During the Second World War the British Government took control of the nation’s railways. The first priority was to assist the war effort, and primary function of the railways became to shift men, equipment, or materials to achieve this. Civilian trains did however still run, both passenger and freight, and attempts were made to provide as normal a service as possible to the public.

At the end of the war, a socialist government was elected, committed to wholesale nationalisation of major industry. Time and money meant that this political dogma could not be implemented across the board immediately, and whilst some industries such as coal mining were immediately taken into public ownership, others such as steel had to wait some twenty years, and several changes of government, before its turn came.

Insofar as transportation was concerned, buses and road haulage escaped nationalisation completely (although bus operation did eventually spend a time when most operators were Government owned, and one road haulage company did find itself in public ownership; but they are other stories) whereas over 90% of all rail operations were nationalised in the first wave. (A major reason for putting rail at the front of the list was the enormous backlog in maintenance which had built up. It was considered better value to buy up the shares of the major railway companies, than it would have been to return their property and equipment to the state it was in prior to the government taking control!)

“British Railways” therefore came into being at midnight on 31st December 1947; although initially there were no significant changes perceptible to the travelling public. The new operator was divided into regions, exactly matching the areas of operation of the former private companies – whose liveries and equipment remained intact for decades. It was very rare, for example, even twenty years after nationalisation, to see former Great Western locomotives or carriages very far from their home turf.

Nationalisation of the railways continued for about 50 years – which saw the end of steam, “the Beeching era”, and much modernisation of equipment and operating practices. Passenger rail transportation was acknowledged through most of the period of nationalisation (to a greater or lesser degree dependent on the politics of the party in power) as a social service, which required subsidy and could not always be expected to produce a surplus of fare income against expenses. This was in fact enshrined in the 1968 Transport Act. Conservative governments were predictably tougher on requiring financial justification for new cash requests, but it has to be said that under investment was a pretty consistent feature of the entire period of nationalisation.

The Beeching Era mentioned above refers to the period when Dr Richard Beeching was Chairman of the British Railways Board. He was appointed (by the then Conservative Government) in June 1961, with the basic brief to make the railways pay. He initiated a survey of the British railways network designed to find out which parts were profitable, and published the findings in a report entitled “The Reshaping of British Railways” in 1963 – which gave an accurate description of the state of the network for the first time. It had been suspected that a lot of the rail network was under used and therefore uneconomic, and the report confirmed that only half the routes covered the cost of operating them, and that half the stations produced about 95% of all the revenue. When the “Beeching Plan” was finalised in 1965, it recommended that only about half of the 17,000 miles of track be retained. It also suggested that 3,000 miles should be considerably upgraded. The cost reduction part of the programme was implemented fairly rapidly (though ironically this was in fact done by the Labour Government which had come to power in 1964) leading to the closure of some 2,000 stations throughout the country, whereas politicians of both parties saw little difficulty in deferring the part of the Plan that involved the spending of money.

With the arrival of Margaret Thatcher as Prime Minister at the end of the 1970s British politics changed forever. Changes in the role of government were made which would be impossible to completely reverse by a subsequent government, and a major part of this was the reduction or elimination of government involvement in anything that the private sector could do better. This led directly to widespread de-nationalisation (or “privatisation” as it became known). For many companies (British Airways, British Telecom, British Petroleum, for example) positive results were immediately apparent. The companies performed better outside public ownership, with benefits for customers and employees as well as the new shareholders. Others such as electricity, gas, and water utilities and bus services were more controversial, but still on balance offer a better deal to all concerned in their new private guise. A further group, including the railways and the post office, were deferred whilst problems arising out of the social service aspects of their businesses were addressed. The delivery of mail is still, in 2002, in the hands of a government owned corporation , but the railways moved out of the public sector in the early to mid1990s.

The way in which railway privatisation was achieved was interesting, and whilst I don’t fully agree with everything, I do have to admit that it provided about as good a combination of social service and private finance as could be achieved, whilst addressing numerous other concerns. It resulted in what I like to call Britain’s “Virtual Railway”.

The result was that we had one company (Railtrack) owning all the railroad, and stations, and responsible for track/signal maintenance and safety, but employing few staff and not able to operate trains. (Even the track maintenance etc is contracted out to private contractors.)

We have a Regulator, who grants licenses to competent train operators. These can be for passenger, mail, of freight. He also has statutory responsibility for ensuring that all licensees comply with regulations and laws and meet agreed levels of service and reliability.

We have a dozen or so passenger operating companies. Each of these initially took part in a bidding process for a geographical slice of the old network, but many are now venturing outside their original areas. (Bids were called in on the basis of “How much subsidy do you require to offer a guaranteed level of service no worse than that already in existence?”, and “How will you improve service and reduce subsidy over the length of your franchise?”)

A necessary adjunct to the franchise system, was the transfer of the bulk of the former British Rail’s rolling stock to leasing companies – which were themselves then privatised. They can take a longer term view and invest in new equipment, safe in the knowledge that even if their initial customer loses – or cannot renew – his franchise, there will always be another one to take his place.

We then have the freight companies (the largest of which were purchased by a consortium led by Wisconsin Central), Royal Mail, Eurostar (always privately owned our side of the Channel, but state owned in Belgium and France), and other operators like Orient Express and Royal Scot – running cruise trains over the national network.

The infrastructure company (Railtrack and its successors in business) – the one part of the privitasion I felt least happy with, my view being that the infrastructure should have been kept under state control for a while longer – is obliged to keep the track in good order, and to provide paths, within reason, for any properly licensed operator who wants one. It also had responsibility for rail safety, but in the aftermath of a couple of nasty crashes this was revised.

Since privatisation passenger service has generally improved. There has also been a lot of investment in new rolling stock – although the line I use to commute to work each day is amongst the last to benefit, and I still travel in a 1956 vintage electric multiple unit – which incidentally is far more comfortable than the modern equipment, so I’m in no great hurry to change! (Replacement stock was ordered, and has been built, but has not been accepted pending resolution of a number of technical problems)

Freight was virtually non-existent on UK rail, but since privatisation most of our rail freight came into the control of EW&S, a subsidiary of Wisconsin Central, and incredible growth has been seen – reducing the proportion of goods being moved on the roads.

On balance, my attitude as a rail user and as a taxpayer, is positive. As a passenger I always felt that railway staff during nationalisation considered that my presence on their trains was an inconvenience to them. Information was rarely available in the event of an operating problem, and trains were dirty and late. Attitudes have changed as a result of the privatisation process, and so has timekeeping – although there is a particular reason for the latter! Once they have agreed a path for a train, the infrastructure company has to pay a penalty to the operator is that path is not available – for example a red light when the train is due to leave. Conversely the operator must pay Railtrack a penalty if the signal is green and his train is not ready to move off. Concentrates the minds a treat, that one! (Under the old system, if my train was late leaving in the morning, nobody responsible for railway operation cared much, and the delay stretched as the journey progressed. Nowadays if we are a few minutes late leaving, we imagine lots of shouting going on in the operations rooms, and guess what? They now tend to make the time up!)

Some final comments about Railtrack. This company was floated to the private sector through an initial public offering which in my view led potential investors to consider that the company was a secure property owner, with a steady flow of income. I felt at the time that the ‘risk’ nature of the investment, and the enormous backlog of infrastructure maintenance outstanding at the time of privatisation were not adequately stressed. Politically, the Government at the time of privatisation was “Conservative”, and the opposition “Labour” party (whose predecessors had nationalised the railway in 1948) advised potential investors to steer clear of the shares since a future Labour Government would renationalise the company at terms which would allow no profit for shareholders. In due time, the Labour Party did come to power, but the renationalisation pledge was quietly dropped when they realised how much it would cost them.

In the early years Railtrack produced some impressive returns to its investors, and the share price climbed steadily. It was not however run particularly well from an operating viewpoint, and regular government interference did not seem to help much. As time went by however it ran into a succession of problems, the most serious of which derived from the aforementioned rundown state of the system the company had inherited, plus the clear conflict of interest involved when a company seeking to make a profit has primary responsibility for the safety of the system.

After two well publicised accidents on the Great Western main line, it became clear that the safety issue was too important for a profit focussed company, and the Hatfield crash – attributed to poor maintenance – compounded Railtrack’s problems in this regard. The company needed almost limitless supplies of Government money, whilst still paying substantial dividends to its shareholders. Safety was hived off into a separate stand-alone subsidiary, with a budget set by Government, and Railtrack continued with its primary long term task of upgrading the network.

A major area for investment was – and remains – the West Coast Mail Line (London-Midlands-Crewe-Glasgow) where the passenger train franchise holder (Virgin Trains) had ordered new rolling stock on the back of an undertaking from Railtrack to upgrade the infrastructure. Cost escalation on this project had rocketed, with the feeling by many that this was due to a combination of bad management by Railtrack – and increased demands for additional safety features by Government. Either way, it was clear that Railtrack would not be able to finance this project without substantial Government help, and a request for funding was duly submitted. Eventually, and without prior warning (unusual in itself from a Government which regularly ‘leaks’ decisions before it announces them, in order to gauge – and mould – public opinion) HM Government eventually decided to decline this request, with the inevitable result that Railtrack was unable to continue as it was. There were many at the time who saw this as Political manoeuvring by the Government, who seemed to have achieved the objective they originally intended, without compensating the shareholders of the company. Ultimately however the government were forced to accept that such compensation was due, and at the time of writing (April 2002) it seems likely that Railtrack shareholders – including thousands of employees – will ultimately receive pretty much the share price immediately before this Government action.

Many who have followed the history of Railtrack will say that this was always a predictable outcome of this sorry tale, and others will have noticed that the timing of the relevant decisions – which was entirely under the Government’s control – by a strange coincidence (?!) came to a head at exactly the time that the allied attack on Afghanistan was occupying the first eight pages of our newspapers.

I am aware that many readers of this piece will be in the USA, and I’m not sure whether any of the above is particularly relevant to the situation your side of the pond, but the separation of track ownership from train operating (and the associated “penalty” payments for non performance) might give you something to dream about!

Dennis McDonald
England
April 2002

A gentleman on our list asked several questions about VIA service in Canada. Eight years ago I led a project that took VIA apart and put it back together again on paper for the purpose of privatizing the company. Our final report presented to Prime Minister Mulroney’s federal government ran about 800 pages, complete with timetables, marketing plans, and a review of union contracts, among many other topics.

It was an interesting project, because our group of professional passenger rail consultants had the opportunity to say “what if?” on almost every topic relating to creating and operating a successful railroad.

For those of you wondering, our figures were created using standard North American accounting principles (we used railroad accounting where necessary, but converted our facts and figures to real-world accounting for the benefit of the government – it was an interesting conversion). Both our marketing and operating figures (as well as corporate overhead) were always conservative to a point where if we knew a coach seat headrest paper towel costs 15 cents to replace, we tripled that cost to err on the side of caution. We used VIA historical ridership figures for marketing calculations.

The only part of VIA for Amtrak to emulate is their customer service. They consistently rank very high with their customers, with high satisfaction scores constantly running above 95%.

The rest of VIA currently emulates Amtrak, and Canada uses the U.S. as a positive model for their arguments.

VIA cuts its annual federal government subsidy each year by improving their efficiency and passenger counts. However, the last time I looked, they were still only recovering  about 40% or less of their operating costs at the farebox.

They have slashed their route system to the bone, where all but one of their long distance trains is tri-weekly. The Ocean, running between Montreal and Halifax is six times per week. VIA started its life with a huge corporate staff. They have trimmed some during the years, but many think they are probably still overstaffed.

Their version of the NEC between Sarnia and/or Windsor and Toronto and Ottawa and Montreal has daily service, but much less dense than our NEC.

VIA has always hauled express service and mail, but only because many of their routes are “social services” where there are no roads. The only form of transportation is either the train or a small airplane. Because of the nature of tri-weekly service, there is not much advantage to mail and express service of much consequence.

VIA has learned correctly that while it is a vital part of Canada’s domestic transportation network, they make huge money from sleeping car service. They also split their coach business into two classes. The long-distance advanced coach service (called VIA 1 on corridor trains) is similar to Amtrak’s regular coach service in terms of spaciousness and amenities. (VIA 1 on corridor trains is similar to first class airline service.) The riff raff in the lower class coach service on long-distance trains have an experience similar to riding in a short-distance Amtrak coach for a couple of days. It isn’t very pretty.

Their dining and lounge car services are exceptional. The diner has a much more upscale atmosphere than an Amtrak diner. The food is excellent.

VIA has no new equipment. They reworked the old Canadian Pacific coaches and sleepers at Pointe St. Charles about seven years ago, and it was on the same level as when the heritage sleepers were reworked at Beech Grove. VIA spent a bit more money and updated the equipment a little better, but they had the benefit of Amtrak’s previous experience to draw upon.

Their corridor equipment is about 20 years old and holds up well. Other than GO transit equipment in Toronto and some other isolated areas of Canada, there is no bi-level equipment that in Canada that VIA owns or operates (other than 35 year old dome cars).

VIA union contracts are not as progressive as Amtrak’s contracts.

VIA is a crown corporation, which means, like Amtrak, it is a creature of the federal government. Unless something has changed in the last few years, VIA has never even had the benefit of statutory authority from Parliament; it was created by an act of the cabinet, not the Parliament. Canada’s form of government is a copy of the English system. Therefore, the Prime Minister and cabinet have considerable powers that automatically flow to them that Congress does not afford our President in our system.

VIA is envious of Amtrak. The Canadians think we have a better system and wish they had our frequencies and routes. VIA management through the years made many of the same mistakes and Amtrak management, and paid as heavy of a price in 1989 when over half of their system was slashed by the government.

Our plan said it would take 11 years to privatize VIA (and not all of it; just the long-hauls) and would require a number of things to happen, including the purchase of bi-level equipment. It can be done, but there must be a long-term commitment to doing it and a workable plan everyone agrees to in advance.

Bruce Richardson

As to the question of privatization of long hauls, ask someone who has gone through this complete exercise. Thank you, I’m glad you asked. In 1990 a group of us took VIA Rail Canada apart and put it back together again on paper. This was not an amateur or academic exercise, but a real-world study to determine the future of rail transportation in Canada. The result? Over a eleven year period, the VIA long-hauls (national system) could be privatized and turn a modest profit. But, this only occurred if their version of the NEC between Toronto and Montreal stayed in government hands. Other details include radical changes in the way the company was operated by senior management, and even more radical changes in marketing practices. It also required new bi-level equipment and the operation of MORE daily trains, not tri-weekly or less trains. The project did not go forward because of the necessary huge capital investment needed and a change in federal government from conservative to the present liberal government.

The same can be done with Amtrak, but it will take far beyond 2002 to do it. And, before it can be privatized, the Amtrak corporate culture must undergo radical surgery to harmonize the company and eliminate many hurtful and wasteful things which now occur on a daily basis.

Also, Amtrak ownership will have to be structured similar to that of the old Pullman Company. Own equipment and motive power, have reservations and marketing, but leave everything else to others, including the NEC. The NEC should remain a government agency because it operates more like a highway than anything else.

Dr. Adrian Herzog of URPA has created a thoughtful White Paper on the future of passenger rail in our country, and he envisions tax credits and a number of other issues, including perhaps cheerful participation by the managements of present freight railroads. Dr. Herzog put much effort into this work, and it is an admirable document, in fact, the only long-term plan now on the horizon.

If others with to think differently than Dr. Herzog, they should put the same time and effort into possible solutions. This could only have a positive effect, with new ideas being openly debated.

As someone who in the regular course of business has conversed with more than one freight railroad president on the subject of passenger rail, it is my opinion – and please read the word opinion again – that the senior management of the major freight railroads today do not wish to become any further involved with passenger rail beyond a commuter capacity. When a workable national play is drawn where the freight railroads can participate on a basis they can justify to their stockholders, then they will come to the table. Before that, they will stick to what they know best now, which is hauling boxcars.

From a non-emotional, business standpoint, the present senior management of Amtrak has a series of problems which must be addressed immediately. These problems were created by their past actions since 1993. Who will answer these remains to be seen.

The next president of Amtrak must be a risk-taker, who is willing to put in place sound principals and be a student of history. Amtrak’s history is spotty at best, and to know where the company has failed before will help in not making the same mistakes again.

When Graham Claytor became president of Amtrak, he did so as the capstone to his career. He had “been there, done that” in about every capacity in the railroad industry, and therefore, was able to go to Amtrak and use his personal credibility to bolster the entire company.

Someone of his stature, age, and wisdom needs to do this again. It us unlikely someone from the freight industry will view moving to Amtrak as a career enhancement on the way to higher position. Too many risks that are too great and too many chances of failure are present. The best candidate will be someone who knows innovation and is far-sighted, but also does nothave a personal agenda for the extended future.

The next president of Amtrak should be someone who is willing to put a lifetime of talent and wisdom into stabilizing Amtrak, and then start it to grow again. Amtrak’s problems will never be solved by cost cutting, but only by orderly growth through revenues from passenger miles, state or regional tax support, and other ways, such as a rational plan to increase express business in such a way everyone can accept it.

Congess appointed a Blue Ribbon panel earlier this year which came up with several good ideas about the future of Amtrak and passenger rail in general. What has happened to this document? Was it only a “feel good” exercise that will never again see the light of day?

Let’s don’t destroy Amtrak now. Let’s work with our politicians to make instrumental change and have a long-term view of solving passenger rail problems. Let’s stabilize and take what we have and build from there. Let the regional needs be met by their own constituencies, and let’s together face the national challenges.

Thanks for taking the time to read this.

Bruce Richardson
Jacksonville, Florida