Government, Regulation and the
Railways – a personal view
Jonathan Pugh, MA FCILT FRSA
Chairman of Council, Railway Study Association
March 2014
The fundamental issues
• Politicians, officials and wider interest groups have
always had a view of the railways
• Transport is not an isolated activity within public
• Theories and practice of government evolve over
time – as do the means by which services are
• Rail people need to be effective at understanding
what drives the overall agenda
• What is seen as good changes over time
• Is the railway its own worst enemy?
Two centuries and counting
• Government, public policy and the railways have
interacted even before the Stockton and Darlington
Railway opened in 1825
• Decisions affecting all aspects of the industry:
Physical location
Operations and access
Commercial and train service provision
• Stockton and Darlington was the first verticallyseparated railway
• Delivering the policy context for railways involves a
number of different groups with diverse priorities,
motivations and working methods
• Transport is not a top political priority – health, education
and defence always trump it
• Since 1919 there have been over 50 Ministers with lead
responsibility for railways at a GB level
▫ Transport often either stepping-stone or demotion rather than
aspirational portfolio
▫ Politicians motivated by electoral cycle and competitive
• Devolution brings further challenges to political dynamics
• Political cycles much shorter than railway investment and
asset life
• Politicians often reliant on external advice and requirement to
respond to pressures not foreseen when they have been
• British civil service has tended to prize generalists over
▫ Strong in wider policy context but discourages
identification with specific sectors
▫ “Yes, Minister” caricature but often necessary to put wider
implications of policy to politicians
▫ Often relatively rapid turnover of officials
• Changes in public administration models from state
corporations to regulated utilities
▫ Regulatory bodies need to be seen to be independent from
implementing ministries
• Quality of decision-making and continuity an issue,
particularly where transport has not been seen as
desirable assignment
Wider interest groups
• Railways always in the public eye
▫ Media commentators
▫ Academics
▫ User groups – even the RSA
• Increasing recognition of the relationship between railways,
economic development and the environment
• Changes in perception of desirability and requirement for the
rail sector over time
• Issues with engagement where:
▫ Unwillingness to identify and resolve the consequences from
conflicting stakeholder needs and aspirations
▫ Focus on structures and ownership rather than overall outcomes
▫ Individual agendas often pursued without reference to wider
The railway culture
• Railways have a strong industry identity built up over
two centuries
▫ Rooted in safety and delivery
▫ Sense of community and common interest irrespective of
organisational structures
• Tends to be defensive in the light of criticism and highlypublicised incidents – and introverted
• Strong leadership required working with government
and regulators
• Need for much better understanding of how to motivate,
influence and interact with outside bodies
• Often own worst enemy – backward-looking, internallycritical and tendency to dispute in public
In context: the road to nationalisation
• Early railways promoted through Act of Parliament
• Enforcing legislation around safety, common carrier and
tariffs/timetables throughout Victorian period
• Government-directed amalgamation in 1921 through Railways
Act to provide financially-stable companies
▫ Great Depression required government backing for investments –
rail companies on their own could not raise capital
▫ Outdated common carrier obligations were not relaxed
• State control in two world wars created nationalisation
▫ By 1945 significant damage and depletion of capital stock
▫ Post-war financial position made repair and renewal problematic
Towards a public corporation
• 1948 nationalisation of transport extended beyond rail
▫ British Transport Commission given strategic leadership
and policy role
▫ Railways delivering within BTC context under Railway
▫ Similar approach to other 1945-51 nationalisations – highly
bureaucratic and effectively run as adjunct of Whitehall
• Disbandment of Railway Executive in 1953 but still
limited in ability to raise capital
▫ No parallel relaxation in obligations
▫ Slow pace of modernisation and rationalisation
▫ Ongoing deterioration in operating results
Defining a British railway
• 1955 Modernisation Plan major public commitment but
flawed – too much improvement to existing practices without
fundamental review of rail’s role and capabilities
• Appointment of Beeching as Chairman and establishment of
public corporation British Railways Board (1963) created
much stronger financial focus
▫ Beeching reports much more subtle than popular image
 Identification of wider benefits to society from rail services
 Development of the Major Trunk Routes key strategic document
• Did not resolve long-term financial deterioration – debt
finances could not go on indefinitely
• 1968 and 1974 Transport Acts created recognition of subsidy,
Public Service Obligations and mandate on BRB to provide
“broadly comparable” services going forward
A reformed monopoly
• Post-1974 BRB became much more politically astute
▫ Chairman able to act as effective lobbyist to government
▫ Change in political and social climate to be more supportive of rail
• Still capital-constrained and managed on an annual cash limit basis
– and still making the case for continued role of rail in overall
transport provision
• Sectorisation after 1983 combined with much clearer direction from
government on subsidy and efficiency
• Commercial focus on passengers and freight delivered improved
results with significant investment
▫ Replacement rolling stock, electrification, improvements to stations
▫ Disposals of non-core business (hotels, shipping)
• Stronger relationships between rail sector, government and
The challenges of privatisation
• 1993 Railways Act established vertical separation
▫ Strategic direction from government, with OPRAF as
procurement and management agency
▫ Establishment of independent economic regulation through ORR
▫ Presumption that rail’s relative decline would continue so no
major projects would be required
• Public and stakeholder concerns during passage of Railways
Act resulted in significant public interest protections
• Raised level of concern and scrutiny of government policy
towards rail – as well as producing period of rapid structural
• Administration of Railtrack and management contracts for
some first-round franchises demonstrated that the market
had not matured effectively – so more control and revision of
policy required
Establishing a new model
• Growth has been very strong since privatisation – driven by
changes in demand patterns, competition and modal shift as
well as improved marketing and more train service provision
▫ Both passenger and freight growth stronger than previous
industry forecasts would have predicted
▫ Need for significant capacity improvements, new rolling stock
and improved services
• Establishment of Strategic Rail Authority in 2000 intended to
provide focus for strategic development of the network
• SRA’s strategic functions continued through government and
funders after Railways Act 2005
▫ Parellel devolution and more focus on strategic planning
▫ No fundamental challenge to principles of 1993 Act but focusing
on evolutionary change
Success and its consequences
• Establishment of Network Rail in 2002 and funder
specification responsibilities in Railways Act 2005 created
much firmer strategic direction
• Devolution and role of independent economic regulation
create additional interfaces between industry and government
▫ Functional government / regulatory relationships important for
service delivery
▫ Need to ensure that there is clarity and alignment between
political and industry priorities
• Much infrastructure has been funded through governmentbacked debt
• Historic network now nearly fully-utilised – where there is no
capacity there is a requirement for large-scale interventions
such as HS2, Crossrail and Thameslink
A new golden age?
• Sustained funding to the industry has been provided through
the regulatory settlement for Network Rail and committed
through franchise agreements – a protracted period of
financial stability
• The three big projects identified by the 1989 Central London
Rail Study are nearly delivered
• New capacity, rolling stock and more trains running than in
any period support more use of the network than at any time
since the 1930s
• Commitment by politicians to long-term investment,
including strategic electrification
• Yet quite often this seems hard to reconcile with the industry’s
own image – let alone how it is perceived by users and
Moving into maturity…
• Government and railways will always need to evolve
▫ Trust and maturity in the relationship
 Confidence in motivation and planning
 Continued stability in funding and required outputs
 Who is best-placed to manage the railway?
▫ Clarity as to how railways support wider strategic priorities
• Industry as a whole needs to reflect on how it behaves
▫ Better understanding of political and government priorities
and behaviours
▫ Standing still and being defensive is not credible or
▫ We are where we are – don’t waste time eulogising or trying
to create an imaginary golden era!

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