Comment

A public and private sector partnership

Paul Plummer, chief executive of Rail Delivery Group, explores the ways in which the rail industry is changing and evolving in order to bring its long-term improvement plan to life.

It would be fair to say that the rail industry is involved in a very public debate over the future of our railway. Questions over the ownership, structure and the challenges and opportunities of further devolution on Britain’s railway are frequently raised among commentators and in the press.

Rail has already been transformed radically over recent decades, and we should celebrate and build on this. A changing and improving public and private partnership, working together with a single long-term plan, is addressing the questions raised by those who want to change the model that has already evolved considerably to meet the needs of the railway’s customers, and our country. It is the best model for Britain’s railway, and offers the best of both worlds.

Finances and fares 

Through Network Rail and the privately-run franchises, rail is already a partnership of the public and private sectors with a long-term plan to change and improve. But simple changes won’t address the challenges around funding, investment and fares – and the choices government is faced with as a result. As a critical public service, the industry will need to inform those decisions. That’s why we are coming together: to make sure all parts of the industry are working as one railway.

Our railway is ever more important to the economy and this is now more widely understood across the nation. Many people don’t realise that the railway and its supply chain support 240,000 jobs and pay £4bn in tax to the public purse. And we are creating more, high-skilled jobs by investing in skills at the cutting edge of technology while taking on tens of thousands of apprentices.

There is less awareness that the industry has transformed its finances. It has gone from running a deficit which stood at £2bn a year in 1997-98 to returning an annual net surplus of £200m back to government, enabling further investment for generations to come.

Quite rightly, the public tell us they want a simple, understandable rail fares system, so it’s no surprise that fares are the source of some of the tensions over the way in which our railway works. Yet fares must be controlled, as is normal in other sectors such as energy and water. Effective regulation can enable the railway to deliver what customers want.

The railway is a public service, so it is right that government policy influences fares – both directly, where passengers have less choice about how they travel and government increases prices in line with RPI inflation, and indirectly, through the franchise payments operators make to the exchequer.

With the support of government, we can untangle many decades of fares regulations that are a hangover from the past to create a fairer, simpler structure, fit for the needs of today’s customer.

Striking a balance

Evolution of the structures that make up our railway is possible. While we have achieved a great deal, we are keenly aware of the future challenges of how we organise our railway and why the industry’s response to those challenges offers a viable way forward.

There are many parts of our railway, and the way that these parts are organised provides a powerful and flexible transparency around each of them. It enables a clear focus on delivery of each part with the different skills needed; for example, to manage the infrastructure and to operate the trains. It enables manageable business units to provide a strong commercial focus on customers, promoting innovation and providing access to capital.

The model also allows a sensible evolution to enable improvements for customers, communities, the economy and our people.

Our model requires collaboration between teams. It doesn’t matter who these people work for – but we need the conditions for success through working together, as one railway. It means working together locally between Network Rail routes, train operators and their supply chains, as well as collaboration nationally to join up these local teams so the network operates in a seamless way while promoting local innovation within proper technical parameters.

Ever‐bigger monoliths are not the way forward. Fundamentally, we need to enable some of the larger organisations within the railway to focus on small problems, allowing innovation and human creativity to be unleashed. Our current model avoids the worst of opposites – neither free market free‐for‐all, nor sclerotic, monolithic corporation. Instead it combines the best of both worlds.

The potential for profit enables innovation and investment, just like in any other sector of the economy. But profits are a result and not a right.

Operators only get the chance to run a franchise if they offer the best value to taxpayers, and will only be profitable if they are relentlessly focused on delivering for their customers. Private sector delivery is combined with a strong public service ethos, within a framework of law and regulation set ultimately by Parliament, delivering a public service for the nation, and custodians of a national asset that belongs to future generations.

The challenges are sometimes presented as reasons for radical reorganisation. Whatever the balance between private and public, the core challenges won’t go away. Modernisation will still be needed, and so will innovation and investment, on which there is consensus. Simple solutions won’t address the challenges.

Partnership

The railway is organising itself in a way that enables continued investment and improvement to be achieved, now and for the long term. Because rail is a key public service, it must be delivered and organised effectively. Government must choose how much railway the nation wants to buy to enable economic growth. This must be done in a way that focuses on the result, rather than the way in which we arrive at it.

Government must also make choices about the balance between how much of this is paid for directly by customers rather than the taxpayer. This has always been true, and will remain so. It must be done in a way that enables sensible evolution of fares so that the customer sees a stronger link between the service they get and the fares that they pay.

But none of the challenges become easier to deal with if we simply remove private companies. There are no quick fixes, but the partnership railway does have a long-term plan to change and improve.

Global perspective

As Britain prepares for an uncertain economic future under Brexit, stability is key. The public want coherence and a railway that delivers joined‐up services, ticketing and timetables, not a period of upheaval.

If we were to close down the opportunity for Britain’s railway companies to seek investment from international investors, how would we meet the shortfall in skills and investment? Trans‐national companies operate here, just as British‐owned companies operate abroad. They are the hallmark of a globalised economy, and in future will be even more important.

We should be proud that British transport firms and suppliers are exporting their expertise around the world, and pleased to see international businesses in the UK bringing the skills and investment that we need.

Evolution now

Nicola Shaw was right when she highlighted the need for a ‘line of sight’ between the customer and those delivering rail services. It is already happening; Network Rail is transforming the way it is organised. Train operators and suppliers are now working with empowered route businesses.

It is also reassuring to see recognition of the need for an industry-owned system operator to join up these local businesses and provide the analysis needed to support the case for investment.

Taken with the conclusions of the Hansford Review, it’s understood that different forms of partnership can deliver projects involving routes, operators, suppliers, developers, funders and financiers, as is perfectly normal in other industries. The regulator is also evolving the way it works to match the devolution of the routes.

There is an alternative to nationalisation. Indeed, the industry is already evolving and adapting to new circumstances and the demands placed on our railway. The experiences of two decades of post-nationalisation model – both the positive and the less so – have taught us a great deal. We don’t need to look back into history through rose-tinted binoculars to feel positive about the railway. We can be proud of what’s happening today and help the nation to be proud as well. And we will continue to learn together, to secure unprecedented improvements to it.