It’s as bad as the old days of full nationalisation. The railways run at a huge loss. They fail to serve the commuters well, the main body of high fare paying passengers. They sell large numbers of very cheap off peak tickets to try to fill the unpopular inter city services at off peak times. Now we see it will cost taxpayers at least an extra £40 million to compensate private sector companies who took part in a competition to run trains that was badly managed by the Transport Department. In many ways Whitehall has more control over the partially nationalised railways than it had when they were fully nationalised. People forget that all the tracks and signals are nationalised, and the other companies using them are highly regulated and controlled by government imposed contracts.
I feel sorry for the incoming new Transport Secretary. It is certainly not his fault that the west cost franchise competition was bungled. He has the unwelcome task of trying to pick up the pieces. He has to find a way of running the services on expiry of the current franchise. He needs to lead his Department to higher standards of administration and adjudication on contracts.
What is curious is the attention the Opposition and media will give to this relatively minor losss – a mere £40 million – when they conspire to ignore the much larger losses I have been talking about revealed in the nationalised Network Rail accounts through dealing in derivatives. Why is a £40 m bungle on contract award a scandal, and another £560 million loss last year on derivatives all part of good management? I have released the information about the losses on local radio (BBC) and through the Wokingham Times, as well as on this site. The national media is not interested.
The reason is simple. The contract award can be attributed to Coalition Ministers. Justine Greening can be dragged into a difficult debate about responsibility. The losses at network Rail are losses from an arms length company set up by Labour, so they have to be ignored or explained away.The media will either ignore it or accept the company’s view that it was necessary because they chose to borrow in foreign currencies. Quite why a company earning its money from the UK wanted to borrow foreign currency money has never been explained satisfactorily.
So was Justine Greening responsible for the bungled contracts? The Opposition will claim she was. They can say that Secretaries of State are responsible for all the decisions taken in the department in their name. In theory they can challenge all advice and overturn all recommendations, as long as they stay within the law, so they are ultimately responsible. In office, of course, Labour Ministers often had reasons why this tough doctrine did not apply to whatever mistake their department had made at the time.
In practise I suspect Miss Greening was assured the complex homework had been done well. She would have received a high level submission summarising the findings on all the bids. She probably signed off on that, wishing to trust her senior officials who had supervised the work. She would have been briefed to claim the process had been “robust”.
I suspect the establishment will decide this was one of those unfortunate errors made owing to an imperfect system. The suspended staff will be allowed back to work. Lessons will be learned. The storm will be ridden. Meanwhile the railways will continue to lose far bigger money than the odd £40 m error with a wonky calculator.
Some will perversely think the answer to all this is even more government intervention in the railways, as they deliberately duck difficult questions about the mounting losses at Network Rail. I don’t suppose they will rush to re-examine the assumptions and figures on HS2, which remain far from convincing to many.