This week's BBC documentary about the 2002 Potters Bar rail crash, which killed seven people, offered a reminder of one of the unfortunate side-effects of the ludicrous "privatisation" of the railways: nobody is responsible for anything any more. Amazingly, thanks to years of work by a team of investigators, the exact cause of the disaster has been established. But with the company responsible for maintenance of the tracks alternately stalling and hiding behind their lawyers, it has proved impossible to assign any actual responsibility.
When I used to commute daily into London, I used to marvel at the number of fragments that the old British Rail monolith had been shattered into. I parked in a car park operated by a subsidiary of the train operating company (TOC). The station was owned by Network Rail but operated by the TOC. The tracks were owned by Network Rail but maintained by a separate company under contract -- with, as the Potters Bar documentary showed, hundreds of sub-contractors. The train was operated and maintained by the TOC, but owned by one of the three leasing companies set up under the privatisation. And this is not to mention all the separate companies running peripheral things like coffee bars and vending machines.
This seems to me to violate one of the key principles of effective corporate structure: clear lines of responsibility. Ultimately nobody seems to accept responsibility for anything on the railways any more, except of course for the passengers and taxpayers who are footing the bill for this massive pyramid of overheads. It seems pretty clear in the case of the Potters Bar crash that there were some fundamental design flaws in the points that derailed the train. It does not appear that anyone responsible for managing maintenance recognised that, but the maintenance workers themselves apparently did, and had devised a crude "fix" that may well have prevented other accidents. Amazingly, both the maintenance company and the TOCs on the Potters Bar line seem to have tried their damnedest to prevent their employees from assisting the enquiry into the crash. There is to be yet another enquiry in 2007, and naturally the companies are happy to see the matter remain sub judice.
Not all privatisations have been a failure, of course. Who now thinks it would be a good idea for BT or BA to be in public ownership? But the list of problematic privatisations is so large -- the railways, London Underground, many many PFI schemes -- that it is important to try to spot the common elements behind the problems. Here's my candidate: the civil servants charged with selling the public assets have no understanding of how the private sector thinks, and have either erred or been outfoxed at every turn. Examples:
* excessive complexity, as in the case of the railways. Companies are always happy to avoid responsibility and blame, something that a truly free market does not normally allow them to do.
* inappropriate term of contracts. On the railways, where some of the key assets (the trains) have economic lives of 40 years, many of the contracts have been for five years or less. As a result, TOCs have been reluctant to order new equipment -- a problem compounded by the fact that they have to finance it through the leasing companies, who seem more interested in sweating the existing assets. In contrast, there are stories of office cleaning companies being awarded 50-60 year contracts by local councils -- hardly necessary or appropriate when the main resource is people and the capital requirements are minimal.
* improperly specified contracts. The negotiations over the part-privatisation of London Underground were very drawn out, yet within a few weeks of the contract going into force, there was a dispute about whose job it was to clean up graffiti. What exactly had they been talking about for all that time? Now, a couple of years into the contract, one of the companies has failed in meeting almost all of its key performance targets. So what will happen? Well, it wants more favourable terms, and will probably get them. Quite by chance, while the company is awaiting the Government's response, the reliability of the Underground has fallen to new lows.
No major political party seems inclined to do anything about any of this. In fact, it appears that Gordon Brown is preparing to sell off more assets as soon as he gets into Number 10. Some of these, including the Tote, should not be problematic -- in fact, why is that in the public sector anyway? But in other cases, it would be nice to think that the Government would apply a test to privatisation candidates: if the only way to sell something is to chop it into pieces and then set up a complex regulatory regime, maybe it would be better just to keep it in public ownership.
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