Getting back on track

The fiasco on the UK's railways over the past two weeks -- the shutdown of the entire system for Christmas Day and Boxing Day, the much longer closure of key parts of the system as a result of emgineering overruns -- has cast a spotlight on the flawed structure of the industry. Will lessons be learned for the future? It's hard to be optimistic. After a barrage of criticism of the Christmas closure at the end of 2006, an industry spokesman said "we'll have to re-examine this for next year"; there's no evidence that this happened. More crucially, as long as everyone in sight can blame Network Rail for the problems, and as long as Network Rail by virtue of its very nature has limited incentives to put things right, it's hard to see where the momentum for change will come from.

The biggest problem over the past two weeks was a major overrun in works at Rugby Station, which were aimed at realigning the tracks so that certain express trains can bypass the station itself. Network Rail has taken a lot of routine maintenance back "in house" after repeated problems with outside contractors in the past, but still uses contractors for big tasks like this. And boy, does it use contractors: no fewer than nine of them had their snouts in the trough at Rugby, with the ubiquitous Bechtel acting as lead. It appears that Bechtel et al promised more than they could deliver, hiring far too few engineers to get the job done on time.

Things went so badly that by New Year's Eve, when the project was due to be completed and the tracks returned to the train operators, Network Rail relieved Bechtel of its lead role and managed the rest of the project itself. Think about this: the argument that the private sector can do these things better than the public sector been disproved yet again, but more than that, it has emerged that in fact Network Rail still has enough engineering expertise in house to manage these things itself anyway. It makes you wonder why it was necessary to hire Bechtel in the first place, and newspaper reports suggest that Network Rail is sufficiently angry about the whole experience that it may take these large projects back in house along with the regular maintenance programme.

We have also learnt this week that the contractors have formed their own trade association. Its spokesman has been quick to argue that the farce at Rugby does not suggest there is anything wrong with the system. Well, that's what they pay him to say, I suppose. It's hard to see how anyone could agree with him, but no doubt he will be actively lobbying at Westminster against any change in the way things are done. Anyway, what with duplicate sets of engineers and a completely unnecessary trade association, it's not hard to see why the cost of running the railways has gone through the roof since privatisation.

There has been a lot of excited talk in the media about Network Rail facing "massive fines" as a result of the events at Rugby and another major overrun at London Liverpool Street. It would be interesting to know whether the contracts with Bechtel and the rest of the Gang of Nine include any financial penalties for them in the event of an egregious cockup such as this. But in any case, there's no point in fining Network Rail: it's a non-profit corporation, a nationalised entity in all but name. Any fine levied on it will simply reduce the profits that the company can pay over to the Government. It's a corporate structure of almost Machiavellian brilliance: the Government can treat Network Rail's debt as off-balance-sheet, but it can tell the company what to do and it can point the finger at it when things go wrong. Maybe the events of the last two weeks will allow a lot more people to see through these fictions.