Issue 235 of SOCIALIST REVIEW Published November 1999 Copyright Socialist Review

Rail Privatisation

The carnage at Paddington could have been avoided--but the privatised rail companies refused to invest in the ATP system

Blood on the tracks

Will New Labour challenge the rail companies' priorities which put profit before safety? Peter Morgan investigates

A wave of anger has swept Britain following the carnage of the Paddington train crash. All the fears that privatisation would lead to a more dangerous railway have been proved true. And this time there can be no excuses. 'Even as early as 1900 certain railway companies were thinking seriously about devices which would prevent a driver passing a signal at danger without being aware of it. The most notable early trials were undertaken by the Great Western Railway. Their pilot installation between Reading and Paddington was in place by 1910 and working successfully.' So said chief inspector of railways Vic Coleman in January this year. It is a horrific and tragic irony that on the very line that piloted the most basic of safety measures--stopping a train if it passes through a red signal--some 90 years later so many people were to pay with their lives in the recent rail disaster.

At the beginning of the century technology was still being developed to make the railways safe. Today that technology exists but is not fitted for reasons of profit. The Automatic Train Protection (ATP) system will stop any train that passes a red signal. It would have prevented the deaths at Paddington, in the same way as it would have prevented the crash at Southall in 1997 when seven people were killed. Both events horrifically demonstrated that those who own and control our railways are motivated by the need to make a profit rather than any consideration of safety. This is the dilemma and central contradiction of a privatised railway which John Prescott and the Labour government have so far failed to confront.

Railtrack claims that the railways are now safer than they have been for many years, and that this is one of the great successes of privatisation. So although Paddington was a disaster, they say, it should be placed in the context of an overall improvement in safety.

This is a bit like saying Jack the Ripper was harmless between murders--everything is okay until the next accident. While it is true that train accident fatalities have been coming down over the last few years since 35 people were killed at Clapham in 1988, the average figures will now increase dramatically because of what has happened at Paddington. The simple fact is that the accident should not have happened, and Railtrack was repeatedly warned over safety--warnings which it chose to ignore.

For example, following a derailment in 1995 near Euston, the railway inspectorate (HMRI) produced a report which found safety levels that were so poor, including a signal being removed without permission, that Railtrack was in breach of its safety licence. The report contained a number of specific proposals directed at Railtrack to improve safety. Yet the House of Commons select committee on transport was told at the end of 1998, 'It is a matter of concern that HMRI continues to identify unacceptable standards of track maintenance... There have also been further derailments which have been attributable to track conditions.' And the HMRI expressed concern 'to Railtrack, and directly to the principal Railtrack contractors involved, about continuing track maintenance deficiencies, and has made it dear that it expects sufficient resources to be devoted to securing infrastructure safety.'

But sufficient resources were not spent and safety warnings were not heeded. In 1998 the rail regulator commissioned a major report on Railtrack's performance. The report paints a picture of inadequate maintenance, poor safety standards and a railway in overall decline. It says, 'There was an acute lack of reliable data at the time of Railtrack's formation on which to base maintenance and renewal strategies. No evidence has been provided to suggest that the current situation is greatly improved.' And 'some case studies examined... do not give confidence that current knowledge of signalling asset and condition is sufficient.'

The report clearly argues that the state of railways has declined since privatisation: 'Overall it appears that the physical programmes have in aggregate been below those which were envisaged at the time of privatisation. It is likely that there has been a decline in the underlying quality of the network assets as a whole... Rail track quality is worse than it was under BR... Railtrack has installed only 80 percent of planned sleepers, ballast, switches and crossings.'

A year later an investigation by the Guardian (14 March 1999) quoted one senior track maintenance employee saying, 'At least 50 percent of the track is on its last legs... if the public knew the full picture they would be horrified... Privatisation has led to a vicious circle. Railtrack instructs the main contractors to do the work. They pass it on and get a cheaper job done, and it leads to unsafe practices. There is a steady deterioration.'

Privatisation and the decline in standards

Profit is the great motive and driving force for the bosses of Railtrack. For one shareholder shocked by the horror of Paddington, it was all too much. His angry letter to the Financial Times (8 October) revealed just where Railtrack's priorities lie:

    'On Wednesday I received Railtalk [Railtrack's] six monthly report for shareholders... Analysing this report in the context of rail safety is painfully illuminating... The preface highlights "performance" and "investment", there is no mention of safety... Page two is entitled "Around the Network", with no mention of safety... Page three is from a statement by chairman Sir Robert Horton; there is no mention of safety... Page four lists the top ten issues raised by shareholders, none mentions safety... Page six says that: "action to reduce train delays is the watchword throughout Railtrack", there is no mention of safety. Safety is mentioned in Railtalk once... This analysis makes it clear that the management culture of the railways has shifted perceptibly towards explicit bonus-linked goals of train performance and away from an absolute safety requirement.'

Even those who insure the train operators against losses have become alarmed that increased pressure on drivers, along with overcrowding and old rolling stock, have combined to increase the risk of a disaster. Colin Hamling, a causality underwriter for the company which insures both Great Western and Thames Trains (which will probably face claims of millions of pounds because of the Paddington disaster) told the Insurance Institute of London last March that increased hours at work, more intensive duties and weekend working for drivers was compromising safety. In particular, he said, the most basic accident risk--the signal passed at danger--was most likely to occur due to fatigue.

John Prescott has reacted to the criticism following the crash by saying that control of rail safety will be taken out of Railtrack's hands and put under the control of an Independent Rail Authority. He claims that this will ensure that safety levels are improved. The central problem, however, is that the rail network is privatised, fragmented and subject to commercial pressures. By definition this runs directly counter to the needs of safety. Yet none of this has been challenged by the Labour government. Despite protestations when in opposition, Labour has refused to confront the deeply unpopular rail companies, despite growing protests from unions and passengers alike. Indeed, it still proposes to continue privatisation. In fact, for the London tube, Labour's solution is to divide it up and sell it off to private companies--including Railtrack. The anger over the Paddington crash forced Prescott to delay the announcement for the future of London's tube network. However, Railtrack has now signed an agreement to run the Circle, District, Metropolitan, East London and Hammersmith and City lines. Prescott claims that safety will not be compromised, but once again a public service will be subjected to the pressures of competition.

Safety last

The sell off of BR shows how this happens. In the run up to privatisation safety was compromised. The recommendation following the Clapham disaster that ATP be fitted throughout the rail network was dropped because of the commercial considerations. On top of this, no new rolling stock was ordered in the 1,000 days before privatisation in order to ensure a smooth sell off. The fat cats made millions of pounds from privatisation that could have been spent on safety.

Nothing illustrates the absurdity of the profit motive better than the Heathrow Express which operates in and out of Paddington. This line is run and owned by the privatised airport authority BAA. Pressure was on BAA to get the Heathrow Express up and running to increase its chances of Terminal 5 being given the go ahead. A report to parliament by the South West Transport Action Group (25 November 1998) says, 'The euphoria of opening Heathrow Express should be tempered with the fact that the new railway is as incompatible with the national system as any narrow gauge railway in Wales.' Its technology was described at the Heathrow Terminal 5 Inquiry as 'unsafe'. A survey done before the line was running showed that the single largest group of passengers expected to use the services was foreign businessmen and businesswomen (36 percent). The total business market was expected to be 62 percent of total passengers. The ticket price is designed specifically to prevent ordinary people from travelling. Rail safety consultant Peter Rayner believes commercial pressures to run the Express every 15 minutes led to flaws in the track layout and meant the Paddington crash was 'an accident waiting to happen'.

Today the structure and running of the railways mean safety is a secondary issue. The Tories broke BR into Railtrack, which owns the railway infrastructure, 25 train operating companies, five freight operators, three rolling stock leasing companies, and dozens of maintenance suppliers. These companies are connected through a web of contractual relations--the purpose was to create a market, similar to the internal market that was imposed on the NHS. The result has been equally disastrous.

Take, for example, the simple relationship between Railtrack and one of the train operating companies. If a train is delayed because of signalling problems (which are under the control of Railtrack) then the train operators can claim compensation. If, however, the delay is down to the rail operators themselves, then Railtrack can seek compensation. The scheme was designed as an incentive to minimise delays. How this operates in practice, however, spells disaster for safety levels. Dave Smith (not his real name), a signal operator at one of London's busy signal boxes, explains:

    'We are constantly told that every minute a train is late costs about 100. The pressure is on to make decisions quicker than you want and keep the delays down. Commercial pressures are there all the time. Sometimes our boss will come down and tell us where to direct trains, and where to apportion blame for delays. Under the old British Rail system each train would have a classification that we could identify--express trains were class one, local passenger trains class two and the freight were always bottom. You would never, run a freight train ahead of a passenger train. Now this happens all the time.'

Following privatisation, rules were changed in 1996 involving train priorities. Formerly goods trains were not allowed to cross the path of high speed trains, but this was changed to speed up freight trains and encourage more freight onto the rail, to increase profits for the rail companies. The Southall crash on 19 September 1997 occurred when a speeding express from Swansea to Paddington crashed into an empty freight train, killing seven people.

Profits are the main consideration, argues Dave: 'In fact, we had one manager employed who was obviously an accountant. He suggested we had a "simplifier". What he meant by this was that alongside each train that we were directing there should be the cost of how much it is if it is delayed.' The same pressures are there for train drivers. Penalties are imposed even if a train is delayed because of safety reasons--the incentive is always not to be late.

Thus the market and the profit motive produce a culture where safety is put at risk. They also work in a myriad of other ways which prevent a rational and planned system. The very fact that Railtrack has to pay compensation for delays means it is reluctant to squeeze more services on the network, as this will simply increase the possibility of further delays. The result is overcrowded trains and an infrequent service. Also, the subsidy from the government is to be reduced by 1.1 billion over the next five years. So the incentive is not to expand the network and increase lines--which are desperately needed when the economy is growing and there are increasing passenger numbers. Instead the rail operators will try to claw back the reduction in subsidy through increases in prices and even cutting services.

The market operates in many other ways which make the rail less safe. For example, Railtrack bases its investment policy on an assessment of how long its assets will last. This is open to creative accounting. So the assessment extended the life of the track in the Severn Tunnel from six years under BR, to ten years. In May this year the rails broke, resulting in emergency track renewal work which caused major disruption for three weeks. Competition between Railtrack's suppliers allows the suppliers to decide which parts of the track need renewing. As the Economist states, 'Naturally, they appeared concerned less with passenger safety than with their own profits. Because they are paid by the mile, they understandably tend to choose sections that are easy to renew, rather than those that involve the most work.'

So we have a system that is divided up between competing companies where profit is the overriding factor. It is a system that runs contrary to the safety and needs of those who travel. It also leads to the most absurd and disgraceful calculations being made. The fact that the rail companies did not go ahead with the ATP system was based on the crude calculation of the cost of a life lost compared to the overall cost of introducing the system. As Andrew Evans, Professor of Transport at University College London, says, 'The hypothetical cost of a possible human fatality is costed and given a value, and that value is then used as an indicator in calculating the cost effectiveness of installing a safety device.' This is the logical outcome of running a railway on the basis of profit and not need.

A decade of decline

  • Every year Railtrack sets out its investment programme for the next ten years.
  • The 1999 statement promised 27 billion of investment over the next decade.
  • The majority of this--some 16.4 billion--is to be spent on basic maintenance and renewal schemes just to keep the system up to existing (inadequate) standards.
  • 1.5 bi1lion is to be spent on the commercial development of Railtrack's assets and buildings
  • Only 3.2 billion is to be committed to schemes to improve the network over this ten year period.
    Bob Crow assistant general secretary, RMT

    'Despite the obvious safety benefits of ATP, the rail board decided not to go ahead with it because they were looking after share values. Our members are constantly being told to work harder. They are told there are cheaper staff that can take their jobs. People's concentration is put under stress. Pressures on the railway from the private rail companies are more than ever. So safety is compromised. The guards' strike is about safety, and it's a principled stand.

    The public don't believe that the market is the best way to run the railways, and there is the feeling that it should be renationalised--a recent poll produced 88 percent in favour. Today people are questioning what the government is up to. The Paddington rail crash concentrated people's minds about the state of the rail--this is a feeling the government will find hard to ignore.'
    Bob Crow assistant general secretary, RMT

  • Flowers left at the Paddington crash shows that many people know where to finger the blame

    The great sell off

    Rail privatisation has proved to be a disaster. But it is just one in a long list of disasters. The nationalised industries were sold off extremely cheaply to make huge profits for the fat cats. The 150 privatisation sales which took place between 1979 and 1997 raised 90 billion. This was about half the estimated value of the nationalised industries. This explains why shares in privatised companies soared in value and why a small number made huge profits. Many of these sell offs did not result in a better service--the privatisation of water, for example, has been a disaster, with each summer bringing problems of shortages which the bosses blame on the weather instead of the long term problems of lack of investment. The same is true on the buses, where in many cities the problems of competing companies, overcrowding and poor services echo rail's problems.

    The sell off of BR was one of the great rip offs of the last 20 years. The National Audit Office reported that the taxpayer was short changed by some 700 million in the sale of the rolling stock companies alone. Three companies were sold for 1.8 billion to a series of buy out teams of BR managers, who sold them on less than two years later for a total Of 2.7 billion--a 50 percent mark up. Sandy Anderson, a former BR middle manager, made 36 million when one of the companies, Porterbrook, was sold to Stagecoach for 800 million. John Prideaux, a senior Intercity manager, made 15 million from the sale of Angel Trains to the Royal Bank of Scotland, and Andrew Jukes made 15.9 million from the sale of Eversholt to the Forward Trust. The current safety director at Railtrack, Roderick Muttram, has share options that would net him some 42,000 profit if exercised today. Other directors of Railtrack include Tory MP Archie Norman and the Millennium Dome chief executive Jennifer Page. Railtrack was floated at a share price of 3.90 each. Last year share values had more than quadrupled to 17.63 before falling back to 12.58 following the Paddington crash--which is still a growth rate of 40 percent. On top of this are the annual dividends to the shareholders--around 450 million in the first four years. Indeed, with an annual turnover of 2.5 billion, Railtrack's profits have risen every year from 190 million to 428 million.

    This increase in profits has been greatly helped with every retreat by New Labour over the issue of rail renationalisation. In a report to the Parliamentary Committee on Public Accounts in 1999 the investment bank SBC Warburg said:

    A stick to beat the unions

    The move to privatise whole sections of the economy that were formerly under state control is commonly associated with the period when Thatcher was in power. In fact the first privatisation, the BP share sale, took place under the Callaghan Labour government. The Tories didn't come to office with a fully worked out plan to let the free market rip--it was something they moved towards as they tried to overcome the long term problems of the British economy. But, did privatising the nationalised industries make them more efficient?

    In their recent book, The Impact of Privatisation, Stephen Martin and David Parker examined the privatisation of 11 nationalised industries in Britain. They concluded that the gains in terms of efficiency and a better service following privatisation did not match up to the promises that were made beforehand--except in terms of short term profitability. They also argued that 'neither private nor public sector production is inherently more efficient... the empirical material presented provides little evidence that privatisation has caused significant improvement in performance. Generally the great expectations for privatisation evident in ministerial speeches have not been borne out... This raises the intriguing question of whether privatisation was necessary.' Privatisation can be seen as a stick that was used to attack the supposed 'dinosaurs' of the nationalised industries and their outdated practices. Most importantly, it was used as a stick with which to attack the working class and trade unions. So it was, for example, that following the privatisation of water and electricity some 25 percent of the workforce, 100,000 people, were sacked or made redundant. It became part of the Tories' strategy under Thatcher and Major, and has been carried on since with Blair and New Labour.

    New Labour's belief in the market

    Where does this leave Labour's proposals for the railways? The trouble for Labour is that to retreat on a privatised railway is to retreat on a central plank of New Labour's ideology. Blair and Brown believe the free market is the best way to run society, that capital can move freely around the world and can only be subject to the minimum of regulation by governments. This view was best summed up by Gordon Brown when he addressed a conference on global economic change: 'Past Labour governments tried to counter the injustice and failure of the free market forces by substituting government for the market, and often saw tax, spend and borrow policies as the isolationist quick fix for national decline. The fact is these policies cannot work in the highly integrated world economic environment in which we live... The old Labour language--tax, spend and borrow, nationalisation, state planning, isolationism and full time jobs for life for men--is inappropriate.'

    But whereas the Tories went for the public sell off of large sections of the British economy, Labour has chosen to extend private financing into sections of the economy that used to be financed by the state. Its PFI allows private companies to make millions out of the building of new hospitals and schools. It is, in effect, the privatisation of services that used to be entirely under state control. Although the form of privatisation may differ, the purpose is the same--to let market forces rip, cut back on staff, attack the unions and allow the bosses to cream off the profits. Just like on the railways the profit motive rules. Public need and safety come very far down the list of priorities.

    While the increasingly widespread demand that Labour curtails the profits of Railtrack or brings the railway back under state control inevitably brings into question the ideas which underpin the Blair government, there is no question of Blair confronting the forces of big business unless he is made to do so. Such is his devotion to free market economics that there is no doubt Labour's leadership will have to be fought all the way. Yet the outcry and anger over the Paddington disaster show the potential is there to force the government to back down and deal a blow to the idea that the free market is the best way to run society.


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