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Chris Grayling: A new approach to Britain's Railways

"Over the next twenty-five years, Britain's transport infrastructure will face almost unprecedented pressures. The forecasts for growth in the number of cars, in particular, are far greater than we can possibly just provide for through building more roads.

That means we will need efficient, modern public transport to help meet the needs of future generations. Railways will be an essential part of that.

But rail also faces huge challenges if it is to play the role it should in future transport in this country.

The past ten years since privatisation have seen huge changes in the industry - and some real highs and lows. But to me the statistic that says more about today's railway than any other is that the network now carries more passengers each year than was the case before Beeching, and before the wholesale closures that cut the network in half. That is an astounding achievement, particularly given the fact that a decade ago people still talked about the railways as being in a long spiral of decline. It has been matched by a reversal of the long-standing decline in rail freight, which is also now growing rapidly.

But it also provides a very clear pointer to the challenges that the industry faces going forward.

It is hard to see how the current network can accommodate the projected growth in both freight and passenger numbers without serious measures being taken to ease constraints on capacity.

To be frank, the forecasts for the next few years do not paint an attractive picture for the travelling public.

According to the Rail Regulator, there will be no growth in the number of passenger train kilometres travelled on the network between now and 2014. To the layman, that means no more space for passengers on our trains than they have today.

But according to both Network Rail and the train operators, passenger growth during those years is likely to exceed 30%.

And the financial small print of the new franchise agreements make it quite obvious that unregulated fares at least are set to rise sharply in the next few years.

We saw the brutal reality of that a couple of weeks ago, when it emerged that the Government had done a secret deal with one of the big rail companies to push up fares and price passengers off busy London commuter trains to try and tackle the problem of overcrowding. And ironically this was on one of the routes where the Government's 10 Year Plan promised that the Thameslink 2000 project would be open by now, and would provide longer trains and more space for passengers. Just another example of a promise that has come to nothing.

You can all do the maths. All of this adds up to more and more passengers, on more and more overcrowded trains, and with constant upward pressure on fares to try to take the sting out of overcrowding.

And frankly, I don't think this is sustainable. If we are actually going to make sure that the passenger of the next decade isn't actually spending more and more on travelling in increasingly overcrowded trains, then things really do have to change. We can hardly expect the general well being of passengers to improve if they travel in conditions that are increasingly unpleasant. Nor can we get more freight off the roads if the rail network is under such pressures.

And you have to remember that this is all happening at a time when the amount of money the taxpayer spends on the railways is at its highest ever. Five years ago, the subsidy for the railways was a little over a billion pounds a year. This year it is more than five billion pounds.

But there is no sign that either the Government, or Network Rail - the two organisations that have the power to do something about the problem - are getting to grips with what needs to be done.

Earlier this month, Network Rail asked for seven billion pounds over five years of extra cash to pay for capacity improvements - on top of the huge extra amounts of money it is already getting from taxpayers to spend on our rail network.

In total, it wants nearly one and a half billion pounds a year more to run the railway than the independent rail regulator thinks it should need.

Now there are only two places that this money can come from.

Either the taxpayer has to fork out more and more money to support our railways.

Or alternatively, the travelling public have to pay more and more for their tickets.

Or both.

If we want people to leave their cars at home and use public transport, if we want to meet our environmental objectives, then this cannot be the right way forward.

And since the Government's flagship transport policy is to introduce a system of road pricing to encourage people to use their cars less at peak times, then it cannot be sensible to follow a path which will price them out of trains as well.

So something has to change - and it has to change soon.

I think there are two big barriers to the kind of change we need to see, though.

The first is that there is much too much political involvement in the running of the railways.

Douglas Alexander is inheriting a Department that has more operational involvement in our railways than ever the Government did when British Rail was around.

I think it makes no sense at all to have railway timetables written by Government officials.

I don't believe that Government should be responsible for procuring new trains.

I think it is madness that new franchise agreements are now so tightly specified that the train operating companies have lost the freedom to innovate.

Small wonder that there seems to be so little being done to address the problems that are building up.

It's time that politicians stopped trying to run our railways, and that we gave responsibility back to our transport professionals.

But we also think that an important part of the problem lies in the structure of the industry that exists today. We think, with hindsight, that the complete separation of track and train into separate businesses at the time of privatisation was not right for our railways.

We think that the separation has helped push up the cost of running the railways - and hence fares - and is now slowing decisions about capacity improvements. Too many people and organisations are now involved in getting things done - so nothing happens.

As a result, the industry lacks clarity about who is in charge and accountable for decisions. Indeed passengers complain that they are never sure who is actually responsible when something goes wrong. In my own constituency I have been struggling for weeks to establish whether it is South West Trains or Network Rail who is responsible for the regular and systematic cancellation of the last train from Waterloo to Epsom. Both have passed me back to the other, and for weeks neither was able to give me a proper, detailed and satisfactory reason.

A key consequence of this fragmentation of accountability and decision making is that projects which could make a difference - for example the re-development of stations like Reading to generate cash for improvements to passenger facilities and track around the station take far too long to become a reality. All too often, major projects are hampered by endless contractual discussions between different organisations. Even smaller changes, like amending a timetable, can take a year of negotiations.

The reality is that speed is of the essence if we are to avoid massive problems of overcrowding - and so the decision making process must be quicker and simpler.

The whole process by which Network Rail and the Train Operators organise access to the track for maintenance and renewal is enormously complex. They take huge amounts of management time, and cause some real financial distortions in the industry.

And there are some other indefensible structural issues. Take the case of our stations. The train operating companies are responsible for station maintenance and decoration up to a height of six foot six above the platforms. Above that, it is the responsibility of Network Rail. So if Network Rail replaces the roof, or even repaints it, it is the job of a totally separate company to finish the job down to platform level. Two different sets of workmen, two different costs - and in the case of one current industry anecdote, at Rugby Station, a little while back, a brand new metal roof placed onto ageing wooden supports because different people were responsible for different bits. No wonder costs are too high.

So we are launching a complete review of the operation of our railways, with a view to securing a much greater degree of integration between track and train. We are not expecting to recreate British Rail, but we do want to work with the industry to identify a better structure to ensure it can meet the challenges of the next decade.

There are several different ways in which this could be done - and we will take the time to find the best way forward. But we are certain that no change is not an option.

Over the next few months we will work with the industry to identify a fresh approach which we can put into effect when we are back in Government.

We know that we will receive a fair hearing for our work.

In 2004, when the Government carried out a review of the Rail Industry, the Association of Train Operating Companies called for a restoration of partial vertical integration of the industry.

In April, Moir Lockhead, chief executive of the train and bus operator First Group, said he would continue to push the Government to "put the railway back together again".

"We are very keen to press for vertical integration, not in the next 12 months but over the next five years. We think it would create another step change of improvement," he said.

Earlier this year an application from Merseytravel, the Passenger Transport Authority for Merseyside to integrate the operation of the Merseyrail Electrics train and track was turned down by Network Rail. Its Chief Executive Neil Scales had said he could have saved £30 million through the change.

Although we are open to different solutions, and will want to listen to views across the industry, there are a number of things we regard as givens when we carry out the review.

Our goal is not to reprivatise the network. Although there are a range of different options which would lead to the greater integration of track and train, we expect any new, integrated organisations to work under franchise or similar arrangements rather than actually own the network.

We do, though, want to see more scope for long term investment decisions, often impossible under today's short-term - normally 7 year - franchise arrangements.

The best example of where this has worked is on the Chiltern Line in Buckinghamshire. Chiltern is the only train operator to have a 20 year franchise. It has been amongst the most proactive in bringing in new private investment to upgrade its service - redoubling one stretch of track that was downgraded in the 1980s, and expanding Marylebone Station.

We need to look at how the lessons learned with Chiltern can be brought to the rest of the rail network. And we also need to make sure that innovative smaller operators do not lose out as a result of what we do.

Of paramount importance in the work we do will be ensuring that any new structure must protect the interests of freight users and encourage future growth in rail freight.

Getting freight off roads and onto rail and shipping will be an important goal of our policy development work, and we are adamant that any changes to the rail industry must reflect the needs of rail freight.

Finally, we want to see rail workers share in the future financial success of the railways, particularly to discourage future militancy and strike action.

We know how frustrating it can be to the travelling public to see regular threats of strike action used by unions as a negotiating tactic in their discussions with their employers. We regard the people who work on our railways as skilled professionals, responsible for the safety, operation, logistics and customer service of our network. We think they should share in its successes and have a real incentive to help improve the service it offers.

Our goal is straightforward.

We believe that getting transport right will be vital to the future of our economy - and that good public transport will play a vital role in helping us meet the environmental challenges we face.

We believe that the railways will play an important part in the future of our transport system.

But if they are to have a successful future, it simply isn't good enough for passengers to face the prospect of more and more overcrowding and higher and higher fares.

Instead, we need to see more investment in the projects that can ease overcrowding.

We need to get value for the money that we, as taxpayers, are spending on the railways.

We need to ensure that we attract long term investment into our railways.

We need to minimise political interference in the day to day workings of the railway, and to let our rail professionals get on with the job.

Our job, as politicians, should be to remove the barriers to short-term improvements, and then to help shape a much longer term strategy for the future of our railways.

And above all, we need a structure where it is quite clear who is in charge, who is accountable and where decisions on improvements can be taken quickly and easily.

If we carry on the way we are heading at present, our railways face a crisis of overcrowding.

If we get it right, they can make a real difference to all of our futures."

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