Lessons from a Railway Privatization Experiment Bill Bradshaw

Feature Railway Management and the Role of Government

This article addresses three key questions. both the management of the industry and primary reason for the breakup of the Was privatization a necessary step in the the responsibility for raising the necessary system was the desire to see competition development of Britain’s railways? What investment to the private sector. Previous in train operation but ministers also has been the emerging experience of articles in JRTR have described the policy wanted to liberalize the rolling stock privatization? What should happen now debate in Britain that led to the choice of (including maintenance and major that the privatization method adopted in the mode of privatization and the overhaul) and infrastructure service Britain appears to be failing? alternatives that were considered. A markets. To provide competition in decision was made to separate supply of these services meant splitting Was Rail Privatization infrastructure ownership and many of the former British Rail (BR) Necessary? management from train operation, to sell activities into smaller parts and offering all the passenger rolling stock to leasing them for sale separately. In train This question is easily answered. It would companies, to franchise the passenger operations, franchises were let, mostly for have been difficult to argue, especially train services in 25 parts and to sell the short contract periods and in defined following the privatization of nearly all freight business. The industry was placed regions. Services with different speed the other transport-related industries as under the supervision of the Office of the and marketing characteristics on a well as the public utilities, that the Rail Regulator (ORR), an independent particular line were frequently divided railways should have remained in the government department. between different operators. Emphasis public sector. There are two main was placed upon the fact that relatively reasons for this. First, the government Was the Best Method of short contracts would keep franchisees could not but continually interfere in Privatization Adopted? on their toes. On-rail competition was what were essentially managerial advanced as another way of securing decisions, often in a way that was The method of privatization chosen by benefits for users. This was the main invisible to the public but was the Conservative government was justification for the decision to create a enormously inhibiting to efficient certainly complex. The key reason for separate infrastructure authority as the management. Fare increases, industrial this was the decision to move from a independent manager of the timetable disputes, changes in services and orders vertically integrated organization where and of day-to-day management of for new trains and equipment were all operations, rolling stock and signalling and operational control. subjects of a constant stream of phone infrastructure are the responsibility of one Competition has developed in supply of calls passing between government and company as in Japan, to the disintegrated rolling stock and which now often the British Railways Board (BRB) and solution of separate ownership of the includes maintenance contracts. But these interventions were usually designed various components of production. A rolling stock supply would probably have to protect or enhance political reputations rather than promote commercial or operational logic. Second, no government, at least in the current financial climate, would ever provide finance on the scale needed to reinvigorate the railway. There are always more politically important targets for public investment, such as schools and hospitals that push railways to the back of the queue. As other industries, escaped these cloying influences, it became clear that privatization offered a more attractive alternative than continued public ownership. But with the rail industry in need of continuing subsidy, the question was whether a mechanism could be devised to transfer Class 57 Freightliner Pioneer in service since 1998 (Milepost 92 1/2)

4 Japan Railway & Transport Review 29 • December 2001 Copyright © 2001 EJRCF. All rights reserved. adopted its present course whatever red, blue or green train to Woking with a the years leading up to privatization. model of privatization had been followed choice of fares. But with incumbent There has been only limited success in because the government was already franchisees understandably not keen to promoting competition. The myriad seeking private sector financing initiatives let in competitors and Railtrack not contractual relationships mean that any in public-sector organizations. When in enthusiastic about squeezing more paths meeting between industry parties is likely opposition and while BR was still in the into the crowded timetable, partly to include lawyers and financiers where public sector, John Prescott, the shadow through fear of the possible effects on none would previously have been Transport Minister, argued in favour of punctuality, there have proved to be few needed. Moreover, railway professionals more leasing deals for supply of rolling genuine opportunities to add competing are not blind to the huge salary stock, particularly in the debate leading services of value to the user. There will differentials between themselves and up to the closure of the rolling stock also be a temptation for potential these other professionals whom they have works at York. However, the operators to play games if the income had to teach to do the job. In addition, Conservative government at that time sharing agreements continue the privatization process was drawn out regarded these as financing deals that automatically to give a share of revenue over a long period, led to great came within the scope of the Public on a route to a new entrant. I hope this uncertainty and created a hiatus in Sector Borrowing Requirement (PSBR). distortion arising from the ORCATS investment, especially in infrastructure In the engineering field, the initial computer system, which allocates and new rolling stock. number of companies offering services revenue between operators using a But has the tearing apart benefited the such as track maintenance and renewal formula, will be removed as ticketing user? In terms of coherence and has declined to five as a result of post- systems develop. accountability, it is unlikely. With BR, it privatization mergers and takeovers. In the freight industry, ministers were was clear who was responsible. Nine different companies purchased the forced to reintegrate the three Trainload Responsibility could not be avoided and 13 infrastructure and maintenance Freight companies created by BR when even after disasters such as the Clapham companies offered for sale at they found that there was no market for crash in 1988, BR quickly accepted the privatization. Although there is still them as separate entities. Almost all of blame. By contrast, 2 years after the competition, a few more mergers may BR’s freight business was sold to the Southall rail crash in September 1997 blunt this and, as in the British bus consortium headed by Wisconsin Central victims were still awaiting compensation. industry, it is impossible to force big Transportation and now operates as Inquiries into another crash at Ladbroke players to compete if they show no English, Welsh and Scottish Railway Grove in October 1999 revealed very inclination to do so because tacit (EWS). However, there is some evidence serious shortcomings in management collusion (except at the margins) is a more that the threat of open access is keeping coordination within the industry. Many attractive policy financially. We have yet EWS’s prices considerably lower than users are simply confused about who they to see the effect of a new competition they might otherwise be and this is are doing business with and the record law in Britain aimed at controlling anti- welcomed by freight customers. number of passenger complaints is competitive behaviour. So was all the tearing apart necessary? It probably much to do with frustration It is true that, there was competition in cost huge amounts of money—some resulting from this. Train performance is the bidding for passenger rail franchises, estimate around £600 million (£1 = still poor with punctuality and reliability especially the later ones. However, some US$1.47)—just to set up the new levels now worse than in the BR days. bids have proved to have been administrative arrangements for the Initially, this occurred because of overoptimistic in terms of the potential railway and running costs are still higher mistakes made by some operating for revenue growth and cost reduction than they were under BR. Two years ago, companies attempting to cut costs by and have been surrendered and I argued that privatization should bring a shedding too many staff, and the transferred to other operators. net financial gain to the government considerable increase in services since The whole concept of on-rail competition before too long, but this was dependent privatization. Running more trains has looks like being a non-starter. It was on franchisees being able to fulfil their led to more congestion, resulting in more always difficult to accept the free current contracts. I also ignored any delays. The current régime of access marketeers’ dream of the traveller turning efficiency gains BR or a different charges gives Railtrack little incentive to up at a busy London commuter station successor might have achieved because alleviate infrastructure bottlenecks. like Waterloo and having a choice of a their record was good in this respect in Railtrack has gained a reputation for

underinvestment in its assets, and there reversed either in their election manifesto wide. Many months followed with so many has been a lack of clarity about the extent or subsequently. The new Labour temporary speed restrictions that the to which additional investment would be government was determined to establish timetable over much of the network was rewarded by ORR through increased its economic credibility and imposed disrupted and still remains unreliable. access charges at each 5-yearly review. stringent limits on public expenditure. It Morton described the industry as having Perhaps the most telling commentary on was anxious to make friends with the had a nervous breakdown. The Chief the breakup of BR is the desire in many business community and committed itself Executive of Railtrack resigned and the parts of the industry to reverse the process. to a number of constitutional reforms that company’s share price collapsed. For the time This is evident in a range of examples, occupied most of the legislative being, there is no prospect of using its profits such as the agreement between Virgin and programme in the first term of office. to contribute to the investment needs. Railtrack on the West Coast Main Line, More than a year was spent in producing Railtrack also had great difficulty in providing where the infrastructure company has an a Transport White Paper. A new Transport timely and accurate work cost estimates. This equity interest in the success of the Bill was not tabled until the third year in makes planning development of the network upgrading project. As the process of office and the proposals affecting almost impossible. refranchising passenger railway services railways did not take effect until the Although many commentators have develops, a number of the major Train fourth year. The primary result was to recognized that there are problems with Operating Companies (TOCs) have create a Strategic Rail Authority (SRA) the track authority model, future policy expressed interest in re-establishing a under its Chairman, Sir Alastair Morton. still emphasizes working within the vertically integrated network. The Authority combined the previous task constraints of the present system rather Running an efficient railway is an of the Franchising Director with that of than a full-scale reorganization of the immense team game where the user producing a strategic plan for British rail industry. Chris Green, Chief benefits most when all the players work development of passenger and freight Executive of Virgin Trains, says that one together to provide a satisfactory railways. Central to that task was reason for this is because British railway experience. Many of the discontinuities encouraging the private sector to managers have become world leaders at introduced into the system during the shoulder as much as possible of the restructuring as a result of so much dismemberment may make sense to investment costs. reorganization over recent decades— theorists seeking to introduce The proposals for greater use of railways perhaps it is about time they were able competition and to professionals who are set out in the Ten Year Transport Plan to concentrate solely on running trains. advise them. But not only do they fail to published in July 2000, which expects A key reason for the present weakness of produce effective competition, they are total railway investment over the next 10 the system is that Railtrack failed to take also contrary to the desire of users who years to be around £49 billion of which a strategic role in development of the want the seamless service that springs £34 billion should be private investment. industry. This was supposed to be based from cooperation. Railtrack was intended to be one of the on a Network Management Statement In my opinion, the track authority model major sources of private-sector investment that the company is obliged by ORR to chosen by the Conservatives was wrong in the railways. However, the company’s prepare each year. The task of providing for all these reasons. While some service fortunes have been steadily eroded over the coherent leadership embracing the whole improvements have undoubtedly been last few years by a series of crashes that industry has now passed to the SRA, made, there would almost certainly have have called its stewardship of the network which has replaced the Office of been more—at a significantly lower into question. There have been serious cost Passenger Rail Franchising (OPRAF) and cost—had a different method of overruns on projects and weaknesses have the former BRB and has also assumed privatization been used. been found in management of contractors some consumer-protection duties from undertaking track maintenance and ORR. It also has a role in future More Recent Developments renewal. Many of these criticisms came to development of rail freight. The track 1997–2001 a head after an express train on the East authority model of rail privatization could Coast Main Line derailed at Hatfield in be made to work under the leadership of Although the Labour Party in opposition October 2000 as a result of the rail the SRA if several key improvements are was very strongly against railway shattering under the train. The failure was made in the areas of cooperation and privatization, there was no serious caused by gauge corner cracking and the competition, regulation and investment. suggestion that the process would be problem was soon found to be network- The question today is whether Railtrack

6 Japan Railway & Transport Review 29 • December 2001 Copyright © 2001 EJRCF. All rights reserved. is strong enough financially or technically that Railtrack and the TOCs will adopt to encompass the task or whether a more Regulation defensive timetabling strategies with radical approach is necessary. slower and more easily achievable point- If competition is to take a back seat, then to-point running times and deliberate tough regulatory régimes must be put in timings to miss connections at junction Cooperation and Competition place to protect consumers. One way stations. Neither outcome is what the might be focus regulation more upon the customer wants and such timetables The emphasis on competition in the rail desired outputs rather than expenditure would actually waste track capacity by industry should be reduced. Although totals. Consideration would be given to reducing the number of paths available competition has a limited role to play, targets such passenger miles and freight to other operators and freight trains. It is privatization will work better if tonne miles with appropriate weightings important that the performance measures regulators, politicians and others being attached to those that are generated address and encourage better outcomes continue to allow the industry to when the busiest and most-congested for users, not simply measure what it is reintegrate those parts of the business roads are under the greatest pressure. most simple to measure. where it can be demonstrated clearly that Existing output targets should also be Decisions on safety, disabled access and users will benefit. Companies should be clear and honest so that everyone other features with very significant cost allowed to seek economies of scale in understands what is being produced, implications should be taken more their operations and reintegration might even if this means that standards appear transparently—organizations such as the be vertical, horizontal or both. In terms to fall in the short run. For example, Health and Safety Executive (HSE) should of on-rail competition, it must be punctuality should mean on time for all be required to justify both their own remembered that most railway users, trains rather than the current 5 or 10 levels of expenditure and the cost benefits except London commuters, do have a minutes late. In setting targets and indeed of the recommendations they make. It choice of other modes of transport. One in such matters as revenue allocation would also be informative if they were task of ORR is to protect captive between operators, perverse incentives to show intermodal comparisons of safety customers from abusive behaviour and should be identified and rooted out. standards and costs. In the end, the it may be better to rely on this mechanism Performance régimes imposing large consumer or taxpayer pays for these rather than contrived competition that financial penalties on the infrastructure decisions and people have a right to may or may not arise from the possibility owner or TOC for delays attributed to know all the implications of of open access. Travellers, especially them create perverse incentives. If large recommendations. those with no realistic alternative to fines are imposed for lateness, it is likely One of the least-satisfactory results of rail trains, must be protected from exploitation by monopolistic train operators by regulation of service quality and fares. But rather than encouraging open-access competition it may be more worthwhile to focus on development of alternative competitive routes such as between Birmingham and London, Manchester and London, and London and Scotland. This will also have the advantage of providing alternative routes when the most direct is unavailable, such as when carrying out modernization. It will enable yardstick comparison and encourage TOCs to focus on the real competitors—other transport modes.

Class 332 Heathrow Express standing at London’s Paddington Station (Milepost 92 1/2)

privatization is Railtrack’s monopoly other shortcomings in the standard of locomotives and wagons. But there still status. While Railtrack may hold service. It is important to view the remains the problem of fitting freight competitions between suppliers of increased use in a historical context and trains into a congested network at times infrastructure equipment and services, it in relation to changes in the economy when the freight needs to be moved and is very difficult for an external agent such more generally because there is close to find the money necessary to meet the as ORR to determine whether the correlation between GDP and railway use. costs of new freight infrastructure both expenditure levels represent value for Yet other factors with a bearing on railway on the track and at terminals. Much of money. It would be ideal to reach a use are the relative costs of train travel this spending will need to come from situation where instead of telling and motoring and the worsening public funds and will require justification Railtrack how much money it should congestion on the road network. One by- in social cost benefit terms. spend, ORR should specify outputs in product of the privatization was the Before taking office as the first Chairman terms of infrastructure quality and imposition of price caps on some rail fares of the SRA, Morton described his capacity to be achieved. As an example, and these will probably have increasing priorities as investment, investment and this might mean that the Regulator would impact over the years if they remain in investment. While many users might require average journey times to fall by place. Given the drastic scaling down of have hoped to see the word ‘quality’ 5% over 5 years. the road building programme, it is also included, Morton’s message was The Regulator has used consultants to likely that the road network will become basically sound. But before he even investigate the efficiency of Railtrack’s more congested for longer periods and addressed the issue of where the money spending but it is difficult to be as satisfied over greater distances and this may be would come from, he had to overcome as one might be were Railtrack to be affecting rail use. If they are to remain two prickly problems. The first is that divided, with comparisons between profitable, all TOCs require growth in investing in railways takes so long. The different organizations in the same passenger numbers—some more than new government’s legislative proposals business field. Whether this conundrum others—and increased investment in both for 2001–10 are likely to include an can be solved without breaking up infrastructure and rolling stock will be of overhaul of planning procedures with a Railtrack is uncertain, although any paramount importance if their aspirations view to speeding up the process as it breakup might herald the regrouping of are to be met. affects large-scale projects. The second the railway into vertically integrated Considerable pressure to reduce haulage is the infrastructure owner must have the entities. There is also the charge levied costs was exerted on the government by technical staff and money to do the work. by Ed Burkhart (the former CEO of EWS) lobby groups such as the Road Haulage that the cost of maintaining the freight Association seeking cuts in Vehicle Excise railway in Britain is far higher than in the Duty and fuel taxes on lorries so that they Sources of Investment USA. Remembering that similar are nearer to European levels and also to comments by Burkhart on the cost of allow lorry weights to increase to 44 tonnes. Before Railtrack’s recent troubles, finance domestic wagon building proved well This pressure accompanied by blockades for new railway investment was seen as founded, this issue deserves of fuel depots by hauliers was successful likely to come from four main sources: consideration. Maybe some thought in influencing the government. Both EWS Railtrack, TOCs and Rolling Stock should be given to the possibility of and Freightliner have invested heavily Companies (ROSCOs), public funds, and transferring the responsibility for and have seen growth since privatization. the farebox. There has been some maintaining some lines mainly used by However, the likelihood of these discussion about the limits of such freight trains to the freight operator. businesses winning substantial traffic finance and the answer is that there from roads will depend upon requiring should be no limit other than the market them to pay only very low track access should be satisfied that the railway can The Need for Investment charges. It will require incentives to be generate sufficient revenue to meet the offered to customers and terminal cost of the capital. This financial capacity The increasing use being made of the operators, many of whom have never is one of the potential gains of railways in the last few years is being cited used rail, to adapt to using trains. What privatization because even in previous both as a measure of the success of privatization has achieved is a much good times it was rarely possible for the privatization and as a reason for the more positive attitude towards freight as railways to persuade the Treasury to meet overcrowding, infrastructure failure and well as the substantial investment in new investment needs. However, if the

8 Japan Railway & Transport Review 29 • December 2001 Copyright © 2001 EJRCF. All rights reserved. franchises early to permit open competitive bidding for renewal. In the absence of such competition, any negotiator acting in the public interest will find it difficult to satisfy critics that the best bargain has been obtained for the user and the taxpayer. In this latter context, it is also important to be clear about what constitutes a good deal for the taxpayer. While in very simple terms this can be defined as the Virgin Class 220 Voyager running south of Oxford (Virgin Trains/ Milepost 92 1/2) lowest subsidy or highest premium that meets the specifications set out by the performance of the industry is end of the initial expenditure Franchising Director, there is no doubt unsatisfactory, it will be impossible to programmes that they committed to. that many interest groups will be seeking raise private funds and will be difficult Rolling-stock manufacturers now talk higher quality standards as opposed to to convince the government to spend about the potential for another hiatus in best bids judged in purely financial terms. more public money. orders like that between 1993 and 1996. The government, with its commitments It is important to keep the cost of Despite the fact that one reason for in the 1998 White Paper, is proposing borrowing capital to improve the railway establishing the ROSCOs was that they alternative transport options to reduce as low as reasonably possible—a fact could take a long-term view of dependence on the car, such as road recently acknowledged by ORR. As well investment, some franchisees, notably pricing, congestion charging, pollution as poor performance, the cost of capital Great North Eastern Railway (GNER), controls, taxation of private non- can be driven up by regulatory claim that it is not possible in the residential parking and green commuter uncertainty, by political risks and by remaining years of their franchises to plans. It is very unlikely that any of these imposition of unreasonable cost burdens order and take delivery of new trains to policies will prove politically acceptable on the railways in respect of issues such supplement their overstretched fleets. without a major change in the quality of as safety and disabled access where very This argument is proving particularly public transport. The Franchising marginal improvements can be extremely strong where a franchisee needs rolling Director has already published criteria for expensive to achieve. It was thought that stock that is not readily transferable to evaluation of bids, but many quality Railtrack would be able to borrow another franchise area. This leads to a features are not easily amenable to extensively on the strength of its balance higher residual value risk. The same economic assessment and a degree of sheet as long as investors were satisfied problems apply to any infrastructure pragmatism will be required in assessment. that future revenue streams were strong works with long payback periods, such This is difficult territory for public officials and certain enough to support the debt. as new stations or major car park and requires a clear statement of objectives The necessary funds would come from extensions that franchisees were and decision criteria. existing track access charges (much of expected to contribute to. The SRA saw the renegotiation of this source is, of course, underwritten by The potential for such investment pauses franchises as a means of generating new the Treasury), revenue sharing deals with was always a weakness of the franchises investment in new rolling stock, operators or public–private partnerships as they matured so it was thought improved service levels, new stations with the SRA. necessary to address the subject of and, through revenue-sharing deals with The second source of investment funds premature franchise renewal to keep Railtrack like that agreed to fund the West is the TOCs and ROSCOs. While there investment flowing. There is no doubt Coast Main Line upgrade, new lines, has been considerable investment in that some franchisees are willing to better line speeds and a range of other rolling stock and some other commit themselves to significant amenities. It also provided the improvements in security and programmes if they are allowed long- opportunity to include a number of information systems, many of the term extensions or renewals. One features that were ignored in the first passenger companies have short difficulty in the refranchising process is round, such as station staffing and franchises and are already coming to the that some operators will not surrender security, cleanliness and adequacy of car

and bicycle parking. At the first operations, £7 billion in the Rail was that the cost of franchises would be franchising, it was assumed that the new Modernization Fund as a contribution to held at a steady level rather than private-sector companies would keep the investment needed to secure the continuing to fall. This would provide trains and stations clean, employ growth targets, £4 billion for capital headroom for new franchises stretching sufficient staff to sell tickets and staff payments towards the cost of upgrading as far as 20 years ahead with substantial stations and would be concerned about the West Coast Main Line, and £5 billion private investment in new trains. In providing secure parking for cars and to complete the Channel Tunnel Rail Link anticipation of higher track access bicycles. This assumption proved wrong and new terminal at St. Pancras. This charges from a busier railway, Railtrack and renegotiation opens the possibility funding had only just been announced was to borrow to finance investment and of imposing minimum standards in these when ORR announced the final the SRA would add capital grants to areas. It is clear that what is not in the conclusions of its 5-yearly Periodic enhance the network, particularly in contract cannot be demanded and that Review of Railtrack’s Access Charges. A easing congestion. cost reduction still ranks very high in the period of intensive negotiations involving However, Railtrack has not been able to priorities of some franchisees despite the government and the SRA followed contain costs, which according to Roger evidence from others that investment in and brought forward £4 billion. The Ford, a prominent railway commentator quality is worthwhile. However, effect is to deplete the investment capital in Britain, have risen to two or three times renegotiation did offer a real opportunity available to the SRA. Furthermore, the the level that they were under BR. It is to draw in more investment funds and costs to Railtrack of the repairs and clear that Railtrack will not deliver the while it may be difficult to rank bids in compensation arising from the Hatfield needed investment and that the quality solely financial terms it would have been crash are to be reviewed by the Regulator, of the network has deteriorated. possible to compare best practice and set presumably with a view to increasing The refranchising programme is halted benchmarks of quality and attempt to track access charges. and Railtrack can neither fund nor secure commitment to ratchet up manage infrastructure projects. standards. Thus strong pressure in the Railway Gazette International says that form of yardstick competition can be Very Recent Developments ‘the prospects of a national rail brought on management, companies and investment programme have all but shareholders that fail to deliver. Railtrack announced ‘devastatingly poor’ evaporated.’ It is very difficult to see a Some other franchisees have had to admit preliminary financial results on 24 May programme being restarted without a they have committed themselves to with a business plan showing a gap of major review of the structure of the impossible targets and, while it may be nearly £4 billion between projected industry. Ministers have so far avoided tempting to squeeze these companies expenses and revenues. Following the June this possibility because of pressure on into bankruptcy, it is difficult to do this 2001 general election and the appointment legislative time. However, it is hard to and not hurt customers and potential of Stephen Byers as the new Secretary of see that 2-year extensions to franchises customers of those companies. State for Transport, it was announced that will produce the benefits for passengers Consequently, some franchises have he had instructed the SRA to concentrate that Ministers want before the next become available for reallocation with on negotiating improvements for election bearing in mind that investment the possibility of being broken up into passengers within existing franchises and in extra rolling stock and even modest more sensible businesses. The original make early replacement of franchises the infrastructure enhancements will not be division of BR into 25 franchises was not exception rather than the rule. Morton has achieved in such a short time-scale. regarded by the SRA as immutable and it announced his departure from the SRA and What conclusions can we draw from the is probable that decisions taken in haste has been replaced by Richard Bowker. British experience at this stage? when the original franchises were let, The greater part of the privatization lies First, the notion that it is possible to have represented the best that could be in the ruins that many forecast. While widespread competition between achieved at that time. the principals may blame each other, passenger train operators on the same The third main source of investment is longer-term analysis will probably show tracks is flawed. Such competition public funds. In the government’s Ten that the fragmented nature of the industry requires penalty and performance Year Plan, the SRA was allocated £29 and of responsibility within it was the régimes that are difficult and expensive billion made up of £12 billion in support fundamental flaw. to administer. for passenger franchises and freight The financial logic of the Ten Year Plan Second, splitting ownership and

10 Japan Railway & Transport Review 29 • December 2001 Copyright © 2001 EJRCF. All rights reserved. responsibility for infrastructure away from within the network. trains, which was done to facilitate open Finally, people in Europe and elsewhere access and competition, is also flawed advocating separation of train operations because the interface is so crucial to safe from track ownership should pause to and reliable service delivery. reflect on the British experience. I Subcontracting maintenance and renewal work needs significant technical management and supervision that Editor’s Note Railtrack did not have in place. While The latest developments after the arrival of this the physical work can be subcontracted, article are picked up below from news reports: the responsibility cannot. On 7 October, the government announced that Third, it has proved difficult to specify Mr Stephen Byers, Transport Secretary, had quality in delivery of passenger train succeeded in his petition to the High Court to services. While the best operators have put Railtrack PLC into administration, following raised standards, there are others where his refusal of Railtrack’s request for additional quality has been poor and has not government funding. He put in place funding improved. There appears to be little arrangements for the administrator to ensure that effective sanction within the present the railway continues to run safely and normally. franchising system against operators He also said that the public interest obligations who choose to secure short-term cost of the rail network operator would, after the savings rather than build a reputation administration, be better achieved through a for service quality. private company without shareholders—a Franchising of railway services in Britain private company limited by guarantee. was based on the theory that the On 29 November, the government announced franchises could be short because major the appointment of Mr Ian McAllister, Ford UK investment responsibility would rest with chairman, to make preparations for a new Railtrack and the ROSCOs, leaving the company to take over from Railtrack. His team franchisees to employ only the directly will put forward a proposal to the Railtrack involved labour force (train and station administrators, who will evaluate the plan before staff) and to market the services. In putting a proposed transfer scheme to Mr Byers reality, Railtrack had very little incentive for approval. Mr McAllister said that the new to undertake the investment required by company would be running in four to six months. franchisees. If franchisees are to invest, On 3 December, Mr Richard Bowker, the new they in turn require longer franchises, in head of the SRA , signalled a possible cut in the effect conferring monopoly rights. This number of train operators on Britain’s railways in turn calls for effective regulation to and called for speedy solution to the uncertainty prevent abuse of dominant positions. over the future of the failed Railtrack business. These are problems that the inevitable review of the structure of Britain’s railways will have to address. The state in the form of the SRA will probably have to reassume ownership of the infrastructure. It may be Bill Bradshaw possible to transfer management of the infrastructure to new long-term franchisees Lord Bradshaw worked for British Rail for 30 years where he held three of the most senior executive positions before retiring. On leaving BR, he became Chairman of Ulsterbus and Professor of but this will involve simplification of the Transport Management at the University of Salford. During the BR privatization, he advised the franchise map. To bring further simplicity, Transport Select Committee of the House of Commons. Currently, he is a fellow of Wolfson College, the SRA should be responsible for Oxford, a member of the Oxfordshire County Council, and Vice Chairman of the Thames Valley regulation, refranchising, safety and for Police Authority. He became a Working Peer in July 1999. securing capacity for freight operators