BLAIR’S BRITAIN, 1997–2007

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BLAIR’S BRITAIN, 1997–2007 Page 41

by ANTHONY SELDON (edt)


  ‘buy-in’ from the Treasury was undermined by the disinterest of the new

  ‘Blairite’ Secretary of State.

  Indecision: the railways

  Railways policy under Blair has proved to be indecisive, ineffective and

  very expensive. The costly debacle on the London Underground (see

  below) came about because of a vague policy delegated to Prescott and

  11 Ibid., p. 416.

  12 Ibid., pp. 416, 633.

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  hijacked by the Treasury. The failure on the national railways came about

  because of a disputed decision by Blair to do nothing. In opposition

  the party had a clear policy: ‘a Labour government will make good its

  commitment to a publicly owned and publicly accountable railway’.13

  But Blair decided not to change the ownership or governance of the

  railway. This was consistent with the 1997 manifesto to keep it ‘as we find

  it, not as we wish it to be’. So nothing much happened, although there

  was a propensity to draw attention to failings and for John Prescott to

  promise ‘action’, including (unrealistically) ‘renegotiation’ of the train

  operating contracts. The rapid growth in patronage which had started in

  1994 continued.

  Perceived failings in the structure of the railways did lead the government to announce an intention to create a new Strategic Rail Authority

  (SRA) in the 1998 White Paper.14 Reform of the railways may have been

  close to John Prescott’s heart, but it manifestly did not catch the Prime

  Minister’s attention: the legislation proved to have great difficulty in

  finding parliamentary time. It took two and a half years to reach the

  statute book in the Transport Act 2000.

  Of all the traumas experienced by the UK rail privatisation, the failure

  of Railtrack in autumn 2001 attracted by far the greatest public attention,

  although the privatised railway would have run into difficulty in any

  case because of the severe financial problems experienced by the trainoperating companies (TOCs), unrealistic aspirations and inadequate

  funding to meet them.15

  There were two major rail accidents, one in 1997 at Southall in which

  seven people were killed, and one in 1999 at Ladbroke Grove in which

  thirty-one people were killed. The extent to which privatisation may have

  been a factor remains controversial, but the general public laid the blame

  at the door of ‘Tory privatisation’. In this they were encouraged by John

  Prescott who started the criticisms on a visit to the Southall accident site

  and initiated public inquiries rather than the normal ones by the Railway

  Inspectorate. Members of the government promised that they would

  discipline Railtrack, to force it to become absolutely safe whatever the

  cost (even though the relevant powers were vested in the independent

  13 Clare Short for the Opposition in SBC Warburg, Railtrack Share Offer, Prospectus, 1996.

  14 Christopher Foster, British Government in Crisis (Oxford: Hart Publishing, 2005), gives an

  important account of the deficiencies in policy and legislation concerning the Railways

  Act 1993 and privatisation in 1996.

  15 See Stephen Glaister, British Rail Privatisation – Competition Destroyed by Politics,

  Occasional Paper 23 (Bath: Centre for Regulated Industries, 2005).

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  Rail Regulator and the independent safety regulators). Railtrack was

  particularly heavily criticised in the press after the Ladbroke Grove

  accident.

  That was a crucial turning point: with sufficient leadership government could wisely have taken the line that this was now a private industry

  and it was a matter for the independent safety and economic regulators

  to sort out. This kind of approach was illustrated by Transport Secretary

  Douglas Alexander in his simple factual reporting to the House of

  Commons on the fatal Grayrigg (Cumbria) derailment in February

  2007.16 There was no commentary and the matter was quickly forgotten.

  The very public intervention by ministers after Ladbroke Grove greatly

  heightened the general public’s perception – contradicted by the evidence – that privatisation had made the railways less safe.17

  These factors became critical after another accident, at Hatfield in

  October 2000, caused by the failure of a decaying rail. Four people were

  killed. The rail in question had exhibited symptomatic cracks before

  failure. Because of their Ladbroke Grove experience Railtrack feared the

  response from the press and from government. Consequently, after

  Hatfield, Railtrack all but closed the system. This destroyed the train

  service and with it their own business and the businesses of the train

  operators.

  At about the same time it emerged that Railtrack had mismanaged the

  major procurement for the refurbishment and upgrading of the West

  Coast Main Line – a failure by a private company that has not often been

  remarked on by New Labour, so keen to allege that the private sector is

  more efficient than the public sector. Railtrack appealed direct to the

  Treasury for several billion pounds to rescue it. The Treasury started to

  make new grants – thus protecting Railtrack shareholders and lenders

  from the consequences of their board’s errors.

  Then, in October 2001, Stephen Byers invoked the provisions of the

  Railways Act 1993 to put Railtrack into Railway Administration. He

  appeared determined to take an opportunity to destroy the privatised

  shareholder-ownership structure. Although there are allegations that this

  move had been planned for some months, neither Byers, Brown nor Blair

  had thought through what new arrangements for ownership and control

  might look like. It was an option to encourage a conventional corporate

  16 House of Commons, 26 February 2007.

  17 See Andrew A. Evans, ‘Rail Safety and Rail Privatisation’, Significance, 4(1), March 2007:

  15–18.

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  takeover of Railtrack and there were companies that showed an interest.

  That would have kept the structure intact and avoided the damaging

  hiatus that occurred.

  If the Labour Party had seen this as a move to renationalise the railways, it was to be quickly disappointed. The Treasury was unwilling to

  find the funds necessary to buy out surviving private interests. In addition Railtrack had considerable and rapidly increasing debt – approaching £20 billion at the time of Blair’s resignation – which had been

  classified by the Office of National Statistics as private debt, in spite of a

  formal financial indemnity provided by government, on the grounds that

  the company was under private, not public, control. The Chancellor was

  absolutely unwilling to countenance any move that would bring that debt

  onto the public balance sheet.

  Railtrack lingered in administration for about a year, at considerable

  cost. Then government replaced it by Network Rail, a company limited

  by guarantee. This is run by an executive accountable to about 120

  ‘members’, many chosen to represent public or private interests including train operators, railway employees and passengers. It was described as

/>   ‘not for profit’, thus appearing to deal with the objection to the earning of

  profit in a public utility – although ‘not for dividend’ would have been

  less misleading. The company would be entirely financed by debt, supposed to be serviced out of profits.

  There is considerable confusion about the governance of Network

  Rail: ‘who is it accountable to and for what?’ Indeed, in order to satisfy the

  crucial test that allows the debt to continue to be classified as private, off

  the public balance sheet, it is necessary that the public sector not be in

  control of the company – and yet government is guaranteeing the debt.

  Arguably, the restructuring of Railtrack into Network Rail changed little

  beyond obfuscating lines of accountability. The Parliamentary Transport

  Select Committee described it as a ‘fudge’.18

  The government was evidently dissatisfied with the new structure it

  had created – not least because the Treasury was surprised by the size of

  the liability they were faced with after the independent Rail Regulator’s

  Extraordinary Review published in December 2003. Alistair Darling,

  appointed Sectary of State in May 2002 on the resignation of Byers, instigated another policy review. He explicitly and publicly recognised that,

  so long as anything like the current structure of the railway survives, his

  18 House of Commons Transport Select Committee, The Future of the Railway, HC145

  (London: TSO, 2004), para. 13.

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  predecessor’s attempts to weaken the position of the independent Rail

  Regulator had been unwise.

  In July 2004 the outcome was published as a White Paper, The Future of

  Rail. The one major change proposed was that the Strategic Rail

  Authority would be abolished and its functions transferred to the

  Department for Transport. It is deeply ironic that this reversed the only

  change that Labour made during the whole of its seven years in power.

  The Railways Act 2005 divides the functions of the SRA between Network

  Rail and the Department for Transport. Crucially, the Conservatives had

  deliberately put the rail industry beyond the direct control of government, on the grounds that experience had shown that government interference had been damaging to the successful running of rail businesses.

  Now, for the first time in history, high-level policy is the direct responsibility of a Whitehall spending department. By 2007 civil servants were

  specifying and procuring new trains.

  As Blair left office new procedures were being implemented under

  the 2005 Act, beginning the attempt to address the new problems

  presented by this slide from a system driven by commercial incentives

  to one that amounts to a mammoth task of government administration. By July 2007 the Secretary of State for Transport and Scottish

  ministers were required to publish a High-Level Output Statement

  (HLOS) and a Statement of Funds Available (SoFA). In principle this

  should remedy a problem that has bedevilled railways policy since the

  1920s – that governments have been unwilling to discuss explicitly

  what they want and how much they are prepared to spend. Although it

  is not the place of the Office of Rail Regulation (ORR) to comment

  on the HLOS and SoFA, it will adjudicate on whether the money on

  offer is adequate to fulfil the expectations and, if necessary, negotiate a

  reconciliation.

  This process had to mesh in some Byzantine way with two other

  related exercises. The ORR had started the normal process of consultation for the October 2008 Periodic Review of Network Rail’s charges for

  the Control Period from 2009. And government as a whole was deeply

  emerged in the overall Spending Review 2007.

  At the highest level of national policy Blair left the railways in a

  strangely ambiguous position. There was almost no money in current

  budgets for capacity enhancements – as distinct from maintenance and

  renewals. The government was in the throes of a particularly ‘difficult’

  spending review, with pressures on overall spending opposing politically

  powerful demands from the health, education and defence sectors, so it

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  seemed unlikely that the HLOS and SoFA process would produce new

  state funds for the railway.

  In an interesting new development in governance, on 10 May 2006 the

  Prime Minister wrote a public letter to the incoming Secretary of State for

  Transport19 setting out what was required of him. Once the platitudes

  have been discarded the letter is quite short and pithy. It contains a good

  diagnosis of the reasons for the anticipated growth in demand for roads

  and railways. But crucially this short letter has two separate mentions of

  the current constraints on public expenditure. There was an important

  steer here that the Secretary of State should not expect to be able to solve

  his problems with large quantities of new Treasury resources.

  In any case, the railway was already costing the taxpayer over £4.5

  billion per annum, relatively few people outside London use the railways,

  and it is hard to point to objective, quantitative evidence in justification.

  It is hard to relate railway subsidy to delivery against stated or implicit

  government policy objectives – such as assistance to the disadvantaged or

  reduction of greenhouse gas emissions where rail loadings are low.

  Blair v. Brown; devolution v. centralisation.

  The PPP for the London Underground

  The story of the Underground Public Private Partnership (PPP) illustrates several aspects of Blair’s administrations: the consequences of delegating without a coherent overall policy; the consequence of blind

  reliance on advice from management consultants, lawyers and business

  people if they are imperfectly briefed on the subtleties of public policy;

  the consequences of allowing policy to develop which is not supported by

  the evidence; the dominance of Blair, and particularly Brown, over

  Prescott; and a philosophical disagreement between Blair and Brown

  over the wisdom and feasibility of the devolution of powers to local

  authorities.

  The PPP for the London Underground deserves attention in its own

  right because of its size. It is far bigger than any other PFI or PPP deal.

  At the time it was conceived it was bigger than all those others put

  together. Announced in 1998 and completed five years later, the Blair

  administrations forced it through in the face of several sceptical assessments by the House of Commons Transport Select Committee, one from

  the Treasury Select Committee, one from the National Audit Office (plus

  19 www.pm.gov.uk/output/Page9455.asp.

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  two post-completion), scepticism at the Standing Committee on the Bill

  and a steady stream of critical assessments from the serious press and

  independent commentators.

  Back in 1997 there was a wide measure of agreement about the

  problem to be solved.20 The London Underground was crowded and

  unreliable. Between £1,000 million and £2,000 million was needed to

  make good past failures and to adequately maintain and renew the
physical assets. New rail capacity was needed.

  It was taken for granted that sorting out the Underground would be

  delegated to John Prescott. But when he proposed an immediate straightforward capital grant the Treasury flatly refused. Apart from the limitations due to the policy of sticking to the previous administration’s

  spending plans for two years, the Treasury was determined to secure the

  same kind of managerial efficiency improvements they perceived as

  having been achieved under the Conservative administrations by the privatisation of the railways and the other utilities. This left Prescott in an

  impossible position and, arguably, he never retrieved control of policy on

  the Underground from the Treasury.

  At this point Whitehall as a whole was at a loss to know what to do. The

  Treasury has steadfastly denied in public that the Chancellor and his ministers ever did anything other than give advice and support to the responsible department. But Geoffrey Robinson, who had been the Treasury’s

  Paymaster General, helpfully revealed in a Commons debate the

  Treasury’s lead in what happened next:

  We could skin a cat in so many ways, and when it came to public–private

  partnerships – which were quite innovative – there were many different

  options available. No. 10 had its view; the advisers to No. 10 had their view;

  the then Department of Transport, Local Government and the Regions

  had its view; I had a view; the Treasury had a view; and the Deputy Prime

  Minister had very strong views. We had to find a way that we could all see

  would carry this forward . . . I convened a group of four business men with

  experience of both the public and private sectors to make a recommendation to us. Essentially, that recommendation is what we have today.21

  The Evening Standard revealed that Robinson had said later that the businessmen were chosen because they had experience of major privatisations: ‘they were, therefore, the very best people to advise the Government

  20 See Stephen Glaister and Tony Travers, Governing the Underground: Funding, Management

  and Democracy for London’s Tube (Bath: Centre for Regulated Industries, 1997).

  21 House of Commons debate, 27 June 2002.

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  on what would work’.22 They were chaired by Sir Malcolm Bates who had

  been the author of two reports to the Treasury about how best to develop

 

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