As if the privatisation of the railways, implemented by a Tory government 15 years ago, had not have caused enough damage, the coalition government seems now intent on introducing more changes, which are bound to aggravate this damage even more.
These changes, if implemented, are supposed to be based on the recent McNulty report into the "value for money" generated by the railway. Not only has the coalition endorsed the findings of this report, but, in fact, it started to implement the report's recommendations even before it was published in May.
It should be noted, however, that this report was not a Tory or Lib Dem initiative - it was actually commissioned 18 months ago by the then Labour government. So, as with the health service, and public sector pay and pensions, it seems the ConDem government is going to base its turn of the screw against the railways on the plans which were being mooted by Labour before it was ousted from office.
A worn-out tune
McNulty's remit was supposedly to look at ways of reducing the cost of the rail service to the public. The starting point of this enquiry was the fact that, as taxpayers and as passengers, the public pays nearly a third more for rail travel in Britain than in the average European country - and it's not as if it gets a gold-plated service for its money in return!
This song is not a new one. Past policies have always been justified by the need to get "better value for money" - in fact, this was the justification for rail privatisation in the first place. The nationalised railway was supposed to be too monolithic and moribund to transform itself into a lean operation. What was needed was an injection of "private-sector dynamism" and "market discipline", while private companies would make the much-needed investment in the railway and reap their returns - or so the argument went.
In fact, the result of 15 years of privatisation is the current sorry state of affairs. A national rail service is inherently unprofitable, so creating opportunities for profiteering has meant not only fleecing passengers, but a state subsidy to the railway which has ballooned from £1bn in British Rail days, before privatisation, to £4.6bn last year (and over £5bn before that). And despite these massive injections of government cash, the private rail operators have performed worse than British Rail, with its chronic under-investment.
But despite its euphemistic title, "Realising the potential of GB rail", the McNulty report has nothing to do with improving the railway. In fact, a more adequate title would have been something like "Realising the potential of GB rail to generate profits for the business sharks".
Far from questioning the very basis on which the railway is run, McNulty's recommendations are for more of the same - more responsibility and "flexibility" for the current private operators, more involvement of the private sector, more "market-driven" initiatives and less capital investment.
McNulty doesn't point out the obvious fact that the escalating costs of the railway are down to the greed of all the private parasites who are taking their cut - or that the more efficient European railways with which "GB Rail" is compared are all state run. But he wants to find "savings" - for the companies - by cutting jobs and pay and lengthening the hours of the workforce. A bit rich from someone who has netted over a quarter of a million pounds over the last three years from his part-time role on the board of the Olympic Delivery Authority (ODA), on top of the £800 per day he gets as head of a Northern Irish quango and the £160,000 salary he enjoyed up until 2009 as chief of the Civil Aviation Authority! But then, that is no doubt why he was the ideal man for the job!
British Rail in smithereens
In fact, McNulty takes his inspiration from the privatisation process of the 1990s and his recommendations merely aim at expanding its scale. So it is worth recalling here how this process unfolded and what were its consequences.
The "big bang" of British Rail privatisation, which broke it up into a myriad individual private companies, took place between 1994 and 1997. Before this, it was "restructured" to prepare it for privatisation. From 1990 onwards, regional BR management was replaced by "business units" - over 100 of them - which began to operate as separate companies, with a spiderweb of contracts and legal agreements to govern the new business relationships between them. In 1994/5 the government had to double its subsidy to British Rail, to £2bn, in order to cover the costs of its new "internal market".
This fragmentation also had an impact at the operational level, on communications between rail workers. Signallers now worked for a different company from drivers and station workers, and workers for different operating companies were supposed to be competing with one another rather than cooperating. This, in an of itself, was a serious potential safety hazard since, in emergency situation, a breakdown in communications was enough to result in a major disaster.
In 1995/6, parcels, on board catering, telecommunications, freight and rolling stock companies were sold off. The 25 Train Operating Companies (TOCs), which had been directly derived from BR's regional operations, were franchised to the private sector between 1996 and 1997.
The biggest problem was what to do with the infrastructure, which required too much investment to be attractive to companies looking to make a quick return. So the infrastructure was separated from train operation altogether, and incorporated in 1994 into a new company, Railtrack, which was floated on the stock market in 1996.
The main target - the workforce
Above all, the run up to privatisation involved a huge attack on the workforce. 150,000 jobs were cut in the process, out of 280,000. Due to chronic under-investment, railway operations were very labour-intensive and the safe running of the system relied on the experience of a lot of workers. The state of the tracks, for instance, was checked by maintenance workers walking the same section of track every day, looking for defects. It relied on them having the experience to spot the smallest change. With the massive job cuts, a lot of this experience was lost all at once, never to be replaced.
Rail workers faced numerous reorganisations, in which they were forced to reapply for their own jobs and terms and conditions were eroded. Breaks were cut and limits to the length of the working day were scrapped. Drivers, for example, lost the 8-hour limit on their working day, which had been won as far back as 1919. Every train used to have two drivers in the cab but this was ended and then Driver Only Operation - running trains with just a driver and no guard - was eventually brought in on some services, though it met with fierce opposition from workers.
With privatisation, national collective bargaining was lost and the door was opened to variations in pay and conditions between companies. The ability that workers had previously to apply for any job anywhere on the whole network without changing employer, was lost since, now, job applications had to be confined to their own companies.
The deal done by the unions at the time of privatisation protected some of the conditions of existing rail workers, like pension rights and redundancy terms, but made no provision for new employees. This paved the way for a two-tier workforce (soon to become three-tier, as the companies began to resort increasingly to temps) and to divisions between those employed pre- and post-privatisation.
While some post-privatisation recruits did not even have the right to join the Railway Pension Scheme, all of them lost the past automatic entitlement that BR workers had to discounted or free travel on the whole network (which in London, included the Underground). Instead, whatever concessions they got were based on deals between the operating companies, which were susceptible to change.
So, for example, when both the East Coast mainline and East Anglia service were run by National Express, workers on the East Coast mainline could travel into Liverpool Street for free on the East Anglia service. However, when National Express bailed out of the East Coast franchise, they suddenly lost that right. Likewise, cleaners working as subcontractors on East Coast mainline trains could travel home for free to Peterborough while GNER run this franchise. But when GNER lost the franchise, they suddenly found themselves expected to pay full fare to come to work on the trains they cleaned, though they were doing exactly the same jobs. At a stroke, this put many of them out of a job, since travelling in from Peterborough was now unaffordable.
Due to privatisation, insecurity became a fact of life for all employees, as they were passed from one employer to another - not only at the end of franchises but also due to franchise operations going bust and contracts being lost.
Subsidising the TOCs' profits
Railtrack, of course, ended up a spectacular failure. In order to maximise dividends, at the stroke of a pen its management decided that rails would last twice as long as under BR. Four years on, that decision had fatal consequences, when a rail on the East Coast mainline shattered as a train was passing over it, causing the Hatfield derailment in which four people died.
Immediately after Hatfield, speed restrictions were put in place on hundreds of locations around the network. Railtrack knew full well the dangerous state of the track and, now that an accident had happened, they could not afford to risk another one. The consequence was widespread disruption for months, as they struggled to catch up with the backlog of rail renewals.
Hatfield was the beginning of the end for Railtrack. Due to the scandal caused by Hatfield and its aftermath, its share price fell drastically. The government, now Labour, hoped for a takeover, but no company would touch Railtrack with a barge-pole, so the government itself ended up winding up Railtrack and bailing out its shareholders - as if they had not already benefited enough from the company's profiteering!
But despite their stated aim - before the 1997 election - of bringing the railway back into state ownership, Labour did not renationalise Railtrack. Instead, it created a "not-for-profit, arms-length" company called Network Rail - meaning that the government, while being financially responsible for it, relinquished any semblance of control over the company. Their intention, right from the beginning, was to re-privatise it. But, although Swiss bank UBS was mentioned as a potential buyer, their demand that profits should be guaranteed by the state, was unsalable to the electorate. So, Network Rail remained in the public domain.
The company's first job was to clear up the confused mess left by Railtrack and its sub-contractors. To this end, it took maintenance (but not renewals) contracts back in-house, together with the workers concerned. But having dealt with the leftovers of Railtrack's negligence, Network Rail started to cut back with a vengeance. Between 2004 and 2009, it cut costs by 30%. In the last couple of years, it has cut 1500 maintenance jobs. More jobs were lost when it cut its rail renewal programme by one-third, causing Jarvis's rail renewals business to go bust. Obviously, Network Rail figures that memories of Hatfield have faded!
However, the other, less publicised remit of Network Rail, right from the beginning, was to renew the ways of channelling government funds to the private operators - to their advantage, of course. So Network Rail was given the form of a partnership between the rail sharks themselves, run by a board of directors, most of whom were closely linked to the TOCs. Behind an apparent increase of state control over the railway, the launch of Network Rail marked a consolidation of private capital's stranglehold over the railway.
Today, the bulk of government funding is at the level of Network Rail, which is mainly publicly funded. The charges which the freight and train operating companies pay Network Rail for using its infrastructure are set by the government and do not reflect the full cost of maintaining the infrastructure, never mind upgrading it. So the subsidy to Network Rail, in effect, subsidises the profits of the operating companies.
The train operating companies also receive direct subsidies, though. Some services will never be profitable without a subsidy, but for the biggest money-spinners, like the commuter services and the main lines to the north of England and Scotland, it was envisaged that through the course of the current franchises, their subsidies would dwindle to nothing and that the operators would finally end up paying back handsome sums to the government for the privilege of having the franchise. Whether this pay back would also cover the companies' indirect subsidy via Network Rail was another question, which was never answered, though. That was the idea on the East Coast line, for instance, when first GNER and then National Express failed to live up to the optimistic promises of their bids, and "handed back the keys".
For other companies, there have been get-outs which have allowed them to take the money and run. Under the so-called "cap and collar" franchise arrangements, if revenue fails to meet the companies' projections, the government forks out the difference. This "revenue support" totalled £290m in 2009/10.
For example, the First Great Western franchise was billed as a "money-spinner" for the taxpayer, since First Group undertook to pay £1.13bn in "premium payments" for a 10-year franchise. But the bulk of the payments were due towards the end of the franchise. For the first three years, First got over £200m in subsidies. Then, thanks to the recession, its very optimistic growth predictions proved unattainable, and revenue support kicked in. So, although it paid £250m in premium payments last year, it got back £141m of public money to compensate for the shortfall in revenue, which enabled it to maintain its profits, despite the crisis. Now First has just exercised an option to bail out of its franchise 3 years early - thus avoiding paying the remaining £826.6m it had committed itself to pay to the government in those 3 years. The ease with which the so-called "money-spinner" for the taxpayer turned into a "money-sponger" is nothing short of remarkable!
Enlarging the sharks' cake
McNulty claims to aim at reducing the cost of the railways to the taxpayer - the same worn-out "value for money" pretext. But in fact, what he is looking for, once again, is a way to increase the profits the state provides to the capitalist class through the railway system.
That is why he is wilfully blind to the drain of profits from the whole system - from the train, freight and rolling stock companies, to the companies like Rail Gourmet, Compass, ISS, Serco, Initial, etc.. making profits from providing cleaning, maintenance, etc, services to the rest. Even "not-for-profit" Network Rail declared a "profit" of £2bn last year, though this should have been invested in new infrastructure, but hasn't. So instead of curtailing the huge waste all this represents, McNulty advocates even more private operators.
Despite admitting the blindingly obvious fact that fragmentation of the railway is a major source of problems and cost, he wants to fragment it still further. Not only does he want to separate off the property-owning arm of Network Rail - providing significant asset-stripping opportunities for what he calls "3rd party equity" - he wants to "decentralise" the rest of Network Rail, forming independent regional operators. These could be privatised, or could be integrated with the train operating companies, so they ran their own section of track - never mind the fact that they have already proved incompetent at running trains, let alone maintaining tracks! This "devolution" of Network Rail has already started, in anticipation of McNulty's recommendations. The Wessex region is the first to go independent, its former route director becoming its new managing director. The first consequence, as functions are decentralised, has been to create a new layer of regional bureaucracy, doubling the number of managerial/admin staff from 1500 to 3000.
As to Train Operating Companies, McNulty wants them to have an even bigger role in the railway. Yet, if passengers and workers were given a say on the issue, they would certainly not put the TOCs in charge of anything! Leaving aside those which have already failed financially, the others have only succeeded in antagonising their "customers" to the extent that there have been angry campaigns against them. As to workers they have long-standing accounts to settle with the TOCs.
But, never mind! McNulty recommends bigger franchises - suggesting that FCC and Southern, Greater Anglia and c2c, and Northern and Trans Pennine Express could be amalgamated - and longer ones. As a cherry on the TOCs' cake, he also wants TOCs to be given a freer hand to run services - i.e. that all government prerequisites should be removed from franchise deals - so that they can cut costs where they please with impunity. And, as mentioned above, he floats the possibility of the TOCs taking over responsibility for the infrastructure and recommends a trial of this "vertical integration". These plans could amount to returning the railway to a worse state than it was in after the 1921 Transport Act, when the dozens of private companies were regrouped into four regional monopolies. Is that what they call "progress"?
The Rail Delivery Group, a strategic body which is supposed to oversee the implementation of McNulty's recommendations, has already been set up. It consists of the CEOs of the operating companies and is chaired by Tim O'Toole of First Group, possibly the most unpopular of all the companies which run a TOC!
As to the claim that this is all in the interests of the passengers, it is the ultimate hypocrisy. McNulty also wants TOCs to have a freer hand when it comes to raising fares, even though they are already screwing a lot more money out of passengers than any other railway in Europe.
In fact, use of the railway, in terms of passenger-kilometres, increased by 59% between 1996/7 and 2009/10, while ticket revenue increased, in real terms, by 76% over the same period. So the train operating companies seem to have had plenty of freedom to raise fares already. They have been allowed to raise regulated fares by 1% more than inflation but most fares are unregulated anyway, and they can do what they like with those - and raise car parking fees, etc., as well. No wonder more than half of all rail passengers are dissatisfied with the "value for money" of their tickets. And they're soon going to be even more dissatisfied, since the government has decided that the cap on regulated fares will be raised to 3% above inflation for the next three years.
McNulty points to the fact that punctuality has vastly improved by now - except that his comparison is based on the immediate post-Hatfield days, when more than a fifth of trains were delayed, rather than being based on the situation before Hatfield, for instance! In fact, punctuality has only got back up to 1996 levels in the last two years. British Rail did better than that. As for the claims that safety is at an "all-time high", they have to be suspect, given the drastic cutbacks in basic maintenance and renewals, and the loss of hundreds of experienced maintenance workers in a short period of time.
Signalling the attacks to come
Finally, McNulty gets to the real target of his report - the workforce. Despite the huge cuts made both pre- and post-privatisation, he scents yet more potential for "savings" on the backs of rail workers - in the interests, again, of maximising the profits of private operators.
McNulty doesn't stop to wonder about the effect of the drastic cutbacks which have already been made by Network Rail - he just applauds them. And he predicts that by 2014, the company will have cut costs by 30%, reducing the workforce by 17%, most of the cuts being borne by maintenance and signalling workers!
On the question of pay, he finds it outrageous that rail workers have enjoyed above-inflation pay rises. He thinks even pay rises which are just at the level of inflation should become a thing of the past and railway workers should have their pay frozen! As if rail workers were not among the lowest paid, especially now that they have been deprived of most of the travel concessions they enjoyed under BR.
Never mind either that many rail workers, employed by sub-contractors, are on minimum wage! The case of the cleaners employed by ISS on the East Coast main line trains, is typical. New workers were taken on at the minimum wage straight away after ISS got the contract. But no-one among them has had a pay rise for the last 11 years (except when the minimum wage was raised by a few pence). The reliance on agency workers, paid at a lower rate than permanent workers, has become common not just among the sub-contractors but also in the operating companies. East Coast, even after passing into government hands after National Express gave up the franchise, has kept some workers on casual contracts for over five years. Though McNulty doesn't mention such cases, he'd clearly like all rail workers to be reduced to this level.
In contrast, those at the top of Network Rail and the private train operators have made a killing. Network Rail has long been notorious for its "bonus culture" - its previous boss, Iain Coucher, got a £1.6m pay off when he left Network Rail under a cloud last year, which came on top of the estimated £6m he made in his eight years in the job. Overall, the pay of directors of train operating companies and of Network Rail has gone up by an average of 14.5% in real terms since 2004/5 - not much evidence of belt-tightening there.
McNulty also deplores what he calls the "continuous" reduction in working hours. It may be true that the working week has been reduced to 35 hours for some rail workers in recent years - mainly those who work directly for the TOCs - but it is also true that the actual hours worked by most people are much longer than this, thanks to the need to work overtime in order to make up for inadequate wages. It has long been common, since British Rail days, for rail workers to volunteer for 12 hour shifts, day after day. And even if the working week has gone down, it hasn't stopped the basic shift length from going up - even drivers can be forced to work 10-hour shifts. It is also the case that many rail workers have irregular working weeks (with length changing from one week to the next), so that a theoretical 35-hour week can easily mean working as many as 48 hours on a particular week. In general, reductions in the working week have always been paid for by a degradation of other conditions.
The report has a string of not-very-original suggestions when it comes to cutting jobs. McNulty wants Driver Only Operation (DOO), where the driver has to cope with safety issues and emergency situations without the help of a guard, to become the "default" way of running trains - 25 years after it was introduced in only a limited number of situations, precisely because of the risks involved! His other bright ideas include closing ticket offices on the smallest stations altogether and reducing the opening hours of others, replacing workers with automatic ticket machines. He blithely asserts that having someone in the ticket office does not increase passengers' feelings of security - try telling that to the many passengers who already have to travel to and from completely unmanned stations! Besides, the companies have found from bitter experience that their CCTV cameras do little to protect even their own ticket machines from raiders, never mind protect human beings.
One of the ways that McNulty implicitly advocates, therefore, as a means of generating more profits in the railway is to reduce the wage bill by cutting jobs. However, although the workforce has increased in size since privatisation, it has not nearly kept pace with the increase in the number of passengers. Under-staffing is a chronic problem, making such straightforward things as booking leave a constant difficulty in many sections, even given the high amount of overtime worked. Any further reduction in manning levels will inevitably be achieved not only at workers' expense in terms of jobs, but at the expense of safety for everyone, workers as well as passengers.
For good measure, McNulty also advocates further attacks on the pension scheme. But neither Network Rail nor the private operators need any encouragement in this respect - they've had their eyes on it for years already. Both British Rail and its employees were allowed to take pension contribution holidays under the legislation introduced under Thatcher and this benefit passed over to the private companies after privatisation, despite the fact that the fund was built up by the employees and with state funds in the first place. The private companies paid nothing for years, saving themselves a fortune. After this depletion of the fund, now employees have to pay contributions of 9-12% of their wages for a pension which is unlikely to allow them a decent living anyway!
In most respects, therefore, nothing in the recommendations made by McNulty is very new. His report is a rehash of everything which has gone before - both the search for new avenues for increasing the parasitism of the capitalists on the rail system and the drive against the workforce, since this is the only way they can do it.
But this time, unlike in the 1990s, the resulting turn of the screw is taking place in the context of a generalised economic crisis, in which the capitalist class and their state are scraping the bottom of the barrel for all the profits they can find. So rail workers can expect the onslaught on their jobs, wages and conditions to be more concerted than ever.
They, along with the rest of the working class, need to prepare themselves to respond in kind.