Certain activities and products are forbidden, or strictly controlled, and so on.
This appears to be a misunderstanding from these two sentences together:
Although your argument is not convincing, as servicing debts are part of the running costs. I cannot say I am living within my means if I have to get someone else to pay my mortgage for me.
Exactly! The reasons that Network Rail ran up such huge debts are two-fold. The Rail Regulator announced an interim review of Railtrack’s funding in September 2002 after it had been put into Administration the year before, Railtrack was brought out of administration on 2 October 2002 and sold to Network Rail - a Government created organisation with no equity shareholders and the only bidder - on 3 October 2002. The Review increased Network Rail’s funding considerably but the Government did not increase the TOCs’ access charges to pay for this as would have been the case under the earlier structure because the increase in the subsidies (at that time few, if any, of the TOCs were paying a premium) would have affected its credit rating. Instead it guaranteed Network Rail’s borrowings without, at least publicly, setting either annual or upper limits. After the Hatfield disaster the Administrators spent millions on track replacement without having the knowledge to know whether alternatives existed and later Network Rail struggled to improve its infrastructure without a proper engineering organisation. As a result it tended to throw money at a problem - because borrowing was cheap and effectively unlimited and there were no shareholders to keep an eye on the developing problems.
I’m not condoning this course of action - I’m trying to explain it. The Government was complicit in allowing a debt of such size to be built up, but the borrowings are a result of past misdemeanours, not a result of present activities - so in a sense they really are Government debt and shouldn't be counted as part of NR's expenditure. The re-classification of NR as a public company means that this route is closed off and it now has to live within its cash limits; I suspect that in four or five years time this debt will be subsumed into the Government's books completely and NR's accounts will suddenly look about £1.5 billion per year better!
I live in hope that Andrew Haines’ changes to NR’s structure will contribute to an improved financial situation.
It does appear that some do, especially in certain parts of the political landscape. We hear constant news of certain MP's saying we should sell of parts of the NHS, or sign trade deals that allow companies to sue government for passing laws that cause problem with there profits, whether or not those laws are needed to solve other problems. Politically, it does seem like some people will not be happy until government is stripped back until it is incapable of doing anything, which presumably will benefit those that can afford to live in a world where social safety nets and workers rights are non-existent. I know that is an extremist position, but it is one that seems to be becoming more likely by the day, due in part to the incompetence of the opposition(another political opinion that might cause arguments, although I suspect not here).
I do understand there is no market economy in the current system, that is my problem with the current system. But is there a way to introduce market forces into a system so integrated, and an essential service? I think here is the big disagreement between us. I don't think that the states only job is to provide things that can't be supplied by a company at a profit. It's job is also to prevent companies making profits by causing damage, either to society as a whole, or to less able, or less well off parts of it, those of us whose only way of influencing the way the world works is by voting. Or, in the modern world, to the environment. The natural state of the railways is, best case, a collection of monopolies, as there will always be parts of the network that cannot support competition, and even in areas that do have competition, the choice of the consumer is often not which company do I want, but what time do I want to arrive. I am willing to accept the DfT is the main problem, but how would you get rid of it, without removing the controls that allow the subsidies that you said you support?
There is always a debate on the optimum way to organise the way that goods and services are supplied whether by the state or otherwise. There is also a continual debate on the size and reach of the state - and it is healthy that there should be. That is a political debate and to influence its outcome one has to take part in some way.
As one of my managers once said ‘There are two types of people, those that drop things and those that have things dropped on them’. If you’re not happy with the things that are dropping - join in. Become a dropper rather than a droppee.
However, there are no objective descriptions of the things which benefit society as a whole - one person’s urgently needed housing is the next person’s environmental damage, more pollution, loss of green space and habitat. There never will be agreement.
Government, national and supra-national, sets the rules within which people and companies live and work. Governments - and the civil services which support them - have to be generalists as the range of topics and issues they have to cover. They are not - with localised and specific exceptions - not specialists. The rules they frame have to be broad and, in a democracy, allow freedom of action. Specific issues are clarified by case law, but the basic assumption is that the people are to be trusted.
This reflects in the way the DfT interacts with the railway business - how much does it trust the railways to act reasonably? There were instances of financial mis-management in some early franchises (referring to the Connex franchises) and some TOCs trying too obviously to game the system with the result that the then Strategic Rail Authority tightened up the franchise terms. This tighter control increased when the SRA’s franchising activities were subsumed into the DfT. This has now reached a point of diminishing returns. I would therefore suggest that the DfT allows the TOCs to act as they see fit within the same constraints as any other company operating in the UK. Allow that railwaymen and women like running trains and let them get on with it. The key is that it should keep out of tactical decision making.
Regarding the overall structure I have no fixed ideas as I always have doubts about the effectiveness of imposing a structure from without. Experience shows that evolution works - both in the biological world as in the commercial one. One the one hand there are advantages in letting potential operators bid for a franchise for a limited term as this allows the Government to control its budgeting better and offers a modicum of market competition. On the other hand people like to work for an organisation which has a long term future - and if the company only lasts for seven years there can be no long term loyalty in either direction.
Competition existed in the days of the ‘Big Four’ for some of the largest flows by different routes to keep the companies honest: London - Birmingham, London - Manchester, London - Exeter and Plymouth, London - Edinburgh and Glasgow being the main ones. In some ways this structure might be appropriate again for the operators together with easing the requirements for Open Access operators to take part as long as they pay the full costs of their presence. (This latter is difficult if the route is already congested so possibly some other rule is needed - for example to state that 15% of all passengers on a route have to be carried by non-franchised operators. But equally this could be seen as state support for Open Access...!) Public opinion, competition from the the car (possibly electric and autonomous) and the Competition and Markets Authority could ensure that standards are kept on other routes.
All power tends to accrue to the Centre. And in twenty five years time, whatever is decided now, this same exercise will have to be repeated!
So the government basically gave Railtrack £1,459 million before it could be sold, then it raised £1,900 million. Sounds like shareholders got a good deal to me.
Yup! But equally at some point BR's debt - of which Railtrack's £2 billion was a share - would have had to have been written off as had happened to BR's debt at regular intervals. So Railtrack's new shareholders came to the aid of the taxpayer to the tune of £1,900 million. And then they were shafted by a combination of inept management and Stephen Byers.
As I mentioned above, the government can run some things reasonably, and it has in the past. Equally, private companies have had massive issues, i.e. Northern Rock and Carillion. I think competence is not a good argument one way or the other.
I agree, both are examples of incompetence. In regard to Northern Rock and Carillion (and many other companies which have folded) I refer you to Joseph Schumpeter’s concept (based on the work of Karl Marx) of ‘Creative Destruction’. It is part and parcel of the market economy - things don’t always pan out as hoped.
My issue with the Government examples was that it should have realised before it started that it had neither the skills, experience or organisation to be able to successfully undertake the tasks it had set itself. As a result millions of taxpayers money was squandered.
SNIPPED
Thinking through, I think we agree more than we disagree, and you have made me see a lot of the problems with more clarity. One thing that strikes me is how complicated the system is, and that means that a large majority of the population do not understand it. While it presumably has many benefits, it does allow everyone involved to publicly avoid responsibility, which does not seem to be in the best interests of the country. At the very least, I believe the government should take full responsibility for it. As I said before, private companies being part of the system is not a problem, at least for me, and I guess many others. One way of doing that would be to have one organization that takes all the ticket receipts, and pays the TOC's to operate the services, with performance targets, bonuses and penalties. I'm sure there are many other ways, but the current system doesn't work for a lot of people, and it is a difficult to work out who to talk to to solve it. There are lots of problems with the ticketing system, I could list them. But I understand that tickets are decided in most cases by some part of the government side of things, but I buy them off TOC's. Who do I complain to when there is a problem? A little bit of clarity would improve things no end.
You have said that the DfT is the cause of many of the problems, but you have also said that you are not in favour of getting rid of the controls. How would you fix things?
I think we do agree, certainly in identifying the issues which need to be addressed. As background reading about fares and ticketing there are two reports published by the House of Commons Library which are very informative. These are Briefing Papers
SN06384 and
SN1904. The other point to note is that part of the fares structure is fixed by legislation in the 1993 Act so any changes will require primary legislation. This is the sort of thing which gives the railways a bad name!
For a system as complex as the railways, the number of possible journeys being essentially infinite, and travel requirements varying from person to person, finding an ideal solution for everyone will be impossible. The best possible outcome will be something that is least bad for most people!
I'm not dodging the last question! Really! I'll try to formulate a fuller response and post it later.
