The state of the railways

Last year Network Rail announced another £232m of losses on financial derivatives, following a £982 m loss the previous year. The company sees that as a technical write down of derivatives which might change, but the last two years have been negative.

I am glad that after I  raised this issue before,  the government has asked the company not to take out new derivatives and has agreed more direct Treasury financing of what is in effect a nationalised company. Stopping additional  risks and potential losses from this source  is a step forward.

The Company also accepted in its last Annual Report that it did not have proper control over the costs of some major projects and has promised to do better in the future. It reported a £200m shortfall on its efficiency targets. Only 89% of trains were on time, below target, and more than 3% were cancelled altogether.

As the relatively new management admit, the railway is short of capacity on busy routes at peak times. It needs to get on with modern digital sysyems to replace traditional signals, as this would be the cheapest way of raising capacity relatively quickly. What is odd is how in their enormous budget they do not seem to prioritise this sufficiently.

The Treasury has offered them more borrowings, but is also requiring that they step up their property asset disposals. There is still huge scope for property development on surplus or underused railway land, especially at main stations. Stations can be transport interchanges, shopping destinations and workplaces with office accommodation. Easy access from the train lines is a bonus, and helps generate footfall for the shops.

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53 Comments

  1. Nig l
    Posted April 3, 2017 at 6:07 am | Permalink

    Presumably no civil servants or executive management have lost their jobs over this ongoing fiasco, merely being allowed to ‘move on’?

    • Lifelogic
      Posted April 3, 2017 at 5:58 pm | Permalink

      Of course not. Even if they do “resign” they will probably get huge pay offs. Doubtless their defence. if ever needed. will be they were following “expert” advice and it was a group decision and they did not have enough money or staff. So many dreadful decisions are made this way in government, no one is ever to blame.

      The “envy of the world” NHS for example is still killing thousands through incompetence, rationing and neglect no one if ever to blame. Yet in the private sector they can bring very serious charges against directors and managers over far more minor omissions.

  2. Mark B
    Posted April 3, 2017 at 6:24 am | Permalink

    Good morning.

    Another State funded failure. Complete with gold plated pensions and other perks, and free from competition.

    Whatever nationalisation touches soon becomes a political hot-potato that cannot, for political reasons and no else, be allowed to fail at great cost to the nation and the taxpayer. Think British Leyland. And now think Jaguar and Land Rover.

  3. Jerry
    Posted April 3, 2017 at 6:28 am | Permalink

    The state of the railways – Worse than even in the darkest days of British Rail, ask anyone in the Southern Rail (GTR) franchise area. Just look at the state of the new trains (once delivered) currently being built for the lines out of Waterloo, the new franchise operator doesn’t want then so the trains will likely be delivered into storage with perhaps little use elsewhere due to the special nature of the traction equipment.

    British Rail, a Tory privatisation, one stop to many? If that is not the title of a book on the failings of the last 25 years it should be.

    Before anyone suggests that I have rose tinted glasses on, no BR wasn’t perfect but it was a integrated system, with common ticketing, pooled rolling stock, and at one point the MoT even managed to get the nationalised railway and omnibus service timetables matched, so that when Mrs Blogs and her children, on their visit to see Aunty Mabel, arrived at the station their onward bus was waiting or arriving. Don’t even ask about connecting trains being held for a late running feeder service…

  4. Bert Young
    Posted April 3, 2017 at 6:39 am | Permalink

    Thank goodness I do not have to use trains . Commuters where I live speak of terrible over-crowding , delays , high cost etc etc ; it must be a nightmare .

    John’s suggestion of using railway property for various types of building projects including shopping centres , makes a great deal of sense – bags of space for parking as well . This proposal is more appealing than further erosion of the countryside .

    • old salt
      Posted April 4, 2017 at 9:59 pm | Permalink

      Railway property SHOULD be utilised for transport interchanges as a priority as in some other better integrated countries.

  5. Lifelogic
    Posted April 3, 2017 at 6:40 am | Permalink

    As it is not their money they are spending not they who get the benefit of the investment. So they care not what they spend nor what value they get. These people are incompetent even at their main activity let alone currency speculation.

    This (invariably incompetent) speculation with tax payer’s money is not however limited to Network rail. Council are often speculating with property or losing deposits of cash in Iceland.

    There was a good File on Four programme about this.

    http://www.bbc.co.uk/programmes/b08jbc1s

    The problem is the people doing the speculation are not using their own money but the tax payers money. So the do not really care sufficiently if their deals make a gain or a loss. They are invariably outwitted by the other parties involved. Perhaps after taking “expert” advice from the sort of economic experts (perhaps with a vested interest) who thought the ERM was a really great plan.

    • Lifelogic
      Posted April 3, 2017 at 2:58 pm | Permalink

      Or the countless “experts” who persuaded all but a tiny handful of MPs to vote for the completely insane and absurdly damaging – Climate Change Act.

  6. alan jutson
    Posted April 3, 2017 at 6:41 am | Permalink

    Unless you are travelling alone (like Billy Nomates) then the cost of using the train as a regular main form of transport for more than one person is very poor value, and in many cases prohibitive.

    That said I see that it is planned that a number of towns and cities are going to implement some sort of penalty tax on some cars shortly, based on emissions, that and the lack of and high cost of parking will mean out of town shopping centres, out of town business parks/centres, and the internet model will gain even more advantage over the so called high street shops and city business centres.

    As a small Country moving about should be easy and inexpensive, but when compared to many much larger Countries the opposite is true.

    • Chris
      Posted April 3, 2017 at 5:31 pm | Permalink

      I bet that has its origins in the EU. It wouldn’t take long on google to find some Directive related to your second para.

  7. Ian Wragg
    Posted April 3, 2017 at 6:48 am | Permalink

    The taxpayers are continuing to have to subsidise 19th century technology for the benefit of a small section of the community.
    Train users should pay the going rate and this could have the benefit of getting some business out of London and the Southern East.
    HS2 being the biggest white elephant of the lot.

    • Jerry
      Posted April 3, 2017 at 5:59 pm | Permalink

      @Ian Wragg; You must have been under the Atlantic when we used to have BR era train strikes, when the whole network was brought to a halt, the roads were a grid-locked hell (and not just in London) – yet you want market forced to apply to this mass transit method…

    • BobE
      Posted April 4, 2017 at 1:58 am | Permalink

      HS2 is to allow MPs to travel to and from London, in first class luxury, all at the taxpayers expense.

  8. Ian Wragg
    Posted April 3, 2017 at 6:49 am | Permalink

    Captcha lets you straight in from a smart phone.

    • Chris
      Posted April 3, 2017 at 5:32 pm | Permalink

      I am particularly good at gas stations!

  9. alan jutson
    Posted April 3, 2017 at 6:53 am | Permalink

    When is the Government going to realise that continuing with the HS2 fiasco is going to be a a very, very expensive, and poor value for money mistake.

    I see reports that the main Contractor has had serious allegations made against them, is now perhaps pulling out, and certain very senior management are leaving due poor decisions and working practices.

    Guido Fawkes web site has far more/extensive detail.

    Cost projections also look like they may go through the roof.

    Were we even planning to use British steel, British made trains, at present it seems unlikely.

  10. JM
    Posted April 3, 2017 at 7:20 am | Permalink

    What is the value of scrap track lying around the network? Whenever I take a journey I see lengths of replaced track lying adjacent to the permanent way. I cannot believe that it is not worth collecting and selling back to the steel industry.

    • Jerry
      Posted April 3, 2017 at 6:17 pm | Permalink

      @JM; Always assuming that it is actually scrap, not just waiting collection and reuse (in less demanding places, such as sidings, or when laying CWR for example), not having been collected during the track ‘possession’ that saw it replaced because it would extend the time the route had a block on it.

      Also, brand new rail can look old when viewed from a moving train due to the usual superficial coating of rust!

  11. The Prangwizard
    Posted April 3, 2017 at 7:21 am | Permalink

    Forcing Network Rail to sell strategic assets won’t improve the efficiency of its operations, merely disguise them in the main figures and will act as a diversion from the main object. Then to please their masters, the bean counters, they’ll say ‘look how well we’ve done’.

    And what do they do when they want to build bigger stations?

    Short-termism and asset stripping has been and continues to be our ruination..

  12. Anonymous
    Posted April 3, 2017 at 7:40 am | Permalink

    Large electrification projects (incl HS2) – in order to meet emission targets – have been a costly mistake.

    We could have delivered much of JRs shopping list with the money wasted.

    • Jerry
      Posted April 3, 2017 at 6:30 pm | Permalink

      @Anonymous; Not “privatising” the railways back in the 1990s, at least how they were, could have delivered much of JRs shopping list too!

      The extra income generated from the multi-franchise model they used must have been spend by HMG many times over on bailing out various failed TOCs or their contracts (handing back the keys as it is called), Fail, sorry, RailTrack, and subsidising new trains etc.

      I carry no flame for BR, even though it might seem that way, I would have been fare more welcoming the denationalisation of the Big Four pre WW2 railways as more or less self contained railways for the five regions within BR, complete with the few remaining railway workshops.

  13. Chris
    Posted April 3, 2017 at 8:02 am | Permalink

    My own view is that the railways should be renationalised.

    I am angered by the continual price rises, which of course are deliberate government policy of passing the costs of running the railways away from the government to the consumers by means of increased fares. Under this system, there will continue to be significant pay rises all the time. Services do not necessarily improve, and there have been over the years serious problems with overcrowding, and poor time keeping, apparently due to lagging technology (why should a little snow or leaves on the line cause the disruption that they do?). The debacle with Southern Rail is a disgrace and Government have been ineffective in dealing with the prolonged crisis.

  14. Denis Cooper
    Posted April 3, 2017 at 8:12 am | Permalink

    Off-topic, how does this fall within the remit of the devolved Scottish administration?

    http://www.scotsman.com/news/politics/sturgeon-independence-talk-in-us-a-sell-out-1-4410100

    “Sturgeon independence talk in US a sell-out”

    Sturgeon occupies a public office created by the Scotland Act 1998 to perform tasks defined and limited by the Act, for which legitimate tasks she may employ public resources.

    If she was taking this trip as SNP leader and it was being funded by the SNP then that would be one matter, but if as appears to be the case she is off on yet another international jaunt as First Minister and at public expense then that is another matter altogether; and unless she has express authorisation from the UK government then it will be ultra vires and fall under Section 107 of the Act:

    http://www.legislation.gov.uk/ukpga/1998/46/section/107

    “107 Legislative power to remedy ultra vires acts.”

    “… (b) any purported exercise by a member of the Scottish Government of his functions which is not, or may not be, an exercise or a proper exercise of those functions.”

    Why does the UK government allow Sturgeon to play fast and loose with the law to pursue her own destructive and illegitimate political ends, and at the cost of UK taxpayers including those in England who are subsidising the Scottish government?

  15. a-tracy
    Posted April 3, 2017 at 8:12 am | Permalink

    Railway stations need good, accessible cheap multi-story parking if you want more people off the road and onto rail, the parking costs the price of the rail fare in many instances.
    Never mind rail, what about our roads. Pot Holes are causing thousands of pounds worth of damage to tyres and cars. BT dug up a trench at the front of our estate didn’t refill it properly and everyone is now running the risk of more damaged tyres, the entrance to the business park has a big pot hole, all the roads are pot hole crazy.

  16. Prigger
    Posted April 3, 2017 at 8:13 am | Permalink

    I have not travelled by train for years. I gave up on them. All privatisation did, as far as I’m concerned, is provide far fresher sandwiches and a proper bicarbonate of soda-free cup of tea. In a clean cup! The prices are a vital component of a balanced slimming diet.

    Though dogs are free to travel with passengers in trains here and at the other side of the Channel, Eurostar bans them…unless Rover is in a car…which could mean of course you don’t need to travel by train at all in the first place. I hear Eurostar is hoping for an underground tunnel to Ireland.

  17. acorn
    Posted April 3, 2017 at 8:37 am | Permalink

    Who gets to pay for the £210 million worth of trains the Dept of Transport specified and ordered from Germany, for the last South West Trains franchise holder, that the new franchise holder, doesn’t want? Where will they be parked, so that rail users can watch them rust away, as they pass by on their way to work.

    If foreign governments, have replaced the UK government, as owners of our Train and Electricity infrastructure; can this legitimately be called “Privatisation”?

  18. agricola
    Posted April 3, 2017 at 9:29 am | Permalink

    Railways are not a cheap form of mass transport. Certainly not in the UK where passengers at paying the real cost. Where fares are considered acceptable then the government concerned is almost certainly subsidising them with taxes collected from society as a whole.

    We know how financially efficient air travel can be. Why do we not look at it as an alternative to rail for journeys of a hundred miles or more. Mr. O’ Leary is currently offering Birmingham to Dublin in May at £14.99 with a return for £13.00. He is not running a charity. All you basically need is airfields and big car parks. How about Staverton or Kemble to London City Airport for £25.00 return or a monthly season of £500.00. Keep the railways for typically Reading to London. There is no shortage of airfields throughout the UK that could be re-commissioned. When you think of the £100 Billion cost of HS2, a project to speed the very wealthy or expense account travellers to London, that no private consortium would consider investing in, then our transport plan is open to question.

  19. Antisthenes
    Posted April 3, 2017 at 9:56 am | Permalink

    Monopolies are sure way to encouraging waste, inefficiency and low levels of customer satisfaction. Network Rail being a perfect example of that truism in action. Where ever there is a monopoly in the public or private sector then there will be found the worst possible provider of consumer needs. Lefty progressives tend to believe the opposite and convince the majority of the public to believe the same. It is bewildering that they do as the evidence in favour of monopolies being totally unsuited to the task they are given is overwhelming.

    Network rail you suggest needs to take certain steps and adjust it’s management abilities to address it’s considerable short comings. In fact you are asking that it addresses only the symptoms of a much deeper malaise which will only contain what ails it for a short period maybe but not cure it so will never stop frequent re-occurrence. Year in year out as you already do you will be returning to bewail the poor performance of Network rail as we do with the likes of the NHS and add another set of sticking plasters. Instead of opening them up to competition where they would be forced to make the necessary and far more effective improvements themselves.

  20. Denis Cooper
    Posted April 3, 2017 at 11:24 am | Permalink

    Off-topic again, can anybody explain how it comes about that we have spent so much on the defence of Europe for so long but gained so little even in goodwill, let alone gratitude?

    • Chris
      Posted April 3, 2017 at 5:33 pm | Permalink

      Ignorance at the highest levels, I fear, determining flawed strategies.

      • Mitchel
        Posted April 4, 2017 at 9:19 am | Permalink

        We’ve certainly had some very undistinguished Defence Secretaries of late.I was looking at Michael Fallon’s CV last week;Classics & Ancient History graduate (fair enough!);active,as a student,in the European Movement(that CIA-funded promoter of European integration),then straight onto the Conservative Party Research dept and an MP.Enough said.

    • stred
      Posted April 4, 2017 at 7:17 am | Permalink

      Another off topic if allowable. I was given my first new larger faceted pound coin yesterday. It is useless in vending machines and supermarket trolleys.

      Who thought of this idea? Which ministers approved it and what is it going to cost to change all the machines? Did any members of the public demand a different pound and were supermarkets and shops asked whether they would like the change?

  21. Tad Davison
    Posted April 3, 2017 at 11:35 am | Permalink

    I keep getting lefties in my ear about the amount of tax-payer’s money the railway companies receive and they inevitably go on to say that proves the railways should be wholly taken back into state-ownership. That Network Rail loses big amounts of money on derivatives, makes my case against state-ownership all the more difficult.

    This is a pig’s ear. I do not believe that the railways cannot be run more efficiently and effectively. There are successful models elsewhere which we may draw upon. Why has this British institution been so badly run, have we learned nothing from our past experiences?

    Getting change is like wading through treacle. It doesn’t have to be that way, it just needs people with guts, vision, and determination to put it right.

    Tad Davison

    Reply Network Rail is in state ownership!

    Cambridge

    • Tad Davison
      Posted April 3, 2017 at 9:50 pm | Permalink

      Rely to reply:

      I know it is. The case I was trying to make is that the left keep telling me that the entire railway system should be put back into state ownership, but use only network rail as an example of where it’s going wrong. If Network Rail wasn’t a mess, they wouldn’t have an argument. As it is, they seem to be winning public support for re-nationalisation.

      That said, I think few would argue that fares are presently too high, and trains aren’t running as efficiently as they might.

      • Tad Davison
        Posted April 4, 2017 at 12:02 pm | Permalink

        Perhaps I haven’t made myself clear. Those who want the railways to be re-nationalised want it all lumped together – Network Rail, and the privatised companies – and some government body to take proper control.

        Their aim is to reduce fares, and improve punctuality. That’s the bit I’m finding difficult to argue against. It is therefore down to Network Rail and the train operators to put the problems right, and thereby destroy the arguments of the left. Not that difficult to understand really.

  22. Martin
    Posted April 3, 2017 at 11:41 am | Permalink

    While the figures you quote are large just remember that Ms Ruud is allegedly spending half a billion pounds to change the printer ink for British passports!

    http://www.telegraph.co.uk/news/2017/04/02/blue-passports-make-return-home-office-500-million-post-brexit/

  23. Denis Cooper
    Posted April 3, 2017 at 11:49 am | Permalink

    Also off-topic, JR, I have just received a notification of a new research briefing from the House of Commons Library which is so flawed and misleading that in my view it should be withdrawn and only reissued after the necessary corrections have been made. However as the briefing is intended only for MPs and their staff it is not permitted for a member of the general public to discuss its contents, and its defects, with the author.

    http://researchbriefings.parliament.uk/ResearchBriefing/Summary/SN06193

    “The financial sector’s contribution to the UK economy”

    Straight off one can see a glaring error in the summary:

    “There are over 3 million jobs in the financial and insurance sector (3.1% of all UK jobs).”

    I know that the population of the country has been expanding rapidly, but even so there are not more than 97 million people employed in the UK. Even if every man, woman and child of all ages was put to work the total would still fall far short of 97 million, and in fact on page 8 within the body of the report it is stated:

    “In December 2016 there were 1.1 million workforce jobs in the financial and insurance activities industry in the UK, 3.1% of all workforce jobs.”

    And that is only the start, the most obvious of the errors and omissions.

    • rose
      Posted April 3, 2017 at 6:04 pm | Permalink

      And this was the authority the judges preferred to the referendum and anything said in Parliament.

  24. Local Lad
    Posted April 3, 2017 at 11:50 am | Permalink

    Yes, plenty of scope for development of railway property. Years ago, I suggested multi-storey rebuilding of Wokingham Station to provide apartments and offices but we got only one floor.
    A very nice station but a missed opportunity.

  25. Jack snell
    Posted April 3, 2017 at 12:20 pm | Permalink

    Glad to see you giving us a change today – away from that awful brexit mess- so anyway with brexit now in place when do you think we can start to fill in the channel tunnel? as i dont think there will be much need for it now? But on another note I heard Boris on tv just now spouting off about gibraltar..you know boris really inspires me when starts to do his foreign secretary stuff, but do you think i’d buy a used car from him?..i dont think so!.. so now what’s that we were saying about the railways?

  26. Andrew Tettenborn
    Posted April 3, 2017 at 12:43 pm | Permalink

    I’d have thought the only time NR ought to be taking out derivatives at all was if they had some specific need to hedge — e.g. machinery to be bought in € or CHF in a year or two’s time. If these derivatives you refer to weren’t taken out for that purpose it seems to me to be a scandal: NR’s job is running the railtracks, not a gambling operation. But maybe I’m missing something.

  27. Terry
    Posted April 3, 2017 at 12:50 pm | Permalink

    Will Network Rail be the principle contractor in the hugely expensive white elephant, HS2? I sincerely hope not for the sake of taxpayers money.
    Can anyone cognizant with the project explain why this country needs it rather than an upgrading of the existing train lines and stations across the existent networks?

    • Chris
      Posted April 3, 2017 at 5:35 pm | Permalink

      It is “needed” only to conform with the relevant EU Directive. Can provide link is you require.

  28. sm
    Posted April 3, 2017 at 1:02 pm | Permalink

    Genuine question: is there any country in the world that runs a railway service that is both efficient and – at the very least – breaks even financially, let alone profitable?

    • rose
      Posted April 3, 2017 at 6:19 pm | Permalink

      Japan. The private rail companies are also property developers and make a lot from advertising too.

  29. Mike Wilson
    Posted April 3, 2017 at 2:18 pm | Permalink

    It’s funny, one sometimes reads things about how the government spends our money and one does not know whether to laugh or cry. If I have money that I don’t want, I might try trading options. I am sure I will lose it and only the broker will definitely make money.

    Another few hundred million down the pan. Kerching! And we have no money to fund social care for elderly, infirm people.

  30. forthurst
    Posted April 3, 2017 at 3:32 pm | Permalink

    What a disaster rail privatisation has been. Not only does the taxpayer have to pay for Network Rail but they have to subsidise the profits of the many businesses whose costs feed through to Network Rail through subsidised access charges as well. In the bad old days, the travelling public were at the mercy of militant rail unions, whereas now the travelling public is at the mercy of militant trade unions. That will be the case so long as the Tory Party continues to believe in the miraculous powers of the ‘Market’ instead of recognising that the only way to get rid of Luddism is to make it illegal. In the bad old days we use to manufacture and export locomotives all over the world; now, dirctly as a consequence of political meddling in the railways, we own no locomotive manufacturer at all.

    Owners, many foreign, of our essential infrastrucure are constantly being exorted to invest. Why should they; they are in business to make as much mnoey out of us as possible and that does not include making investments that would take over a decade to provide a return. That is why most of our infrastructure was created by public money before privatisation.

    The best way of usng ‘the market’ effectively is to recognise its limitations.

    Reply This is the nationalised railway losing this money!

    • graham1946
      Posted April 3, 2017 at 6:01 pm | Permalink

      Reply to reply

      What are the subsidies then, if not a way of making up for losing money?

    • forthurst
      Posted April 3, 2017 at 7:33 pm | Permalink

      “Reply This is the nationalised railway losing this money!”

      Yes, because Railtrack had gone into liquidation owing £7 billion; of course, the shareholders were still compensated for their loss with taxpayers’ money so a bit like the banksters, then.

  31. stred
    Posted April 3, 2017 at 4:07 pm | Permalink

    Travelling around and listening to the media, I note that the extremely highly paid and ineffective railway monopoly is now engaged in an expensive advertising campaign. It sounds really wonderful. They must know there is something which makes makeup necessary. Rather like an ageing old tart who likes her style of living.

  32. mike fowle
    Posted April 3, 2017 at 6:21 pm | Permalink

    As someone who commuted for 20 odd years on and off between the 1960s and 1980s, at the mercy of BR, and the rail unions, when I hear someone calling for the renationalisation of the railways, I generally rub my eyes in disbelief.

  33. Posted April 3, 2017 at 6:56 pm | Permalink

    Winston Churchill would have sorted this out. Winston knew you could never run of the £ it was skills and resources that mattered.

    Churchill quickly found out during the war the difference between excess capacity and excess demand

    http://monetaryrealism.com/excess-capacity-vs-excess-demand-as-explained-by-winston-churchill/

    This lot are too busy winning elections with the balanced budget myth. They are going to get found out.

  34. fedupsoutherner
    Posted April 3, 2017 at 8:11 pm | Permalink

    Return from Girvan to Ely. £136.00 per person. Drive the same distance door to door and four people can do it for around £100.00 or £25.00 each. This is why people use their cars. Of course, you also have the problem that once you get down South you are lucky if a train is running. Stop HS2 and sort out the railway network first. What on earth visitors to this country think I really don’t know. Even in countries that are supposed to be poorer than we are they have a better railway service.

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