Tony Lodge is a Research Fellow at the Centre for Policy Studies and author of Changing Track – How to rescue the railways after the pandemic.
The new Draft Rail Reform Bill is something of an anomaly. It is the result of a tortuously drawn-out process which started six years ago with the Keith Williams Rail Review; this eventually led to the Shapps-Williams ‘Plan for Rail’ White Paper in May 2021, which enjoyed a large degree of industry support for its proposed Great British Railways (GBR) plan.
Bringing infrastructure and operational decision-making together would go some way to tackling fractured out of date planning and misaligned incentives which are the root of many of the railway’s problems.
But after all this, where was the long-promised Railways Bill? Why wasn’t a draft Bill published later that year with the final plans in the May 2022 Queen’s Speech? Such a timescale would have seen a Railways Act, creating GBR, now in place. (After all, under 20 clauses, it is short.)
Instead, and to huge disappointment, a draft bill requiring pre-legislative scrutiny was hesitantly bolted onto last year’s King’s Speech.
As a result, the current plans to reform the railways, in line with the White Paper, will not now become law before the general election. If the Conservatives lose then their Bill will not become law, as a new government will move to deliver its own vision for rail, with yet another bill and perhaps another rail review too.
The Commons Transport Select Committee (TSC) has been tasked with delivering the pre-legislative scrutiny on the Draft Bill which should be completed by the early summer. However, there will clearly be no time for it to clear its formal parliamentary stages before the election.
So what can be concluded (and hopefully salvaged) from this frustrating business?
Firstly, the saga is likely – and rightly – going to be seen as yet more rail policy drift. Since 2010 there have been ten different rail ministers and seven secretaries of state. The result of this churn has been seven contradictory rail reviews, most of whose findings were largely ignored, against a rising subsidy for running trains and maintaining the network.
The best time to radically reform the railways was immediately after the pandemic, but this opportunity was missed. Running empty trains with non-furloughed staff cost the taxpayer £17bn;
It remains far too high – the annual rail subsidy still stands at £11bn – and this is a direct consequence of rail planners failing to react to new patterns of travel behaviour and fare spend. For reference, only two per cent of all journeys taken by the public involves a train.
If the Conservatives win the election they will have a fully-scrutinised bill ready for its parliamentary stages. But if they don’t, a new government must be sufficiently encouraged by the industry to seriously consider the Bill, and adopt its most workable elements. Labour ministers might find a significant number of clauses, which have faced cross party scrutiny in the TSC, fit well with their plans.
For example, are Labour’s calls for “public ownership” of rail a version of the concessionary model we already see in London? Private companies are contracted to run trains by Transport for London, which is a statutory corporation headed by the Mayor. This has arguably worked well on the London Overground line for many years.
Likewise Network Rail, which is responsible for infrastructure, including tracks, signals, tunnels, bridges and most stations, has been in public hands since 2014.
A key concern around the Bill is where it fails to place sufficient emphasis on what clearly works and where it can better support innovation and market growth, the only way to control sector costs and bring high subsidies under control.
Arguably one of the most significant and welcome developments since rail privatisation has been the roll out of on-track train competition, known as open access. Sadly for most passengers, it has been on too small a scale and is still limited to just one main line; the new Bill must do all it can to strengthen and widen this success.
Why then does the it appear to give the rail regulator new powers to limit train and route competition?
There is now clear evidence that trains which compete for passengers on the same track lead to lower fares, more passengers and more regions enjoying direct fast trains. The ‘open access’ model, where unsubsidised, long-distance, high-speed trains compete with government-sponsored franchises also sets a key performance benchmark.
If the subsidy for the franchise needs to rise to cover its losses, as a result of competition then the answer is more open access and less reliance on a failing franchise. These services between London, the North East, and Scotland have also had a huge positive impact on the levelling up agenda, connecting many towns and cities which were without direct and competitive fast train links.
The Bill states that competition should only be permitted so long as it doesn’t increase the subsidy required by franchises. But this completely fails to appreciate that whilst successful competition may well lead to pressures on a failing franchise’s business model, this is ultimately reflecting what a demand-led railway’s passengers want.
Supporting innovation here is key and there is a risk that old blocks to railway competition (based on out-of-date criteria) are simply resurrected.
The Bill creates a new Integrated Rail Body, which hopefully won’t resemble the old British Railways Board. Questions need to be asked about its independence alongside the regulator, and its power to control costs and boost financial performance. It must not just become an extension of Network Rail. It will be interesting to watch the select committee examining all these points.
Despite all the delays and uncertainty, this legislation is more important for the future of the railways than it might first appear. It might never become law in its present form, but it will influence whatever comes next. Ministers must take the time to get it right.
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Author: Tony Lodge
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