Thursday, 16 August 2012

Beardie Branson: Just a Bad Loser?

Get your hands out of your pockets!
It's hard to tell, isn't it ?  At least, for those of us with no rail industry insight.

On the one hand, while Branson tells a plausible story and is mightily pissed off, he-would-be-wouldn't-he; and how else is the government to decide these things except by going with the most economic bid after investigating with due diligence ?  FirstGroup's winning bid seems to have a number of attractive aspects; and they are not without experience in the sector.  Branson can't expect life-long incumbency as of right.

On the other, as I know in graphic detail from my own area of special interest (alongside well-known abominations such as the last 50 years of defence procurement), the ability of civil servants to screw up procurement-type things up knows few limits.  Picking winners ?  They wouldn't know a winner if it came home by five lengths.

The field is of course replete with vested interests and lobbying: always hard to pick out the salient facts.  So - any views ?  Comments with inside-track knowledge (sorry) particularly welcome.

ND

* per the comments, an MW illustration of the Wild Man of the Caribbean over at his place.  Looks like Robinson Crusoe ... 

31 comments:

lilith said...

Can't illuminate further but I do know that First Group are not famous for their cheap fares and reliability.

Demetrius said...

As someone who loaded and unloaded the old "Master Cutler" and "South Yorkshireman" trains on the former Great Central line one has many memories. Additionally, my experience of the West Coast Main Line runs from the late 1930's to 2011. We still make around 100 rail journeys a year. Also, I do not like RB and have a long list of reasons. But I think he may have a case. Also, there may be reasons other than the financing in play.The First Group (Worst Group in Private Eye) figures do not really add up. If their bid is based on optimistic bets on future passenger numbers it is not going to work. Something has to give big time if for their bid to make sense.

Kynon said...

WorstGroup have a near-monopoly on rail services in Scotland, in the guise of Worst, sorry, FirstScotrail. Their rolling stock is predominantly designed to shoehorn people in, the facilities are poor (no wi-fi, one toilet per two carriages, bugger all luggage space) & frequently broken, their advance fares are fairly horrific compared to other advance fares(especially for the commuter routes & times when there's no other option), and their customer service is pretty poor. When you couple that with the fact that they also have a virtual monopoly on bus services within Aberdeen & Glasgow (and probably elsewhere as well), it paints a fairly unflattering picture.

I'll be interested to see how it pans out, since the last two sell-offs of the East Coast franchise went so well for GNER/National Express, and I seem to recall the "experts" opining that they'd overbid at the time...

Elby the Beserk said...

I used to know the lass who was Branson's secretary for this first business - a student mag, I think. She said he was a complete shyster. Whilst the car I bought from Virgin Motors was OK, the customer service was crap. Whilst our internet, provided by Virgin, is really pretty reliable, their support service is risible*.

So this feller is always quite happy to see rabbit teeth get one in the goolies :-)

* - well meaning Indians who know less about PCs and networking than I do, by a long streak. When they disabled my email account, having had three different explanations from three different, largely incomprehensible Indians, I thought - sod this, and rang them to close the account.

Problem solved. By an English speaking support person. In 15 minutes.

Indeed, I would suggest to any VM users that if they have problems, just threaten to close your account. You may well be able to screw a reduction in your monthly charge as well.

Elby the Beserk said...

Oh. Forgot! Also knew the lass who ran the first Megastore in Oxford Street.

She said he was a shyster as well :-)

QED

Anonymous said...

I knew the original Virgin ...

(she said he was a shyster as well!!!)

Bill Quango MP said...

Slightly O/t but i read today that the 'giro', the old unemployment cheque that was cashed at a post office can no longer be.

Paypoint won the contract with a very low bid.

However so far they aren't ready to cash the giro's in their convenience stores and garages and such, despite 18 months preparation.

PO is considering just stopping cashing these giros, as they no longer have any contract to do so, and letting paystation take the rap.

Especially as PlayStation has put in a bid to take the Tv and driving licence work from post Office too.

Paystation originally won the bid to pay out all benefits and pensions, again from the post Office, before business secretary Peter Mandelson over ruled the department for pensions cockups and overpayments and
rejected the paystation bid AFTER it had been awarded.

At the time it was reported he'd told the procurement idiots that saving £2 million in payment costs was worth about 5p a pensioner and the f#ck ups and the necessity of having to subsidise PO for the loss of 30% of its work would COST hundreds of millions.

Sympathy for Beardy. He should have had a 25 year deal with plenty of wriggle room and targets to hit so if he had messed it up the gov could have pulled out of the deal.
but long enough to ensure it's actually worth investing in.

Electro-Kevin said...

The West Coast mainline was a successful franchise though I'm not sure who did best out of it - the passenger or Sir Richard. The Pendalino (tilting) trains did not achieve the promised 140mph and cost a lot in needless infrastructure alterations. Virgin benefited from a combination of huge government investment in new junction layouts, the introduction of city congestion charges and a fuel crisis which drove commuters and leisure travellers on to trains on ALL franchises - not just his.

Shooting fish in a barrel is an expression which comes to mind. The unions ought to thank Mr Branson (along with GNER) for poaching staff from other operators in the noughties which caused shortages and drove wages up across the board. On the other hand his company helped implement Driver 2000 training schemes cutting driver training time down from two years to around one year (for drivers to reach starter link level.) The scheme recruited trainees directly off the street in larger numbers thus bringing new blood into the industry. The high wages attracted record applications from graduates which drove up the quality of staff to the standards desired.

We'll know soon enough if First Group have over bid for the route but I fear that the projected 10% year-on-year increase in passenger numbers (according to press reports) is optimistic. I expect that Richard Branson may well be right when he cites precedent and he has a right to be irritated having delivered most of what he promised.

With the East Coast operation two franchises were broken on the basis of wildly optimistic expectations of passenger increases. One of them was the excellent GNER which was the very model of what the privateers had hoped to achieve. If a company like that can fail under privatisation then we have proof that the privatised railway is deeply flawed.

The railways ought to have been privatised along the lines of 'the big four' pre-nationalised companies of the '40s. Operations and infrastructure all run by one company on a regional basis.

There seemed to be almost wilful ignorance as to how the railway works and much integration between staff and rolling stock was lost when operations were broken up into services rather than regions. "Everything BR bad. Everything privatised good." I saw this mentality in action during the creation of Heathrow Express by airline operators and they had to ditch it pretty quickly to get the service off the ground (no pun intended.)

Slightly off topic but on the theme of 'wilful ignorance' behind privatisation:

McNulty (according to the Daily Mail) blames 'antiquated' rest break entitlements for staff being unproductive for much of their shift but this is wide of the mark. Our entitlement is a minimum of twenty minutes break every five hours. A maximum of twelve hours a shift - a minimum of twelve hours of rest between shifts and a minimum of one rest day in fourteen... and that's it. Our shifts start at literally any minute of night or day - we have 00.01 am starts, 03.11am starts, 16.36pm starts ... whatever fits the trains we are expected to work.

How flexible does Mr McNulty want us to be ?

What few conditions there are are a safety requirement brought in by the Government after the investigation of rail disasters (Justice Hidden's report) and not some archaic union practice. The time is, in fact, being lost whilst travelling as passenger to start trains elsewhere on our regions and being unable to cross-cover services in between because they belong to other private operators. Under BR the workforce was far more flexible in its route and traction skills. This loss in productivity is wholly as an unintended consequence of privatisation.

Electro-Kevin said...

It would only be fair to add that Virgin were present during the WCML upgrades and had to work around them for the first half of their franchise.

He and his staff did well considering.

Any new franchise would have it easy by comparison

Nick Drew said...

thanks for comments folks, esp Kev, I was hoping you'd stop by

Electro-Kevin said...

Nick - My pleasure but purely a personal opinion based on extensive messroom discussions and a smattering of experience. Not much in the way of reading I'm afraid.

Doubtless others can point out the flaws in my summation.

I'm not anti-privatisation of the railways per se - not in any viable form anyway.

The mistakes, I believe, were in making operators compete for trade against each other on a line-by-line basis. The competition should have been against road and air transport and externalised.

Weaning off of subsidy should have been done at the earliest and when this couldn't be done alarm bells ought to have been ringing.

The tit-for-tat penalty system for delays between Network Rail (nee Railtrack) and TOCs keep us all on our toes for sure, but I am doubtful as to their effectiveness in making the railways cost effective - they seem to be so punitive, in fact, as to force TOCs and Railtrack to pay over the odds for staff, infrastructure repairs etc in order to avoid them. There are people on the railway whose jobs are devoted entirely to blame shifting.

It says something when I speak to many unionists who say that they do NOT want a return to nationalisation.

BR was lied about in order to justify the case for privatisation (I was there.)It had been underinvested for decades and various roles were both underpaid and underestimated - this had impacted on quality.

I happened to be both smart enough to do the job and dumb enough to take it - though I deftly avoided, throughout my career, top scale pay despite having worked for the top companies and on innovative and elite railway work.

This was bad timing on my part but then I was never really motivated by the money. I was a driver when the job paid a pittance but our productivity far outstripped what it is now.

I believe that the unions were over estimated and demonised - they had already been defeated over flexible rostering which resulted in the crazy shift demands which I mention in my previous post.

By comparison railway workers were a bargain in those days.

Anonymous said...

Its speaks volumes that First Group has 'fire walled' the subsidiary which won the franchise from the Group.

The risk is 100% asymmetric with the tax-payer in the frame if First Group walk away, but downside for them is negligible.

First Group have obviously learned a lot from the banksters - socialise losses, privatise profits!

Budgie said...

All these worthy comments about the rather sorry state of Britain's railways and no one mentions the EU?

EU Directive 91/440 forced the UK government to separate the management of railway infrastructure from the provision of trains.

This does not make sense (as much of the EU doesn't). Trains and track should be run by the same management, both for accountability and for efficiency. I agree with comments above that the main competition should be with air and road.

However rather than re-creating BR I suggest two companies only: LMS + GWR and LNER + Southern (approximately). And the EU to take a jump.

farmland as an investment said...

Budgie makes a rather good point. All for creating more competition. But in this case, breaking up one monopoly just just creates two monopolies, with no seeming benefit. Just keep in mind, at the end of the day its government employees making decisions on who to choose, and to me, that's always a crapshoot!

Mark Wadsworth said...

a) Yes.

b) I've emailed you a suitable illustration to this post

TheFatBigot said...

Will Virgin Wines be offering products made from sour grapes?

Electro-Kevin said...

I agree that there is a risk of monopoly with Budgie's suggestion of a Big Two.

However, expanding the paradigm shows that a monopoly on the railway does not mean a monopoly on passenger transport.

He is right. These regions should have been fully integrated and the competition encouraged between road/rail/air and not between rail operators line by line.

There would have been more flexibility, integration and economies of scale.

I had not considered the EU angle.

Anonymous said...

Electro-kevin

Spot on, I agree with just about everything you say there, I retired from Network Rail in March after 35 years as a signalman and saw all that you describe. When privatisation was about to happen nearly everyone at operating level was saying that it was full of flaws but we knew that we would be the ones who had to get on and try and make it work and as you say the workforce in many ways have benefited from it a lot more than the passengers. When I started in signalboxes most of them were badly maintained and wages were poor which was compensated for by excessive overtime, which I always declined to do. Now pay rates are generally above the national average and conditions much improved although your reference to breaks made me smile a bit, most boxes apart from the largest ones, don't have breaks at all, it's a straight eight hour shift, twelve even in some cases.
On the matter of franchises, it is obvious that the wheel/rail interface should never have been separated so in theory I would favour a return to fewer, integrated companies. However the big four structure that you mention wasn't without its own problems and I would still keep some of the smaller franchises, such as Chiltern which seem to be well run. It's probably better though to have extended franchises and leave things much as they are with a gradual evolution towards a saner system rather than have yet another big disruptive shake up, re-nationalisation is a definite no no.
The decision to give the West Coast franchise to First will end in tears I'm pretty sure of that but the flack will rebound on Labour as they will certainly be in power again by the time it all goes seriously wrong.

Thornavis.

Anonymous said...

Budgie

There was nothing in that directive about creating completely separate companies, as usual we went way over the top with our approach,3 which really had little to do with the EU and more with getting the railways off the government's books, went well that. Other European countries have done the usual thing of paying lip service to the EU directive and then largely ignoring it, apparently we aren't allowed to do that for some reason.

Thornavis.

Blue Eyes said...

Point of Information:

The EU Directive was driven by the Major government, not the privatisation driven by the EU. Tory ministers wanted an EU-wide rail market where the UK had already built up some industry expertise before the other countries were forced to open their markets. Similar thinking went into the energy industry.

The idea of separating track and wheel was that in the second phase of market reforms franchises would be replaced by full competition with multiple operators able to run trains on the popular lines. So there might be a Virgin at 0855 and a First at 0910 on the West Coast.

Worth noting that the roads (and canals) never had vertical integration.

The infrastructure company would have an incentive to invest in capacity and speed so as to be able to increase revenues.

It never got to that point - once the franchises were awarded we effectively had a cartel system. There were few opportunities for companies to run new services anyway because the system already ran pretty much at capacity. And Railtrack didn't bother to invest properly in new capacity because it had no incentive to do so.

A huge missed opportunity.

It might have got sorted out if the Tories had stayed in power at the critical moment, in the way that the second phase of energy market reforms got us quite a good retail energy system in the end.

*ducks for cover*

Blue Eyes said...

Also worth noting that the freight rail industry works on pretty much the second phase model with various companies offering services on the same lines. Freight rail is thriving as far as I know.

Anonymous said...

Blue Eyes

The idea that you could have had a multiplicity of companies offering competing services on the same track was always a pipe dream, comparison with roads just doesn't stand up, they are totally different. Road vehicles for one thing can be driven on sight with a minimum of external control, which is why we get jams, you can't do that with trains and someone has to work out timetables, track access etc. Where there is more than one operator they are usually doing different things, with different stopping patterns. Even in the days of multiple private companies prior to nationalisation there wasn't actually a great deal of direct competition and what there was had largely disappeared by the time road transport became a serious competitor, as EK has already mentioned competition is with other modes, it seems very hard to get this point across to those outside the industry. Freight is actually a good example of the limitations of the present system, there is always a lot of wrangling between TOCs and NR over providing 'paths' ( the available slots for each train ) and it is a constant complaint by the FOCs that they are bottom of the list. The TOCs counter argue that, as it is they who provide the lions share of the revenue for NR, they deserve first bite of the cherry. Freight has held up reasonably well since privatisation but it is arguable that no more tonnage is carried now than in the closing days of BR so there has been no sea change in freight usage of rail.

Thornavis

Budgie said...

Anon 12:42pm: The Europa website summaries of legislation states that "EU countries must ... ensure that railway undertakings are independent ..." and "EU countries must ensure the separation of infrastructure management and transport operations by keeping separate profit and loss accounts and balance sheets ...".

For all practical purposes this means track and train companies independent of each other; that is, separate businesses.

Blue Eyes said: "The EU Directive was driven by the Major government, not the privatisation driven by the EU."

I would like to see proof of that statement. Since 91/440/EEC was effected on 29th July 1991 and Major came to power only on 28th Nov 1990, I hardly think that was likely. Certainly Major and the EU would have had to work phenomenally fast.

Anonymous said...

Budgie

The separation can be achieved without forming distinct entities the are run along entirely different business lines, BR was split into sectors in the eighties, this process could have been taken further with the integrity of the whole structure maintained. There is a further problem, the attribution of delays. At present this is mostly NR's responsibility as just about any delay that isn't directly attributably to a TOC defaults to NR, which is usually most of them ( calculated in minutes ), many are outside NR control. NR then has to pay the TOC, this creates a ridiculous money go round and extra bureaucracy. All this impacts on NR finances to no good purpose. Integration would largely remove this farce.

Thornavis.

Electro-Kevin said...

Thank you Thornavis.

Blue Eyes makes sense. The main difference between rail, road and canals is the inability to pass for vast stretches of the rail network.

This is why I proposed on John Redwood's site that HS2 money would be better spent on (among other things) a nationwide increase in the number of passing loops.

Anonymous said...

EK

Extra passing loops would indeed be a good idea this is the problem with the network having been so drastically rationalised during the years of decline, not just closures but singling, removal of relief lines and simplified track layout have drastically curtailed flexibility. I don't blame BR for this really, they were operating under severe financial restraints and couldn't have been expected to predict the future growth, indeed one thing we do know for certain about our railways is that whenever confident predictions of either growth or decline have been made they turn out to be wrong. Something for the HS2 advocates to ponder.

Thornavis.

Budgie said...

Thornavis, if the management and the finances are forced to be both separated from, and independent of, each other as required by 91/440/EEC, then there is no meaningful "integrity of the whole structure" left.

. said...

Thornavis: I totally understand what you are saying. I didn't say the ministers were right, but I am allowed to speculate* on what they wanted to see. As I said in my comment, the goals were not realised because of a lack of spare capacity.

Budgie: OK so maybe it wasn't John Major while Prime Minister as such. However you may remember that the people in and around the top of government had been in quite a bit before John Major became Prime Minister. John Majors premiership was not a radical break from the preceding ten-and-a-bit years, was it??!

Don't forget that Thatcher tried very hard to get the EU to open up other EU countries' markets. She had some success. The idea that somehow rail market reform was pressed on the UK by some malign outside force is absurd. The UK blazed a trail for economic reform in Europe in the 80s and 90s.

* I can't provide documentary evidence. However I have good reason to know ;-)

Blue Eyes said...

Whoops, the "." above is me.

rwendland said...

This Bruges Group report discusses 91/440/EC, claiming there are many misconceptions of it, eg it does not require a UK like industry structure, giving Major some stick for the structure:

'However, a closer look at the Directive
shows that while it talks of “separating the management of railway operation
and infrastructure from the provision of railway transport services”, it adds
that while “separation of accounts” is compulsory, “organizational or
institutional separation” was optional. In other words, for those unhappy
with the franchise system, the Railtrack fiasco or the vast profits made by
the rolling stock leasing companies, it is John Major’s Conservatives who
are to blame, not this directive.'

'During the run-up to
the privatisation of Britain’s railways in the 1990’s, it was widely reported that
[vertically-integrated railway companies] was the preferred model of the then Prime Minister John Major, but that
the franchise-based scheme which finally prevailed was chosen because it
would be harder for a future Labour government to re-nationalise.'

Anonymous said...

Budgie

i don't think you've quite understood what the problem is with separating the TOCs from NR. A rail company with separate financial and operating sections is still a unified body with a hierarchy of decision making, where people talk to each other about what the company as a whole requires to be efficient and profitable, one hopes so anyway. In fact there was a long history on the railways of quite separate virtually autonomous departments within the company structure, this could sometimes cause problems but generally it worked very well, knowledge and experience were built up over a long time and produced an intermeshing system that could not be easily broken up into functioning pieces. This is what happened though at privatisation, those of us who were there at the time were appalled by some of the absurd things that went on in the immediate aftermath of the break up, with Railtrack and the TOCs hardly on speaking terms at times and pulling against each other in a vain attempt to assert superiority, the results are well known. The situation has greatly improved in recent years with everyone is at least attempting to sing from the same hymn sheet, however there are still inherent problems, I will give you an example. There used to be one Control structure who co-ordinated all traffic movements and worked with the various departments to keep things moving, this virtually broke down after privatisation with Railtrack and TOC controls doing their own thing and very often resulting in nobody knowing what the hell was going on, signalmen in particular were caught in the middle. This has gradually changed and generally controls are now integrated and usually work together, however there are still two of them and the increase in the number of controllers is phenomenal, was privatisation really supposed to produce a massive increase in bureaucracy ?

Thornavis