CONFLICTOS INTRAFAMILIARES EN SENTIDO AMPLIO, RESPETO A LA VIDA

In 1997 there was a change of emphasis with regards to rail objectives when the first Labour Government for nearly two decades came to power. Labour had pledged to bring Railtrack back under public control. The White Paper of 1998: ‘A New Deal for Transport: Better for Everyone’, was an integrated transport policy that would also tackle pollution and congestion by encouraging users to switch from cars to buses and trains. The Conservatives had planned an efficient stand-alone network but had not built into the equation any plans to enlarge the network. The Labour ideology would need extra financing to ensure that instead of a decline in services, they were increased to accommodate extra routes and increased capacity. The Labour idea was to use the Strategic Rail Authority (SRA), supported by the Integrated Transport Commission (ITC) and the Rail Regulator, to steer this forward. The Rail Regulator would, in fact, become subordinate to the SRA, as reflected in the Transport Bill 2000. Unlike much of New Labour’s inheritance of the privatised industries from its Conservative

predecessors, the railway industry was made subject to radical reforms by the newly elected government. This change of policy, from the Conservatives’ drive for efficiency, to a White

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Paper that called for an expansion of the railways, required substantial reforms to the structure of the industry.

According to the 1998 White Paper, the Strategic Rail Authority (SRA) would take the

objectives of policy and translate them into a ‘clear, coherent and strategic programme for the

development of our railways’ (DfT, 1998). Crucially, the White Paper did not specify the

sources of funding for the SRA’s activities. Therefore, when the shadow SRA4 attempted to implement the slogan of its first chairman, Sir Alastair Morton, ‘investment, investment, investment’, it had to consider its options carefully. It quickly became clear that Railtrack’s balance sheet did not provide the solution, and with the Hatfield Crash highlighting the many inefficiencies of the infrastructure, Railtrack saw no option other than embarking on a far reaching and costly maintenance programme that left the SRA severely constrained in its spending review (Gourvish 2008).

The resulting lack of confidence in Railtrack, and resulting fall in share price, led to the failure of Railtrack and the beginning of the end for the SRA (Gourvish 2008). The new structure for the railways was developed with efficiency in mind. The structure became simpler and the Government – through the Office of the Rail Regulator (ORR) – increased their control. The organisational structure of the new railway is shown in Figure 2-4.

4

The Shadow SRA was set up to ‘shadow’ for a year before becoming the railway authority – this is fairly common practice when regime change is implemented and can be seen as a practice run to iron out potential problems.

49 Figure 2-4 Post Hatfield Organisational Chart

Source: (Preston, 2002)

Network Rail became the infrastructure authority and was a company limited by guarantee. Although the SRA worked on the development of Network Rail it was rapidly seen by the DfT as an unnecessary complication in the management process and by 2005 the SRA was

dispensed with (Gourvish 2008). Under the new arrangements, the Government would set the level of public expenditure, and take the strategic decisions on what this should buy. New regulatory and contractual arrangements would be put in place between Network Rail and the Government, to run alongside, and provide the context for, the franchise contracts with train companies. Network Rail has been given clear responsibility for operating the network and for its performance and accountability and control is more clearly given to the different sectors with a move towards integrated working and shared interests planned. This arguably gives back control of the purse strings firmly to the Government and in economic terms questions the ability of the franchisees and Network Rail to provide a commercial and competitive industry. In the meantime; environmental concerns, congestion, and a deepening fuel crisis have switched priorities towards favouring rail, and yet very little investment on increasing the infrastructure had been made.

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The structure set up first by the Conservative and then Labour Governments was fraught with problems. The fragmented structure of two regulators and the separation of infrastructure owner, train operating companies, rolling stock providers, and infrastructure maintenance and renewal companies forced many new entrants into the industry into steep learning curves (Gourvish 2008). The bidding process and franchise agreements were expensive to carry out and rigid in their design (Alexandersson et al., 2008). Over optimism regarding cost savings and streamlining meant profits in the interim were negligible and service suffered as TOC’s cut staffing to meet targets; over half the original franchises failed (Gourvish 2008). In many respects, mistakes were made that had far reaching consequences that were not considered at the time.

One of these mistakes was possibly the management of the failure of the MTL franchise in Liverpool. The MTL was the first franchise to fail and also occurred at the start of the new Labour Government in 1997 when policies were still being defined and knowledge of what to do in the event of a franchise failure had not been tried or tested. OPRAF approved a

management agreement and bailout before refranchising which opened up the way for other franchises to see that failure was not the major financial risk that was first thought. Soon after this franchise failure other franchises appealed for either renegotiation or management buyouts costing the Government a considerable sum. Eventually the Operator of Last Resort was used even though this ability had always been in place and failing franchises could have been left to ‘go to the wall’ possibly securing both a reduction in taxpayer costs and a better commitment to the franchise contracts from the operators and even a reduction in the failure rate of the initial franchises (Whelan, 2008).

Regulation needs to be stringent but should not encourage adverse actions. Instances during the last few years have seen a variety of negative impacts from regulation designed to improve the service. Regulation regarding punctuality saw operators cancelling trains rather than be penalised for lateness. Regulation encouraging operators to claw back money from other operators (or Network Rail) if their service was delayed through the fault of another saw some operators collecting more from fines than from passenger receipts ((Preston, 2008b). Since the more recent – post-Hatfield – restructuring of the industry there have been

significant improvements, although there are still areas where regulation and competition are not compatible.

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1. Service requirements should be easy to define and reasonably stable. 2. the technology should be well understood.

3. sunk costs should not be too high.

4. the initial costs of defining and letting the contract should be low. 5. monitoring of service delivery and quality should be feasible.

Arguably these features only partially apply to the passenger railway industry and as a result franchising has had mixed results. Risks and uncertainties have distorted the process, and coupled with so few incumbents’ winning repeat bids for their franchises, investment into the industry is understandably cautious. Ensuring that investment follows increases in franchise length, to encourage investment, has proven to be a difficult problem to solve.

2.4.2.1 Where Are We Now?

Vertical separation has had some advantages in promoting specialisation, a better

understanding of infrastructure costs and encouraging competition. However, there are also significant challenges in providing the appropriate incentives for investment, given the naturally monopolistic characteristic of the rail network, and the scale of investment that has been and continues to be required.

Preston (2008) finds that rail franchising in Britain has been competitive and has permitted reductions in revenue support to something approaching the pre-privatisation levels. There have been risks and uncertainties, though, and that has been found to have distorted the process, resulting in relatively little transfer of risk from Government to the private sector and therefore limited innovation. Rail reform has been a costly and on-going exercise that has yet to be completed. Transparency of objectives is paramount to the success of any privatisation programme and this was lacking from the original scheme. The current structure has

improved the situation, but competition has not developed to the extent that was envisaged in the original infrastructure and franchising model.

Competition within the industry does raise questions for the quality and value of service to the consumer. Individual franchises are now competing for customers and deriving their own unique brands with differing weight put on particular service requirements. This begs the question of the effectiveness of horizontal competition; should franchises compete so ruthlessly with each other or should the emphasis be on competing with other transport modes through a pooling of resources and collaborative support? One of the examples of this is through the fare distribution software process – Operational Research Computerised

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Allocation of Tickets to Services (ORCATS). The revenue received through the ticket sales are distributed to each franchise along the route the ticket covers and weight is given to the presiding franchise. Many operators are now producing specific tickets to named stations to avoid part of the allocated revenue being taken by other operators. These tickets tend to be cheaper but stipulate the train service that can be used and the time the journey can be taken. The Operator then gets the full amount of the revenue received and builds loyalty with the customer through reduced ticket prices. Allocation is also given on the nature of the service provided; therefore a fast train will get a higher percentage of revenue than a competing slower train. Concentration is then given to the receipt of increased revenue allocation rather than on the suitability of service to passengers.

One of the key aims of the separation of the rail sector was to facilitate investment in the infrastructure and the rolling stock. Under public ownership, the financial constraints led to under-funding of long-term investment. The model initially adopted, with a single privatised operator managing the network while sub-contracting a significant proportion of the maintenance work, enabled significant investment to be channelled into the system, but at the expense of quality controls over the work undertaken. The transfer of the responsibilities of Railtrack to Network Rail, and the change in working practices that that involved, appears to have addressed these concerns.