To illustrate the extreme disarray into which the British rail system has plunged, consider this following historical fact: In 1830, as locomotive design was in its infancy, passengers traveling the 48.3 kilometers between Liverpool and Manchester covered the distance in one hour. Today, that same journey takes one hour and 14 minutes. Another, not so historical fact: In September 2000, the trip between London and Liverpool took approximately two hours, 40 minutes; today the trip takes four hours, 15 minutes. Repeat that scenario along different routes throughout the UK and one can understand why, in the words of one British railroad analyst, the system is suffering “a nervous breakdown.” The most immediate cause of the breakdown goes back to October 17, when a fragmented piece of track caused a train to derail just north of London, killing four people and injuring 34 others. In the wake of that disaster, Railtrack, the private company that owns and operates Britain’s 20,000 miles of rail, set up speed restrictions of 20 miles per hour over much of the system. Long-distance routes became tortuously slow and commuters’ fury at continued delays pushed many on them onto the highways. Indeed, revenues from ticket sales dropped 19% in the first 12 weeks after the October accident. But most observers of the UK’s rail meltdown agree that its real cause goes back to 1992 when the idea of privatizing what had been a national rail system first received serious attention under the then Conservative government. “Legislation to privatize, or restructure, the system went through in November 1993, and the process of breaking up British rail started in April 1994 with the creation of Railtrack, which started out as a publicly-owned infrastructure company,” says Richard Hope, an editor at Railway Gazette in London. “Railtrack was floated on the stock market and passed into the private sector in May 1996.” Under the current somewhat byzantine system, Railtrack owns and maintains the track and makes any investments necessary for the upkeep and improvement of the rail network. Railtrack itself employs only dispatchers, dieselmen and the clerks who prepare the timetables; all physical and technical work is contracted out. The trains themselves are run by 14 operating companies which bid for seven-year franchises and then pay track charges (right to operate) to Railtrack. The operating companies, which receive subsidies from the government, run the trains, employ the train crews and service the passengers, who are the dominant customer in England (unlike the U.S. where the rail business is mainly freight-based). Operating companies have few tangible assets: For example, they don’t own tracks, maintenance depots, passenger cars (they are leased from banks) or stations. Because the right of way is not under the control of the operating companies and because of the limited time term of franchise agreements, says Wharton public policy professor
Derailed by the Bureaucracy
How did this happen? To begin with, a tortuous maze of contracts binds together all components of the rail industry, with precise stipulations as to who is responsible for what. “An army of clerks employed by Railtrack records every minute of delay to every train in the system,” says Hope. “And there are scales of payment made according to who causes the delay. If a locomotive breaks down, the train operator has to pay compensation to Railtrack and Railtrack passes that on to other operators whose trains were delayed by the breakdown. Contractors pay Railtrack and Railtrack pays contractors, and so forth.”
What sounds incredibly bureaucratic and inefficient can, in fact, become deadly, as it did with the crash last October, and one a year before that. The defective rail that caused the October crash was detected in January 2000, says Hope, but was not dealt with because of “buck passing. The contractor responsible for maintenance can only report a damaged rail. He can’t initiate replacement because that is done by a separate company under a different contract. The company that replaces it can’t move in without being instructed to do so by Railtrack. But Railtrack doesn’t have enough employees to actually go and inspect the track so it relies on the maintenance contractors to inspect their own work.”
The accident last October, Hope says, “caused Railtrack to panic and impose the speed restrictions, which meant that the timetables fell apart and long-distance journeys became impossible.” Another train crash a year earlier resulted in 31 deaths and 150 injuries when a large commuter train ran a red light and collided with another commuter train.
To make matters worse for Railtrack, England has been suffering from the worst floods and landslides in about 50 years, adding to further delays and maintenance problems.
Tony Ridley, former manager of the London Underground and now an emeritus professor of civil engineering at Imperial College, offers this perspective: “There is no doubt that an organizational shake-up, if done properly, is healthy because it makes all the managers in the business think harder about what they do and encourages them to be more commercial. But if at the same time, you ignore the systemic nature of the entity, you will run into difficulty. If you take all the components of the railway and chop them into bits and operate them separately, you may well fail to take into account the fact that any one bit can’t work without all the other bits … We need to establish an identity of interest in the railway business. Otherwise, nobody feels responsible for the total system.”
Once the decision was made during the Conservative government to privatize the railways and get out from under the costs of government ownership, “various political think tanks came up with a number of different ways of doing it,” Ridley adds. “Anybody in the industry will tell you that the system eventually agreed upon was the last one they would have preferred.”
A Daily Fare of Bad News
That is clear on a number of fronts, some of them quite public. During a radio broadcast several weeks ago, Labor Prime Minister Tony Blair met listeners’ fury at continuing train delays with his own indignation over a system that he says is “absolute hell” to travel on. He blamed the Conservative government for years of underinvestment in the rail network system and proposed a “quadrupling of public investment over the next few years.”
While politicians point fingers at political opponents past and present, everyone seems to agree on at least one point: that the process of privatization was rushed to such an extent that “the integration of the system was destroyed,” says Vukan R. Vuchic, University of Pennsylvania professor of transportation engineering. Over-energized free marketers in England, he says, split the system into so many competing companies with so many narrow interests that the government soon had to set up various controls and regulations, many of them complicated and almost all of them involving accountants. “If a train is delayed, for example, someone has to decide if it was delayed because an engineer didn’t arrive on time, which is the operating company’s responsibility, or because a signal malfunctioned, which is Railtrack’s responsibility. Maybe it’s 65% one group’s fault, and 35% the other, which means blame has to be apportioned accordingly. I cannot imagine how you run a railway like that.”
Indeed, the costs of doing so are just now becoming clear, both financially and with respect to further delays. Recent articles in the British media report that the government is considering a “cash injection” for Railtrack after hearing reports that the October crash will cost the company $858 million. That figure includes $263 million for repairs as well as $584 million in compensation to train operators for lost ticket sales and passenger pay-outs. Several train operators are reportedly considering legal action against Railtrack.
Already Railtrack has said delays on many of the lines would most likely continue until Easter, if not longer, and the company’s own 10-year growth forecast was recently cut from 47% to 37%. Ticket revenues, which had been rising before the October accident, are now falling, which in turn may jeopardize a government-proposed transport spending plan that would have pumped billions into the system. “This nervous breakdown has simply cut the ground from underneath all the calculations,” says Hope.
The bad news continues on an almost daily basis. Standard & Poor’s has threatened to lower Railtrack’s credit rating, and the French in mid-January blasted Railtrack for its threat to renege on payment for its portion of the Chunnel tunnel rail link. An inquiry into the October crash is expected to turn up evidence of gross incompetence against Railtrack and its contractors, and may result in criminal charges. Railtrack’s CEO resigned two months go.
Edward K. Morlok, a professor of transportation at Penn’s engineering school, describes railways as “very complex, interdependent operations…To organize them you have to figure out how to coordinate the workings of the various operating companies so that trains do not interfere with each other. And you will certainly have to change the infrastructure, including setting up ways to allocate capacity and obtain the revenues necessary for adjusting track quality. Very little work was done on these issues before the privatization.”Country Comparisons
Bruce Allen sees an analogy between the British rail system and the U.S. airlines. “The airlines in the U.S. would argue that a lot of their performance problems are caused by antiquated air traffic control systems and the fact that little public investment is made in airports. The airlines say they can move passengers through from one destination to another if the air traffic system was modernized and airport capacity (airside, e.g., runways, and landside, e.g., gates and terminal space) was added.
Before the Denver airport opened in 1995, the last new airport in the U.S. was Dallas Fort Worth, built 25 years ago. And there have hardly been any new runways added in the last few decades.” The English train operators, Allen says, feel the same way.That’s understandable. But why is it that, overall, the British rail seems to be such a disaster compared to its counterparts in other developed countries? In Japan, for example, passenger rail service is provided by six companies operating in six different geographic locations. The companies own and maintain the infrastructure on which they operate; freight service has access to, and pays a fee to use, these lines. “Japan is unique in that passenger service is profitable,” says Morlok. “The experience in most Western countries is that, with some exceptions such as Switzerland, operators have been unable to make a profit on passenger service.”
In Germany, says Vuchic, the large rail system, Deutsche Bahn AG, has been reorganized and is now nationally run although there also exists a number of smaller regional authorities. But the Germans “did it cautiously, internally rather than selling out the whole system and destroying it that way.”
The French government’s equivalent of Railtrack is a public company and the state-owned railway gets generally high marks for its passenger service. “The French invested heavily in high-speed trains and other improvements, but they were also willing to underwrite massive deficits, which the British were not,” says Morlok. Today the French system is in the process of a “transformation toward a more quasi-private operation in which a lot of passenger services have been spun off to regional authorities.”
In the U.S., the rail business has its own history, and prejudices. America, says Vuchic, is “extremely anti-rail and pro-highway, especially when it concerns [the passenger service] Amtrak. Amtrak is downgraded and neglected by the federal government [which operates and subsidizes it], an attitude that is apparent even with the introduction of the Acela. Instead of applauding the arrival of the first high-speed train, Time magazine describes it as the last attempt of Amtrak to survive.
“The government has given Amtrak $28 billion since its beginning in 1971. It is common to quote the total of 29-year federal payments for Amtrak and call it a ‘subsidy,’ while the federal payments for highways are quoted for annual amounts and referred to as ‘investments.’ This phraseology shows the deep bias.”
What’s ahead for Britain?
Just how do people expect the current crisis to be resolved? Certainly not by renationalizing the railways, a course of action that Ridley for one contends would never happen, primarily because the government doesn’t want back either the cost or the responsibility of running the system. Hope would like to see a system modeled after the Japanese one, rather than the British approach in which operating companies are separated from the management infrastructure. In any event, no one expects any big changes to be announced before the election next May.
So things in the UK remain, for now “in a very big mess,” says Hope, adding: “If you are going to restructure a railway, for god’s sake, don’t do it this way.”
