Vertical integration of Network Rail, would it help?

[brianthegiant]

Seems fashionable in the medai to criticise Network Rail at the moment, separation into regional units vertically integrated withs TOCs seems to be a popular proposal, but would it make things better or worse? Many think there is a need to reshape NR, but is vertical integration the best solution?
I see a number of issues with vertical integration (VI):

not used in most other transport sectors (airlines dont own airports & ferries dont own ports), why is it needed for railways?

many industires moving away from vertical integration, instead outsourcing more & focusing on core business, eg the smart car plant works more like an industrial estate of component fabricators working together

specialised equipment like test trains, FMUs etc, would have to be either divided up or put into ROSCO hands, would be more difficult to rapidly deploy.

specialist engineering skills would be divided up or outsourced, would be more difficult to strategically deploy in different regions according to demands & projects

smaller regional bodies would be less resourced to run cutting edge projects like ERTMS trial for example

would TOCs operate network any better, some are better than others, some fall foul of commercial pressures, but in general the expertise of TOCs is focused on tickets sales and stock operation, would they prioritise track/signals upgrades renewals enough?

Possible Conflicts between competing TOCs & freight operators..
Do stagecoach want VI just so they can prioritise their movements over eg cross country?

 

[Oswyntail]

I think that the objections listed are more than enough to militate against VI. Seeing the "Stanier and Gresley" approach to stock procurement between TOCs, it is unlikely that there would be any standards between them on infrastructure maintenance or development. Imagine if two (or more) different signalling technologies emerged. All perfectly manageable, but a recipe for disaster. And then, what about a broken rail causing a major incident just on the boundary between two TOCs.
Does VI work, and has it ever worked?

 

[Invincibles]

Without knowing the precise nature of VI it is difficult to know whether it would work or not.

The example of the broken rail on a section where companies routes join is an interesting one, but in the original clamour to build lines such routes would probably have been "Joint" lines. Whether there would be a possibility of joint lines I do not know, but I expect any division would be done in such a way that permitted the creation of joint enterprise over shared track. Cross Country would have to have elements of "joint" about it given the number of different regions it enters into.

I would split the tracks up on basic routes:

GEML and to Kings Lynn - "Anglia"

ECML, Lincolnshire, in to Nottingham, Sheffield (from Retford) and Leeds as current. - "LNER"

MML, lines to Peterborough, Nottingham, Stoke, Hope Valley, Sheffield - Doncaster/Leeds/Huddersfield, Settle and Carlisle - "LMS"

WCML lines through Northampton, Birmingham, Stoke, Crewe, Liverpool (main line), Manchester to Preston, Cumbria, on to Glasgow and Kilmarnock - "LNWR"

Transpennine lines, ALL connections between Manchester and Liverpool, other radial routes from Manchester and Liverpool, East Lancashire, through to Leeds as eastern limit. - "Lancashire and Yorkshire"

Chiltern main line, GWML to Hereford, Didcot to Coventry/Birmingham. - "Great Central" (OK not Great, but they can have the title)

GWML to Wales, West Country, interconnecting lines, Devon and Cornwall - Great Western

All other London lines to stay with their current franchises, although who gets to call themselves the Southern Railway they can argue about.

Where there are issues of joint ownership then I am sure something could be resolved.

What I think this sort of split would really do is give "Lancashire and Yorkshire" a strong revenue stream in terms of all Liverpool, Manchester, Leeds flows and with a carefully constructed agreement that money could be turned to real use in redevloping the network in the area and providing many of the much needed improvements.

Whether the "LMS" would want a Nottingham to Carlisle service to make use of their network I do not know. However the potential for competition between "LNER" and "LMS" between Nottingham and London could have some interesting results.

I have a feeling it could be very good, IF it was set up properly. I hope that this is what the government are looking at. If the companies subsequently decide to contract out then that is fine, really the only important thing is that an improved service results. Whether they use the traditional large inventory approach or not is up to them.

I actually think we would still see "Roscos" brokering deals between manufacturers and "regions" to get suitable stock given the similarities of branchlines network wide.

 

[DarloRich]

I have a plan - lets "vertically integrate" the whole lot into one body - you could call it BR!

The discussion of vertical integration is always on the the TOC terms - why? It is always the TOCS should take over the track. They are very keen for this to happen but we have seen what "private enterpirse" does to a railway system when left to thier own devices. Jarvis? Potters Bar? Hatfield? Why not have NR take over a TOC and run one integrated service?

I think ideally the Cons(dems) would like to regionalise everything, perhaps along the lines of the old regions, and try and sell off the chunks.

 

[NSEFAN]

Doesn't EU regulation require the rail infrastructure to be a seperate organisation from the train operations? If so, it wouldn't be possible to integrate TOCs with their tracks anyway. I suppose you could do what SNCF did: just have two companies to exist (one for the trains, one for the track).

Either way, I think that splitting up the network allows for (even more) breakdown in communication! A unified network with sectors (like in the late BR) seems to be a good approach, but there must not be any bickering between organisations, or else we could end up with another Potters Bar scenario where an incident occurs and nobody knows who's job it was to fix it.

 

[DarloRich]

Doesn't EU regulation require the rail infrastructure to be a seperate organisation from the train operations? If so, it wouldn't be possible to integrate TOCs with their tracks anyway. I suppose you could do what SNCF did: just have two companies to exist (one for the trains, one for the track).

Either way, I think that splitting up the network allows for (even more) breakdown in communication! A unified network with sectors (like in the late BR) seems to be a good approach, but there must not be any bickering between organisations, or else we could end up with another Potters Bar scenario where an incident occurs and nobody knows who's job it was to fix it.

it isnt as clear cut as the friends of privatisation suggest - the SNCF approach is the one used by most countries.

 

[Metroland]

Doesn't EU regulation require the rail infrastructure to be a seperate organisation from the train operations?
.

Nope, it requires the accounting to be separate that's all.

As a pure guess, I wouldn't be surprised if NR was reduced right back, and the TOC's lease the lines for 30 years, similar to HS1. You'd reduce a lot of middle management and with longer franchises could get on with upgrading tracks similar to Chiltern, again, saving a lot of management time, compensation and tax payers money.

You could compare the TOCs to benchmark which one is the most efficient and apply best practice.

I don't see worry with freight operators, open access rights are enshrined in law as is fair treatment. It works fine in Japan and Europe, and before 1947.

 

[Ploughman]

Take an example like York.
When it was remodelled in the late 80s the various bits of BR then were asked what they wanted for operational purposes as a layout.
Every sector came back with a plan of varying standard. Some fully scaled and detailed others literally the back of a fag packet.
The one thing they all had in common was that none wanted anything to do with what other operators wanted. As for paying for the work it was a case of thats my bit, We will pay for that but not that bit as someone else uses that.

Do you think that in the intervening period things will have changed for the better or the worse?

 

[WatcherZero]

Im undecided on VI really, big benefits and big problems.

PRO
* Tailor work to local needs
* Allow more investment as the firm recieves the reward
* Shorter chain of responsability
* Faster response to needs
* Dont have to wait in a work queue of national jobs
* No point having a team standing around doing nothing so more work may be done

AGAINST
* Duplication of equipment and work teams
* Firms may have proportionally less resources, decide it can take longer to do jobs to save money.
* Higher burden of costs on a smaller organisation
* Interoperability and technical standards could suffer
* Less incentive to invest in the best tools when existing could be made to work longer, loss of economies of scale
* Issues around culpability and shared track/stations

 

[imagination]

I think that the objections listed are more than enough to militate against VI. Seeing the "Stanier and Gresley" approach to stock procurement between TOCs, it is unlikely that there would be any standards between them on infrastructure maintenance or development. Imagine if two (or more) different signalling technologies emerged. All perfectly manageable, but a recipe for disaster. And then, what about a broken rail causing a major incident just on the boundary between two TOCs.
Does VI work, and has it ever worked?

Wouldn't there have to be cooperation simply because of trains that run through multiple areas (esp cross country)?

Anyway, it seems easy enough and sensible enough for parts of the country that only see one operator (most of SW England for example) but I don't see how the whole thing would work very well. How did things work in the grouping days? Particularly with regards to "joint" lines (which is probably what most of the network would have to be like)

 

[Invincibles]

I have a plan - lets "vertically integrate" the whole lot into one body - you could call it BR!

Why stop there? Now we have DB and others coming through the tunnel surely one merged body would make more sense? In fact if China do manage to build the high speed rail route they plan then why not integrate Chinese railways into the mix?

Certainly one global rail company would make things simple, the profitable countries could subsidise the ones where investment is needed and the whole thing would progress.

In fact I am surprised that no caring and sharing types have suggested any of this.

The discussion of vertical integration is always on the the TOC terms - why? It is always the TOCS should take over the track. They are very keen for this to happen but we have seen what "private enterpirse" does to a railway system when left to thier own devices. Jarvis? Potters Bar? Hatfield? Why not have NR take over a TOC and run one integrated service?

It is a good job there were no problems under BR because that would be a bit of a hole in your argument if there were.

But to give your point credence for a minute how many of those incidents were the result of firms that also ran the trains over the track in question. Indeed because there have not been any vertically integrated companies since the second world war, and arguably they were struggling before that, I would suggest it is difficult to get evidence either way.

I think ideally the Cons(dems) would like to regionalise everything, perhaps along the lines of the old regions, and try and sell off the chunks.

Ah it is ok because they have "Con" in their name so it is bound to be wrong. Because I struggle with the rest of the sentence/post to see your point about what is wrong.

To me it comes down to what you believe the objectives of business are, specifically the extent to which they need repeat custom and therefore are compelled to promote welfare maximisation, and so to reduce the weighting on profit in that welfare function.

Im undecided on VI really, big benefits and big problems.

PRO
* Tailor work to local needs
* Allow more investment as the firm recieves the reward
* Shorter chain of responsability
* Faster response to needs
* Dont have to wait in a work queue of national jobs
* No point having a team standing around doing nothing so more work may be done

AGAINST
* Duplication of equipment and work teams
* Firms may have proportionally less resources, decide it can take longer to do jobs to save money.
* Higher burden of costs on a smaller organisation
* Interoperability and technical standards could suffer
* Less incentive to invest in the best tools when existing could be made to work longer, loss of economies of scale
* Issues around culpability and shared track/stations

To me this is the key argument against, and therefore the one that would need to be most carefully fixed into the system.

A thought though, under my proposal for splitting there might be mileage for "Lancashire and Yorkshire" to get Manchester Piccadilly reorganised to get the Liverpool - Manchester - Leeds trains running faster and not conflicting with all of the "LNWR" services coming in from Birmingham and London. Without any attempt at that I think the Piccadilly throat would be a real problem if two firms were operating into it and having ownership of it.

 

[tbtc]

I'd imagine that the first step towards this will be the breaking up of Network Rail into smaller geographical organisations which braodly mirror TOC boundaries...

Watch this space?

 

[DarloRich]

@#11 I don’t seek to make any political points out of who is in Government. The last lot were not that great either, just don’t want to write the Conservative-Liberal Democrat Coalition every time!

My feeling, for what it is worth, based on the very low level impact I have had on the McNulty/VFM review and in listening to feedback from those involved much higher up the chain is that in an ideal world the government would like to use a regional base to integrate the TOC and infrastructure into one business. Personally, I don’t think they can do that at the present time due to the economic situation meaning the financial returns of another privatisation will not be as high as required. I also think they would find that the public would have, at present, a perception problem in seeing private companies in charge of the infrastructure.

There are , however, several "business units" within NR which could easily be sold off to the private sector without to much perceived impact to the public. I also think the review will push for a greater regionalisation of the business along with closer working with the TOC/FOC as a first step to the desired goal set out above.

As for BR it was by no means perfect, anyone who suggests otherwise is clearly mad. However, it was better that the mess we have now NR/FOC/TOC/ROSCO/SRA/DFT, did more with much less money, absorbed far less subsidy and ran a service that actually was of benefit to passengers. Several business units were either in profit or close to it and most were going in the right direction.

I think that GNER would take issue with the suggestion they were at fault for any of the major accidents on their patch. Great Heck, a sleeping driver crashing his car on the line,(admittedly not the fault of the INFRACO either!) Hatfield "Rolling Contact Fatigue" and Potters bar, a broken switch. Two of the accidents were caused by private companies acting in an incorrect manner and not putting safety first. People died because profit and dividends came over safety. NR will also have to take some responsibility for the Potters Bar crash as they were unwilling or were unable to operate oversight of their contractors correctly. At least they admitted liability straight away and made important changes quickly. Maintenance is better now but still not perfect.

Finally my objective for the business is to run a safe railway, so that passengers and railway staff get home unhurt at the end of every day.

 

[Bittern]

Some fully scaled and detailed others literally the back of a fag packet.

So...they came with the back of a fag packet? Cause, y'know, they litterly came with the bag of a fag packet.

 

[Old Timer]

I think a couple of things should be remembered or maybe learnt here.

Firstly for the greater part of their lives, the UK railways were vertically integrated under private ownership and managed OK.

Even under BR the Railways retained their former vertical separation to a very great extent, indeed the Regions pretty much managed as autonomous operational and commercial units Sectorisation. This extended to locomotive policy, fares structures to a large extent, track manintenance practices and standards, even terms and conditions of employment.

At one stage it was not possible to transfer from one Region to another unless one was in a salaried or managerial position. Wages grade staff (i. e. Drivers, Guards, Signalment, station staff, etc, etc) had to transfer to the basic grade and re-start their grade seniority. Only length of service was allowed to be retained. You could therefore have a senior Driver or Guard who requested a personal transfer and had to start in the lowest link at their new Depot and work back up.

In terms of signalling Rules and Signalling Standards, the Regions had a degree of autonomy as to changes to the ways Rules were interpretated and applied, and Regions had their own individual signalling standards in some cases. For example the Eastern did not believe in installing full Welwyn Block Controls (ironic given the background), whereas the LNW Western Lines until recent years still allowed "One Pull" as opposed to "One Train" Line Clear releases.

Turning now to post-Privatisation.

People have suggested that there would be varying track maintenance standards, which is actually not the case.

Railtrack did not have any specific Standards set at all. Indeed under Privatisation it was the Engineers within the various Infrastructure Maintenance and Renewals Contractors who developed the whole mass of Standards and Procedures that Network Rail eventually took over - and then have promptly dumped in many cases because of cost.

There was very considerable co-operation between the IMCs and IRCs and a completely "Open Book" sharing of accidents and incidents as part of a co-ordinated effort to prevent a recurrence.

In addition some considerable amounts of joint money were invested in studies and investigations by outside bodies such as Universities into human behaviour, human factors, and other subjects such as fatigue, in order to establish the root causes of many errors made by staff at work. Most of these were immediately stopped and funding withdrawn by Network Rail in taking the remaining maintenance contracts in-house after Jarvis Rail walked away from theirs.

Standards for the acceptance and operation of Plant and Road/Rail Plant, Cranes, etc, etc were commonly owned and shared through the medium of the M&EE Networking Group.

Standards for the loading and operation of Engineers Trains were developed and jointly agreed with the freight train operating companies without any involvement from Railtrack/Network Rail.

Even the Sentinel system now so lauded by Network Rail was developed and paid for by the IMCs/IRCs.

It is safe to say therefore that those who suggest vertical integration do not speak with experience or authority on the subject but merely from opinion.

Elsewhere in the World, vertical integration is the norm, and there are no problems with the interworking of trains, indeed South America has a completely privatised Railway system, even the suburban and metro systems are let out on LONG term franchises. This has ben very successful and the Country where I am presently working has a system where you pay on entry and can travel wherever you want for a flat price of about £1. You do not need a ticket except to get through the entry barrier. You simply pay each time you enter the system. You can therefore travel around the whole day for £1 if so minded.

Vertical integration within the UK could be introduced very simply indeed. All it would require was separation of Operations from Infrastructure. There is no need even for separate Companies to exist, this is NOT a requirement of the EU Directive.

Already there are EU Directives concerning the ability of trains to work between different networks (Interoperability Standards) and in Europe interworking of freight and passenger services continmues on a daily basis withouit any of the Armageddon scenarios painted by some on here over the last couple of years.

Maintenance Standards, and Signalling Standards would remain in the gift of RSSB, and audit of compliance with the ORR in terms of an increased HMRI. This would be similar to the FRA/NTSB in the USA.

The costs savings to the UK Railway system would be enormous as a huge chunk of the existing Network Rail organisation could be removed and withdrawn for ever at a stroke. It should be remembered that much of this organisation exists only to second guess the Contractors and in actual fact much of this second guessing is actual interference, which if looked at properly by HMRI would be seen to be in breach of existing Safety Legislation.

 

[Zoe]

I believe Sweden were first to introduce the split between infrastructure and opreations and the EU issued the directive based on the success of this.

 

[Old Timer]

I believe Sweden were first to introduce the split between infrastructure and opreations and the EU issued the directive based on the success of this.

The Swedish experience was what led towards BR being Privatised. It was the next "logical" step and sadly this template has been taken and honed by the EU into its framework.

I recall after the fall of the Berlin Wall, when money was being spent on investing in the Railway infrastructure of the former Soviet Union States, that the UK form of Privatisation was being hawked around by various EU funded Consultants, even when it was clear that that was not an appropriate solution.

Sadly the EU is so blinded by the vision of Competition that it cannot see the harm its blind adherence is doing, and how its particular approach has not been followed up elsewhere in the World.

 

[Zoe]

I remember John Major wanted a return to the pre-1948 system. If not the EU directive, why was this not the option chosen?

 

[Old Timer]

The issue lay with the Treasury principally.

Since Nationalisation the Railways have never really been adequately funded. Remember that they were in tip top condition before the War but were totally decimated through overuse, lack of maintenance and enemy action.

The Pre-Grouping Railway Companies were never properly (indeed not at all) reimbursed for the damage caused to their Railways systems, and as the Companies themselves were unable to afford to keep the system going, hence we had Nationalisation.

Because under Nationalisation all money for investment and running the Railways nust come from the Public purse, it follows therefore that the amount of money available will be ever changing reflected both the condition of the economy, as well as whatever Political imperative is flavour of the month.

The Treasury used its Nationalised Industries as a way of controlling wages when it suited, and with the ever increasing demands for money, many Nationalised Industries, especially in transport, were seen as a convenient and Politically "safe" way of being denied funds. Which MP or indeed Government seeking re-election would not rather ben seen opening hospitals or schools as against investing in some un-newsworthy piece of industrial equipment.

As we reached the 1990s it was recognised by the Government that the investment required to bring the Railway system up to date could never be found alone from Treasury funds. Even borrowing from outside the Treasury had to be guaranteed by Treasury Bond thereby creating the problem of generating indebtedness. Labour simply took much public spending "off the books" by manipulation of the accountancy practices and a distortion of the liabilities created by PFI.

As the Government could not guarantee to provide the money the Railway needed, the only way to attract private money was to ensure that any investor made money through investing in the Railway. Hence Privatisation.

 

[Zoe]

As the Government could not guarantee to provide the money the Railway needed, the only way to attract private money was to ensure that any investor made money through investing in the Railway. Hence Privatisation.

But if it had been sold as BR PLC or had returned to the pre-1948 system private companies would also have made money out of it.

 

[Old Timer]

But if it had been sold as BR PLC or had returned to the pre-1948 system private companies would also have made money out of it.

Possibly

The Treasury did not favour that system as it would only have meant ONE source of taxation income. They preferred the version we have where everyone is billing everyone else and everyone is paying dollops of tax, well that is the theory unless, as some have, you have very good tax arrrangements.

If you did a little digging you would soon find out that those in the know back in 97, made some VERY efficient arrangements to enable them to extract the maximum for nothing in return. It is all a one-way street.

The spin being sent around prior to the 97 General Election was sufficent to scare off some very large Companies indeed. They could not take the risk of the renationalisation without compensation scenario that was being bandied around.

Legally they have to act in the Shareholders best interests, and some of the real big Companies whose presence would have dramatically changed things, took advice and baled out of the process, thus allowing sharks, speculators and those with the right Political connections and influence to make enormous sums of money when the oft promised renationalisation without compensation never took place.

We then saw how the one TOC that was making a profit, was cynically sacrificed on the alter of Political expediency and retribution simply because the Chief Execs did not find favour.

Even had a Pre-Grouping Privatisation been planned I doubt that the Political atmosphere would have resulted in a sale for the reasons spoken of above. That type of programme would have required a long-term committment and again it is beyond doubt that the big Companies would have taken the financial risk knowing the colours of the next Government and listening to its continual statements about renationalisation without compensation.

It was not Privatisation per-se that has destroyed the Railways, it is how things have panned out in the 16 years since. Certainly those with the right connections became very rich indeed. You only have to look at recent events within Network Rail to see this.

 

[Zoe]

So if it had been your decision, would you have chosen the exact same model the Conservative party did?

 

[Trog]

There was very considerable co-operation between the IMCs and IRCs .

That was far from universal the IMC local to the renewals unit I worked for had their knife in our back and their hand in our wallet any chance they got. Most co-operation was of a low level mutual favour swapping don't tell my boss kind.

 

[Aictos]

I think what Major ought to have done to please our bosses in Europe was go for the split version which SNCF and DB use basically one company manages the services and the other manages the track.

This looks better then the Big 4 proposal although BR Plc would have been nice!

 

[Old Timer]

That was far from universal the IMC local to the renewals unit I worked for had their knife in our back and their hand in our wallet any chance they got. Most co-operation was of a low level mutual favour swapping don't tell my boss kind.

I talk of the co-operation at Senior level (ISLG, etc).

 

[Clip]

Without knowing the precise nature of VI it is difficult to know whether it would work or not.

The example of the broken rail on a section where companies routes join is an interesting one, but in the original clamour to build lines such routes would probably have been "Joint" lines. Whether there would be a possibility of joint lines I do not know, but I expect any division would be done in such a way that permitted the creation of joint enterprise over shared track. Cross Country would have to have elements of "joint" about it given the number of different regions it enters into.

I would split the tracks up on basic routes:

GEML and to Kings Lynn - "Anglia"

ECML, Lincolnshire, in to Nottingham, Sheffield (from Retford) and Leeds as current. - "LNER"

MML, lines to Peterborough, Nottingham, Stoke, Hope Valley, Sheffield - Doncaster/Leeds/Huddersfield, Settle and Carlisle - "LMS"

WCML lines through Northampton, Birmingham, Stoke, Crewe, Liverpool (main line), Manchester to Preston, Cumbria, on to Glasgow and Kilmarnock - "LNWR"

Transpennine lines, ALL connections between Manchester and Liverpool, other radial routes from Manchester and Liverpool, East Lancashire, through to Leeds as eastern limit. - "Lancashire and Yorkshire"

Chiltern main line, GWML to Hereford, Didcot to Coventry/Birmingham. - "Great Central" (OK not Great, but they can have the title)

GWML to Wales, West Country, interconnecting lines, Devon and Cornwall - Great Western

All other London lines to stay with their current franchises, although who gets to call themselves the Southern Railway they can argue about.

Where there are issues of joint ownership then I am sure something could be resolved.

What I think this sort of split would really do is give "Lancashire and Yorkshire" a strong revenue stream in terms of all Liverpool, Manchester, Leeds flows and with a carefully constructed agreement that money could be turned to real use in redevloping the network in the area and providing many of the much needed improvements.

Whether the "LMS" would want a Nottingham to Carlisle service to make use of their network I do not know. However the potential for competition between "LNER" and "LMS" between Nottingham and London could have some interesting results.

I have a feeling it could be very good, IF it was set up properly. I hope that this is what the government are looking at. If the companies subsequently decide to contract out then that is fine, really the only important thing is that an improved service results. Whether they use the traditional large inventory approach or not is up to them.

I actually think we would still see "Roscos" brokering deals between manufacturers and "regions" to get suitable stock given the similarities of branchlines network wide.

Why have you missed the whole of the northeast of england?

 

[Invincibles]

Why have you missed the whole of the northeast of england?

Small oversight that, but I suppose I just thought it naturally fits into "LNER" and did not write about it.

Carlisle to Newcastle is a little bit more difficult because there is the potential for through trains to Glasgow under "LNWR" but really I think making it "LNER" makes sense as that allows Newcastle to be entirely under "LNER" removing any of the access issues there. Carlisle is a little more self contained as the trains mostly use the bays on the east side of the station? I also have "LMS" running into those bays from the S&C but under normal operation that should all be possible without too much conflict. If either company did want to run through to Glasgow then I suppose it would be governed like any train that operates on someone elses metals.

I am just not sure there is enough room for a "super PTE" like "Lancashire and Yorkshire" in the North East. However if the political will was there maybe all non ECML lines could go into "North East Rail" but I am not convinced of that one.