Renationalisation can’t save Croydon’s railways. But can TfL?

By - Friday 5th February, 2016

Once a railwayman, always a railwayman – Robert Ward takes a look at the proposal for TfL to play a bigger role

It is decades since I worked on the railway, but I still follow the railwayman’s rule of checking the rails as I walk along the platform at East Croydon. In those days, it was British Rail – we were publicly owned.

When I hear that bringing the railway back into public ownership is popular with the public I wonder how many remember those days. Train carriages were ancient, punctuality was poor, journey times were long. My friends introduced me as working for ‘British Snail’.

Granted, there were hard-working dedicated people working on the railway. But there were also a lot of people doing very little. Non-jobs in the public sector were apparently preferable to higher unemployment. Pay was poor, but overtime was plentiful, at least for track workers. Sunday working was normal.

There is talk of Transport for London taking over more suburban services

Since then the railways were privatised, and then partly brought back into public ownership. Now there is talk of Transport for London taking over more suburban services. Britain’s passengers have now experienced a publicly owned railway, a privatised railway, and various mixtures.

Socialists think that pretty much everything is better in public ownership. Others generally favour private companies and a market, albeit a very contrived one on the railway. Having experimented with all these alternatives you might think that we’d have figured out the right answer for the railways. We haven’t.

Promised lower fares mean different people will pay

But there are some fundamentals – if costs increase, someone pays. It may be passengers through fares, or the taxpayer. Promised lower fares mean that different people will pay, including those who never use the railway, and the costs are hidden. This also applies to ideas such as moving East Croydon into Zone 4. One can talk about what is fair and what isn’t, but less revenue from Croydon commuters means that more has to come from somewhere else.

A market helps because competition drives innovation and efficiency, so costs are reduced. Passengers and the taxpayer pay less, and there is still room for shareholders to make a profit. It is not a zero sum game, although proponents of public ownership will try to tell you that it is. Their favourite phrase is money going into ‘the pockets of shareholders’ as if there is not also less money going out of the pockets of taxpayers and passengers.

The big problem for the railway, especially acute in London, is that the physical structure of the railways makes creating a market difficult. If I want to commute into Central London from Croydon, then the railway is the only sensible option. Unfortunately, a railway is not like the road where setting up a rival bus service is rather easy. The result is that there isn’t a competitive market that functions on a daily basis. To make that happen would require huge over-capacity on the infrastructure, which is never going to happen.

The lack of options for travel from Croydon means that market forces don’t work to correct an operator’s shortcomings

We are left with a compromise, and a pretty messy one at that. Currently the infrastructure is publicly owned through Network Rail. Baffling therefore that nationalisation has sometimes been portrayed as a solution to the disruption caused by the upgrade to London Bridge when this is already the responsibility of a nationalised venture.

Train services are run by private companies through a franchising system. Competition happens when companies bid for franchises, and the winner has control of the franchise in question for a long time. Southern has performed poorly with train cancellations and overcrowding being commonplace. Yet the lack of options for travel from Croydon means that market forces don’t work to correct this.

On fares, the politically sensitive peak time fares are controlled. So the only short term competition, albeit a very limited one, is on off peak fares. An abundance of ‘free’ (paid by the taxpayer) fares such as those for older people and school-age children clouds things even further. It’s a mess.

How does the proposal for an increased role for TfL stack up?

If we had a clean sheet of paper then we could look at all sorts of options but, given where we are, we are looking at some kind of fudge to make the best of a bad job. How does the proposal for an increased role for TfL stack up?

Actually (and maybe you weren’t expecting this) not badly at all. Making the compromises and judgements across London would improve, especially integration with the tube and at interchanges like East Croydon, a particular bottleneck. Properly run, there are opportunities for efficiency to bring better service without increased cost. TfL is ultimately ‘run’ by the mayor, who has to stand for election, so we can periodically make our opinions known.

That is a long way from renationalisation and the route back to ‘British Snail’ with its lack of investment, unproductive staff and slow journey times, but it is an improvement from where we are. If I were a far-sighted prime minister I would look at reforming the entire rail network. I don’t think that that will happen any time soon. In the meantime, for Croydon an incremental improvement is very welcome. Zone 4 would be better still.

Robert Ward

Robert Ward

Engineer and project manager specialised in helping businesses make better strategic decisions and improve safety, quality and effectiveness. Conservative Party Councillor representing Selsdon and Addington Village on Croydon Council. He tweets as @moguloilman.

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  • Peter Staveley

    Effectively the railways in London are a monopoly supplier and therefore is closer to being a utility than a market. Therefore, I think that they should be treated as a utility.

    The main difference between ‘London Overground’ and the rest of ‘National Rail’ is who is responsible for letting the operating ‘franchise’ and how it does it.

    Since privatisation of the railways the DfT have operated a ‘hands-off’ policy with the franchise operator just being required to meet certain high-level key targets. This has meant that the client (the DfT) is an ‘uninformed client’. Does the operator meet the targets? yes/no and leave the details to the operator. However, it is very difficult to change any aspect of the operation because it needs a separate negotiation between the franchisee and the DfT. The fact that the DfT do not have any details of the internal costs of the franchisee means that the DfT does not easily know if the franchisee has inflated the costs of any proposed change in order to make-up for them under-bidding in order to get the original contract.

    For London Overground the concession is awarded by TfL and TfL take the revenue risk. Moreover, the concessionaire (London Overground Rail Operations Limited (LOROL), which is a 50/50 joint venture between Arriva UK Trains and the MTR Corporation) have an ‘open book’ with TfL. That means that TfL know all of LOROL’s costs.

    What is even more important is that the contract, with LOROL, is such that practically anything about the operation can be changed at anytime. They can do this because the profit margin on every item has previously been agreed as part of the award of the concession. Incidentally it is the same system that is used for TfL buses and for Docklands Light Railway.

    So if TfL wishes to run an additional train they simply ask LOROL what the cost for that train would be, LOROL calculate the cost (and show how they arrived at that cost) and add-on their profit margin. TfL then look at that cost, compare it with their predicted income and other social benefits and decide if they can justify the change.

    TfL is then an ‘informed client’. The downside is that TfL have to employ experienced railwayman who know how the operator should be running their operation so that they can properly monitor their operation.

    As you say, the main advantage is that TfL is responsible to the Mayor whom we elect. So if we do not like the way TfL does things we can easily change the Mayor, i.e. there is a reasonably direct link between the voter and the operator through the Mayor. The link through National Rail to the DfT and then to the Government is not direct and pretty ineffectual, as the Croydon MPs have discovered.

    Ironically, it was the privatisation of the railways, or more correctly the reorganisation of the railways that helped allow London Overground to happen. The reorganisation created track access contracts which meant that each train operating company had specific rights to run trains on Railtrack/Network Rail and what the cost for that track access would be. This meant that it was relatively easy for London Overground to be created since it is just another train operator running on Network Rail.

    Also ironically the franchise for Govia Thameslink Railway (GTR) has been let by the DfT on the basis that the DfT keep the revenue. However, that only started in July last year and, of course, we still have virtually no link between the voter and GTR.

  • Anne Giles

    Spol on! Excellent article. Unfortunately, a lot of people either don’t know or can’t remember just how awful the train services were before being privatised.

    • Peter Staveley

      What was worse is that the railway managers (of BR) could not do any long-term planning.

      They rarely knew until around January how much money they would have to spend in the next financial year (i.e. from April that year). What was even worse is that around October it was not unusual for the budget to be changed for the current financial year meaning that projects had to be stopped or, occasionally, projects had to be found because more money had been given to BR but it had to be spent by March!

      At least now we can do long-term planning of what we what from our rail system.

      The actual services were a lot less frequent then now in the off peak. For example, apart from Monday to Friday peak hours there were literally no trains on the Fast Lines between East Croydon and London Bridge and the slow service was only every 30 minutes. Also Thameslink did not exist.

      Now there are 12 tph slow services (north of Sydenham), 4 tph Thameslink plus other fast services.

  • Ebenezer Crutton

    TfL has had some success with its Overground lines already. But the network in south London is more complex than some others, and delays often seem to occur because of knock-on effects. If a train is delayed on one line, other services that share or cross that line may need to wait. So I’m not sure that an improvement in service will automatically follow any takeover by TfL.

    • Robert Ward

      Thanks. Nothing is guaranteed and there is no simple fix. What we need to do is make improvements where we can and learn as we go.

      I agree that South London is more complex with much less flexibility in the system. Many problems are indeed knock-on effects where even minor disruptions cannot be cleared quickly due to bottlenecks. Capacity at East Croydon station during peak hours is a good example.

      What this does mean though is that small changes that prevent disruptions can result in a significant improvement in service.