INFORMED SOURCES JULY 2011
Well, it’s been a Stakhanovite month here at the word face, with around 400 pages to mine, what with McNulty and the Network Rail Rolling Stock
McNulty Report – a strange mixture
McNulty reforms – eight years to save the railway
ROSCOs - McNulty rejects Competition Commission findings
Network Rail crosses the rail/wheel interface
Having given Sir Roy McNulty’s Rail Value for Money Study the classic Informed Sources ‘tables ‘n’ charts’ treatment in the February column, based on the Interim report, this month I look ahead to the what, how and when of implementation.
Despite a daunting list of 11 barriers to efficiency, plus an analysis of the ‘many and complex’ causes of rail’s ‘excessively high’ costs, Sir Roy is optimistic. He declares: ‘The Study does not see this set of barriers as a cause for despair. On the contrary, given that the issues are already fairly widely recognised, it believes that the barriers can be overcome with strong leadership and with concerted efforts from all concerned’.
Talking to a wide range of senior sources, it is clear that the railway industry, while applauding the analysis of the problem, is not always convinced by the solutions proposed. However, Informed Sources close to the Study point out that its real purpose is to get the industry committed to change.
At the first meeting of the new Railway Delivery Group (RDG), Chairman Tim O’Toole reportedly urged members to rise above cynicism. That the call was considered necessary, and at least one Chief Executive is alleged to have succumbed, pretty well sums up the industry reaction.
Central to Sir Roy’s vision is abandoning the current contractual relationships. There is a lot of stuff about working together for the common good and the introduction of partnerships.
So, tough on fragmentation and tough on the causes of fragmentation. And there’s heavy emphasis on the need for the various parts of the fragmented railway to work more closely if the 30% efficiency gap is to be closed by 2019. ‘We’re all in it together’ was a recurring phrase at the press conference to launch the report.
Yet, contrarily, other than calling for various approaches to vertical integration to be tried, the Report seems content to leave the railway fragmented. So top level leadership, in the form of the RDG will be needed to direct the ‘substantial programme of change’, focused on cost reduction, culture change and a ‘more-integrated whole-system approach’.
Er, why not start to recreate a ‘whole system’? As my old chum George Muir has pointed out, we can be certain that in the European state railways against which Sir Roy has benchmarked GB Rail efficiency does not come from ‘a thicket of strategy documents and cross-industry bodies’.
I’m particularly interested in Sir Roy’s proposed ‘small, independent Change Team’, which will be responsible for ‘planning, coordination, monitoring and reviewing implementation of a programme across all elements of industry of a complex series of actions’. The Team should be set up by DfT but be ‘independent from industry and Government at the beginning’ so that it can pursue the reform agenda freely and impartially’.
I can think of several chums who would be up for this ‘inefficiency inquisition’.
Timetables for change
Both in the Full Report and the Summary version, the really interesting bit is the timetable for what has to happen between now and 2019 if the efficiency gap is to be closed. And Sir Roy sets a cracking pace in five phases. The first has already begun and runs to the end of August.
Interestingly, someone failed to check that the timetables in the Full and Summary Reports are synchronised. Thus the Summary says that a decision on an ‘early’ vertical-integration pilot scheme should be taken in Phase 2, that is by the end of this year. But the Full Report puts development of ‘the Greater Anglia concession/franchise’ in Phase 1, in other words by the end of August
And, anyway, why
Also in Phase 2 – I said it was going to be busy - Network Rail and some TOCs are expected to have identified opportunities for ‘initial bespoke joint venture or alliance arrangements, where potential efficiency gains make this practical and desirable’. And here’s another anomaly. Where the Summary Report talks about ‘identifying’ opportunities, the Full Report refers to the ‘commencement of selected, bi-partisan bespoke partnering arrangements between Network Rail and TOCs where desirable’.
Clearly McNulty is confused and, anyway, I’m not sure how seriously to take this, or, indeed, what it would mean in practice, let alone whether it can be done in six months. But it could refer to Merseyrail taking over its infrastructure.
Later this year the Government is due to publish a Rail White Paper taking in McNulty, Franchise Reform and all the other current distractions from running a railway. So Sir Roy calls Phase 3 ‘Post White Paper’.
This Phase covers the whole of 2012. Activities will include completion of DfT’s review of fares policy and strategies, which should get the mass media’s attention. Oddly, this review is not mentioned in the timetable in the Full Report.
Also only in the Summary does Phase 3 include DfT’s continuing analysis of what subsidy buys. This further political liability due to emerge in Phase 4, which covers the remainder of the current Control Period from January 2013 to March 2014. It maintains the unrelenting pursuit of change.
By ‘2013/2014’ two joint ventures or alliances between Network Rail and a TOC should be in place. The Summary alone adds a VI pilot scheme to this aspiration.
According to the Summary ‘Lower-cost regional railway’ pilot schemes (plural, note) should also have started in Phase 4. The Full version refers to ‘commencement of outsourced “lower-cost regional railway” pilot scheme (singular).
Finally Phase 5 lasts for the whole of CP5 which starts on
One final anomaly. The Full Report schedules the start of ‘a full Vertical Integration pilot on Network Rail routes by 2014/15 followed by a two year evaluation’. This is not mentioned at all in the summary. Also only in the Full Report and starting by 2014/15 is ‘one route Infrastructure Manager (IM) concession’. This surely has to be Merseyrail?
ROSCOs back in the firing line.
In my view, just about the only thing that has worked as advertised since privatisation are the Rolling Stock Companies. They have funded and acquired coming on for 5,000 passenger vehicles and locomotives; have invested substantial sums in re-engineering and Continued Service Operation of the British Rail legacy fleet; and on top of that fostered rolling stock engineering skills during the dark ages.
But, as we know they are unpopular with DfT, which reckoned that they were overcharging by £100 million a year. And when the ROSCOs wouldn’t cough up, DfT complained to the Competition Commission which found that, in the case of re-leasing when franchises changed hands, ‘ROSCOs have tended not to increase capital rentals as far as they profitably could, - even in the absence of credible alternatives’. Any market failure, concluded the Commission was largely down to the structure of the privatised railway.
Into this rare area of calm in a turbulent industry, bumbles Sir Roy. While conceding that it is too early to make a full assessment of the effectiveness of the Competition Commission’s remedies, the Study ‘finds it difficult to understand how these remedies will give the DfT sufficient information to satisfy itself that rates on re-lease are value for money’. ‘We don’t think they (the Commission) went as far as necessary to satisfy the objectives we have described’, the Study claims.
In rejecting the Competition Commission’s finding Sir Roy is effectively endorsing the original complaint. But instead of ‘give us back our £100 million’ Sir Roy recommends that DfT should now ‘explore the possibility’, of establishing a “strategic partnership” with the ROSCOs to ensure that re-lease rates are ‘demonstrably value for money’.
This is, of course, all about the ex BR legacy fleet. ‘How can we satisfy ourselves that we are getting value for money from the leasing rates that are being quoted’, the Study asks, adding ‘in particular, what is the capital cost element that is being amortised within these lease rates and over what period is it being amortised’?
Well, the capital rental on a Pacer is under £2,000 a month. Say a replacement two car DMU would cost £3 million, which is optimistic. Then the capital rental would be £27,000 month. So the Pacer is cheap at the price.
Or to be really topical, in a recent Written answer DfT estimated the capital rental for a five-car IEP bi-mode at £180,000 per month (which implies a cost of £4 million per vehicle!). Compared with that, a re-engineered eight car IC125-10 has a capital rental of under £50,000 a month. Value for money? I think so.
It gets worse. If the ‘strategic partnership’ does not work, the Study proposes regulation of ‘fair rates of return’. Actually, I understand that what Sir Roy would really like is a state owned people’s ROSCO ‘to procure and hold rolling stock in the public interest’. Madness on stilts.
Network Rail eyes rolling stock
On 1 June, Network Rail published the latest in its Route Utilisation Strategies (
It is a deeply unimpressive piece of work, based on misconceptions, perceptions which are at 180 degrees to reality and general lack of rolling stock knowledge. In fact, I was tempted to ignore it. But Network Rail is the major player in the industry and someone in a position of authority might take this
So I have tried to cover the main divergences from the real world, while pointing out that any number with a £ sign in front is suspect. As with the research strategy documents panned in this column in recent months a recurring problem is ‘unknown knowns’. So we are told about things that would be a cool idea, when they were implemented years ago.
Gauging
There’s a lot of theorising gauging, but, apparently, the work inspired by the then Strategic Rail Authority and described in Informed Sources in August 2005 is another unknown known. At that time, the aim was to define two gauges, including one described as ‘go-anywhere’, and it seemed to be happening
Now, according to the
Meanwhile, can I leave you with the most perceptive comment in the
Late breaking news
Transport Minister Theresa Villiers announced on June 16 that Siemens Plc and the special purpose company Cross London Trains – a consortium of Siemens Project Ventures GmbH, Innisfree Ltd and 3i Infrastructure Plc – had been appointed preferred bidder to build, own, finance and maintain the 1200 vehicle fleet for Thameslink.
According to DfT, the trains are scheduled to start passenger service ‘early in 2015’ alongside the existing fleets, with delivery completed by ‘mid 2017’. The full fleet will be in service by the end of 2018.
Thameslink will get Siemens’ ‘radical evolution’ of the existing Desiro UK, as described in the September 2009 Informed Sources Some above-the-floor features of the new design have already been used in the Class 380 Desiro for ScotRail which is described by Siemens as ‘30% Desiro City’.
Roger’s Blog
Well, questions weren’t invited at the Transport Secretary’s naming of an eco-Meridian last month. But Mr Hammond did make some very positive comments about electrification.
Next up came the bash to celebrate the 25th anniversary of Network SouthEast, Apart from being a great social occasion this was a chance to canvas the views on today’s railway of the hard core railway operators and engineers who created the ‘one railway for London’ that almost broken even in its glory year. Many of the views were trenchant. With so many old friends, the one person I didn’t get to speak to was the main man himself – Chris Green!
Last week it was Railtex, which I thought was particularly good this year. My technique is to start at one corner and go up and down the aisles until I finish at the other side. And there was so much to see, photograph and talk about that I got to MTU – at the end of my trek – with barely half an hour before closing time.
After admiring their pretty little Vee-12, it was over the road to the Railway Industry Association reception where I learned a lot as ever. Oddly, although the Transport Secretary had made a speech at Railtex that morning, the Thameslink announcement was saved up for the next day.
This coming week is pretty lively. On Wednesday there’s lunch with a ROSCO, where McNulty may come up, then it’s the Modern Railways Innovation Awards at the fourth Friday Club, Guest of honour is Transport Minister Theresa Villiers who wanted a copy of my CV beforehand.
On Monday 27 at 18.00 hours there is a joint presentation on the Intercity Express Programme by DfT and Hitachi at the Institution of Mechanical Engineers Headquarters at 1 Birdcage Walk in London. Entrance is free.
Not sure whether I will be able to make it because of domestic commitments. And the meeting will be chaired by a DfT official, so I can see many heads above the parapet come question time.
The following week it’s the Stagecoach summer reception, which always fills up lots of pages in the note book. And I must remember to call our host Sir Brian!
Otherwise, a period of relative calm beckons. But I’m sure it won’t last.
Roger