GBR: the big issues require more details

At last the starting gun has been fired and we have the outlines of what Great British Railways will look like.

At last the starting gun has been fired and we have the outlines of what Great British Railways will look like. There are no shocks, but a few surprises and, of course, a lot of the detail remains to be sorted out.

The main surprise is the role of Network Rail which is clearly taking centre stage. There has been a long debate over this and no shortage of rows within the Department for Transport, and it seemed for a while that there would be a ‘twin engine’ approach to the leadership of the organisation, with Network Rail being subsumed into the new GBR organisation. In fact, as the Conservatives had suggested in their version of the legislation published before the election, the new organisation will be built out of Network Rail and its 40,000 strong workforce.

The reason why this is controversial is concern that the engineering function will be allowed to dominate what happens on the railways. Network Rail once had the slogan of ‘Engineering Excellence for Britain’s railways’ but this is not really what a transport provider should focus on. Their role is to run trains for people, and the engineering needs to be economic and effective rather than ‘excellent’, a word which suggest a needless search for perfection. Now the danger is that the operations, in other words what the train services are for, will be under the control of engineers who do not understand the needs of the operators.

Ministers do seem aware of this risk as in the response to the Commons Transport Committee report on the new structure, there is a very strong emphasis on the fact that operational considerations will dictate much of the new rail policy. Specifically, the report says: ‘GBR will be incentivised to deliver high performance and will be rewarded through a framework agreed by the government’. Indeed, the purpose and targets for GBR will be set by the government, and these could be tailored to ensure that priority is given to key aspects of the service.

To be fair, I see no sign of this in the train operators such as SouthEastern which have been under the control of the Department for Transport for some time and have been working towards the integration which Lord Hendy, the rail minister, sees as the heart of improving the network. Hendy argues that there was no alternative to using Network Rail as the basis for GBR given that it would have been administratively difficult to shift the staff over to a new organisation. In his interview for my Calling All Stations podcast, he stressed that the culture of the new organisation would be very different from that of Network Rail.

It will need to be. GBR will be in charge of so many aspects of the railways that they must not pander to particular interests. It will have to take a wide view. One key aspect, much trailed, is that the power of the Office of Rail and Road, the regulator, will be severely constrained in relation to who is allowed onto the tracks. Previously, given that the whole rail privatisation structure was geared towards encouraging competition, the ORR bent over backwards to ensure that as many open access operators as possible were able to run trains. Indeed, in one of Louise Haigh’s strangest moves in her brief time as transport secretary, she seemed to encourage the ‘let a 1,000 flowers bloom’ approach to open access, and indeed the operators were so encouraged that some, like FirstGroup, have bought new fleets in anticipation of being allowed new routes.

However, the Bill makes it clear that it will be GBR that has the say over who can run trains and it will set the rules about how decisions will be made. There will be an appeal procedure to ORR but only on the basis of whether GBR has followed its own rules, not a vague ‘we don’t like this decision’ kind of basis. That is crucial. It will be quite possible for GBR to simply make up a very restrictive set of conditions that will prevent any new open access operators. Expect this aspect to be most questioning by some of the big beasts in the industry – in particular freight operators who are widely concerned about their ability to negotiate new train paths in this environment given that the Government envisages a growth in goods traffic.

There will also be much debate over ticket sales. Originally, rather oddly, the Tory proposal for Great British Railways envisaged it becoming the sole provider of tickets, a Stalinist option that was later dropped in the draft bill, and Labour has not gone down that path either. As with train operations in relation to open access, GBR will be the main outlet for ticket sales but will compete with private providers. How this will work is unclear as one source put it to me, ‘the devil is in the detail’. Will GBR be aggressive and try to squeeze out private companies, which take 4.5 per cent commission, or will they allow the sector to flourish. There will be a set of rules for private providers, a kiond of licence arrangement, but there are concerns within the industry that GBR itself will not have to abide with them. Will it be above the law? Ticketing is in flux and GBR will have to be fleet of foot. With increased use of digital tickets, the importance of offices in stations will continue to diminish, and clearly GBR will need to monitor just how many should remain open and will also need to bear the cost of running them. As with many other aspects, there is much to sort out.

Another issue where there is little clarity in the Bill and associated documents is the position of Derby as the headquarters of GBR, a commitment made by both the Tories and Labour. The position of HQ for Derby is confirmed, but what does this mean in practice. Clearly a city of around a quarter of a million people is not about to take on 40,000 staff, and major Network Rail centres such as Milton Keynes will obviously continue as they are. However, there is no indication of either what buildings – or size of buildings – in Derby are being earmarked for GBR, nor of what functions might be moved there. Again lots more questions.

And finally another big one. The government has reiterated its commitment to a long term rail strategy and that could be exciting, the first time we will be told what the railways are for. The Bill says the Transport Secretary will have to publish a rail strategy that sets out its long term use and what services should be provided. Moreover, this policy, which is very much in the hands of the government, could be changed, which rather spells danger for the railways should a Reform administration take control (Reader, Mystic Wolmar reckons that will not happen…). Despite that risk, overall this is an important move but again details have not been forthcoming over, for example, how many years ahead the strategy will cover. The Tories when in government had suggested 30 but to my mind that is simply too far in the future (especially as I will no longer be on this planet by then). Nevertheless, the process to develop the plan will be revealing and welcome.

Sadiq’s electric shock

A policy change that could have a big impact on the economics of transport was slipped out by the London mayor Sadiq Khan earlier this month. For the first time, electric cars will be subject to the congestion zone in central London. Rather than being totally exempt, electric car drivers will pay a reduced charge, initially, but I suspect this will change over time.

This is a long overdue recognition that the taxation system for driving has to change given the growth of electric cars and the consequent effect on fuel duty. Rachel Reeves will have been lobbied hard by the various players in this game, from the big oil companies to electric vehicle suppliers, because she is going to have to make a decision soon, if not in this budget, on future taxation policy for transport.

And that’s where railways come in. For more than a decade, fuel duty has not risen, even in line with inflation, while rail fares have several times gone up by more than the rate of inflation. This makes no sense in the context of government policies which have net zero as their long term aim. By kicking over this can of worms, Sadiq has done us all a favour. Once electric cars are taxed and fuel duty increased, rail will seem like a cheaper option for many journeys. And the virtuous circle would then be that investment to provide for that demand will then be forthcoming. We can only dream.

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