From the archives: Rail privatisation - 22 years on

• This feature was published in February 2016.

The 0510 South West Trains service from Twickenham to Waterloo ushered in the new era.

The slam-door train was still painted in the colours of British Rail’s Network South East. But a red sticker was hurriedly slapped along the side, proclaiming this to be “Stagecoach 1”.

On any other Sunday this train would have been virtually empty. But on this particular damp morning there were 100 passengers on board. One was a rather startled fare dodger. About a dozen were genuine travellers. The rest were journalists, politicians, and rail enthusiasts seeking either to mark the start of a new regime or to lament the passing of the old one.

Brian Souter, founder of Stagecoach and the driving force behind this service, was nowhere to be seen. But Sir George Young, the Secretary of State for Transport, was on hand to claim the credit. As he faced the cameras, he must have been chilled to the bone in his impeccably tailored suit - this was still two hours before dawn in the middle of winter.

“I think that over the next year you will see a progressive improvement in passenger services, and more people coming back onto the railway,” he told me.

At Waterloo the driver, Gary Weller, was handed a commemorative plaque. “I was very nervous,” he admitted. “What do you expect with all these people about? Just got to get on with it, haven’t you.”

Others claimed that the first Stagecoach train had actually been a bus. The company had officially taken over from British Rail at 0200, but the 0250 Eastleigh to Southampton Central service went by road instead, because of local engineering work.

Labour MP Glenda Jackson and Shadow Transport Minister Brian Wilson had turned up in the middle of the night to gloat. “It’s a fiasco,” Wilson proclaimed outside Eastleigh station. “It’s particularly appropriate that the first train is a bus, because there’s going to be an awful lot of that under privatisation.”

The inaugural Great Western service followed about an hour behind South West Trains. In charge was a management buy-out team of former British Rail staff.

At Reading station the first few Great Western services were all buses. Even on such a landmark occasion, Railtrack had halted all the trains to carry out some maintenance.

Back at Waterloo, I interviewed Peter Field, the first managing director of South West Trains.

“We believe that the way we can become more effective will include not only some downsizing, but also some better value for money from the contracts that we have with Railtrack and the train leasing companies,” he told me.

“A lot of our working practices date back to 1920. And frankly they are not fit for today’s society. We are going to work hard at serving our customers better. And we need new working practices which allow us to do that.”

Standing in front of Stagecoach 1 at Waterloo, I recorded my piece to camera. “Top of Stagecoach’s priority list is to make the railways more efficient,” I told the BBC’s Sunday morning audience. “Most interpret that as meaning substantial job cuts.”

How true that turned out to be. Stagecoach had taken a plain vanilla, simple seven-year franchise. There were to be no new trains, and the minimum service specification was barely changed from the level provided by BR. Private sector enthusiasts swept away what they saw as the bad old days of state stewardship. Overheads were lowered and outdated methods replaced.

What I failed to see at the time was that all but one of the dozen top South West Trains managers taken on by Stagecoach would be sacked. In less than two years, they would be gone.

It would be much the same story at Great Western, where punctuality tumbled. A year after privatisation, I reported that punctuality had dropped from 90% of trains arriving within ten minutes of time to below 84%.

That happened just as the ex-British Rail management buy-out team sold their shares to FirstGroup. Overnight they became multi-millionaires and walked away. Soon afterwards Thames Trains bosses sold out to Go-Ahead. Much later the franchises would be amalgamated, along with Wessex Trains, to become First Great Western.

SWT would gradually evolve into consistently one of the best performing and highest regarded rail businesses. But at this early stage of privatisation, the team labelled the “bus bandits” got some things badly wrong.

Stagecoach management made a mistake that led to 2,000 trains being cancelled in the space of just two months.

Like all the new train operators, it sought deals with its staff to sweep away complex and restrictive “Spanish practices”, by replacing low basic salaries and myriad bonuses with a more simple structure.

The drivers liked the deal. They got a pensionable salary of £25,000 a year, approaching double the basic pay under British Rail, which made them among the highest paid blue-collar workers.

Managers liked it, too. It gave them greater flexibility when organising the staff rosters, and ensured there were always enough drivers for the anti-social shifts at weekends or at night.

Productivity went up. So South West Trains cut costs by making some drivers redundant. It was a voluntary process, and many (mostly older) drivers decided the offer was sufficiently generous. Ten per cent of the workforce departed.

It was disastrous. Suddenly, SWT found itself without sufficient experienced drivers with comprehensive route and traction knowledge to operate all the services. This was February 1997, exactly one year after taking control.

There was a long history of militancy among the drivers, particularly at Waterloo. They chose not to bail the company out by being more flexible about working on their rest days.

For weeks, this became my regular lead story on TV news bulletins. SWT had to run to Opraf (Office of Passenger Rail Franchising, the government office that controlled franchising) to agree deliberately to cancel 39 trains a day (2.6% of its total). Transport Minister John Watts called the company “inept”, and other MPs called for Stagecoach to be stripped of the country’s largest franchise.

This was politically damaging - others picked on a local management error to signify a wider malaise. “Railway privatisation is in meltdown,” proclaimed Labour’s Glenda Jackson. “It is the final humiliation for John Major.”

Stagecoach’s share price suffered. Peter Field, SWT’s managing director, had to fall on his own sword. The company was desperately short of executives with railway expertise, and Graham Eccles, an experienced railwayman who had narrowly lost a management buy-out bid for the neighbouring South Central franchise, was brought in to sort out the mess.

ASLEF drivers were offered a £1,000 bonus to work on their rest days for a fortnight. This was repeated over six weeks, with a further £1,000 for those who worked straight through. Drivers would pocket £4,000 extra, but lose it if they reported sick at all. It worked… the crisis was averted.

Under Eccles, SWT focused on running an efficient railway with reliable but old rolling stock. Stagecoach reported record profits, way ahead of any other train operator. At Waterloo I said to camera: “This will increase the pressure to replace slam-door trains, many of which are already 40 years old.”

Labour MP Gwyneth Dunwoody, who chaired the influential Transport Select Committee, told me: “That rate of profit certainly justifies nice new rolling stock and a commitment to a really good railway. That is what they told us they could deliver.”

Yet the scrapheap for slam-door trains remained years away. The Mk 1 rolling stock had been condemned as unsafe by the official report into the Clapham disaster in 1988. And the report into the 1994 crash at Cowden, which killed five people, recommended the replacement of all slam-door trains within seven years.

The French owners of Connex offered to do so. But the Department for Transport did not want to tear up existing franchise agreements or foot the substantial bill. And so slam-door trains soldiered on into the 21st century. The last one on main line duty was finally withdrawn in November 2005, almost ten years after privatisation.

Being the first franchise had ensured that SWT received a more generous subsidy than subsequent contracts, and it remained comfortably the most profitable rail operator throughout its first decade. Despite the early years of negative press coverage and political mauling, South West Trains turned out to be an inspired business deal for Brian Souter. Stagecoach emerged as one of the most successful transport operators, a position it has retained ever since.

South West Trains is also the sole passenger franchise to have remained with exactly the same owner since the railways were first privatised. The current contract expires in 2017, and the battle to retain control of its services (carrying wealthy commuters) will be hotly contested.

 

Then And Now: The SWT Facts

 

1996: 108 million passenger journeys a year

2016: 230 million passenger journeys a year

1996: 1,580 trains each weekday

2016: 1,689 trains each weekday

1996: 1,022 train carriages

2016: 1,449 train carriages (plus 150 more on order)

 

Then and Now: Transport Secretary Sir George Young

Twenty years after first interviewing Sir George Young on the first privatised slam-door train at Waterloo, I repeated the experience on a Class 444.

After two years as Secretary of State for Transport, he was later Leader of the House. He stood down as MP for North West Hampshire in 2015, becoming Lord Young of Cookham.

“It made the railways better. In those days there was just one train operating company - British Rail. And if it didn’t run the trains well, there was nothing you could do about it.

“Privatisation created a train operating industry, with people who had successfully run airlines, buses, shipping companies or railways overseas. So there was real competition. If one company failed, you got another one. They competed against each other on price, to get the best result for the taxpayer.

“They competed for customers in a way that British Rail never needed to do. The only way these people made real money was by getting more people to travel on the trains. We had an industry that looked outwards towards the customer, not inwards to the taxpayer.

“And we freed it from the constraints of the Treasury. Every penny British Rail spent was public money, and I had to bid for that money against defence, schools, health, and so on. Once it was in the private sector those constraints fell away. They could borrow money from the City.

“It had to be done quickly because an election was imminent in 1997. The opposition parties said they were going to renationalise the railway - they still do - so there was an incentive to get it in the private sector in its entirety before the election.

“In an ideal world we would have had more time to deliver the policy. It would have been easier if the other parties had not threatened to renationalize - in the end they left it as it is. But the threat did make it more difficult to get people to bid for the railways.

“Of course it took time to bed down. But it has stood the test of time and the basic structure has remained the same. There has been a fantastic growth in usage. Partly because of the strength of the economy, but partly because there has been an incentive to win new business.”

 

Then and Now: RMT organiser Phil Bialyk.

Phil Bialyk is a lifelong servant of the RMT union. For 30 years he has represented members in the region served by South West Trains and the Great Western. Considered a moderate, he stood for RMT General Secretary in 2002, but was heavily defeated by the late Bob Crow.

 

“Our policy has always been that we would prefer the railway to be brought back under state control. But we’ve had to live with the private sector, and we’ve adapted. We have bargained for, and achieved, better pay and conditions.

“Organising a national strike is really difficult. It is easier to hold a regional company to account through the threat of industrial action.

“Do we have a better deal for our members than we would if all this hadn’t happened? It’s impossible to say. It’s more about a straight salary now than payments for the specific tasks our members are asked to do. But it’s above the living wage.

“A lot of changes have been made for the better. Good things have happened. But they could still have happened under public control. Many of today’s managers were there under the old British Rail - the people are the same.

“If you ask our members what they do, they say they work on the railway. They don’t say they work for South West Trains or First Great Western. Their pride is from working on the railway. It’s not about pride in the private company running the trains.”

 

Then and Now: Passenger representative Christopher Irwin

In 1996 Chris Irwin was vice-chairman of the Rail Users Consultative Committee for the West of England. He has chaired the successor organisation TravelWatch SouthWest for most of the past 20 years. He now heads the UK delegation to the Channel Tunnel Intergovernmental Commission.

“There had been a shadow privatisation beforehand. British Rail was split into companies, and the Great Western was already being led by the people who would take it into the private sector. Thames Trains had recently been through a renovation with new rolling stock and a strong identity, so it was in good shape.

“So the prospect of privatisation had moved things on quite well. But during the sale process, senior managers were so busy talking to their bankers and getting into prospective private companies that they took their eyes off the ball.

“I blame many of Great Western’s problems on that. The managers did not really appreciate just how useful the corporate cushion of British Rail had been. Look at the Southall crash, when a Great Western train went through a red signal and collided with a freight train. Seven people died and 139 were injured.

“To some extent that happened through a lack of comprehensive expertise in the management teams. They’d always had the rest of BR to fall back on for guidance and advice. You had much less fleshy train operator management, and you had Railtrack getting rid of long-serving railway people.

“Train operators felt let down by Railtrack, and Railtrack hit out at people who had recently only run buses. It was the birth of blame culture, and everyone fell short.

“Did that early phase make the railway better? No. It was disappointing. People had too much to learn. People like Brian Souter thought running a railway would be like running a bus company. What they didn’t understand was the tedious enormity of running it. Something that looked intelligent and innovative on paper, such as reforming the pay structure, fell very flat when Souter tried to deliver it.

“The corner was not turned until after the creation of Network Rail. Getting rid of the blame culture was very important - that was under Richard Bowker’s Strategic Rail Authority and Tom Winsor as regulator.

“New rolling stock, new IT systems, better public information… all these things came well after the new millennium. We endured Southall, Ladbroke Grove and finally Hatfield. It took these crises to forge the change. It took the best part of a decade before the privatised railway started to be better for passengers than British Rail had been.”

 

Then and Now: Train Operator Christopher Garnett

Christopher Garnett of Sea Containers led the winning bid for the East Coast Main Line. He became perhaps the most widely respected train operator.

 

“People have an extraordinary way of looking at British Rail through rose-tinted spectacles. You didn’t see clean trains. You didn’t see passenger-friendly staff. But there was a massive public expectation that things would change overnight. We could not meet that.

“It was great fun in the early days, though. We could add trains, change frequencies, do all sorts of things because there was still the spare capacity. We could lay on more services just by using the stock more effectively and with better maintenance.

“We had the freedom to act. BR was not allowed to increase staff - it was incentivised to reduce staff numbers. We had to put more staff on the trains.

“But a lot of people made the mistake of thinking BR was inefficient - it wasn’t, it was highly efficient. Some of the new operators thought they could come in and apply bus principles to make big savings. That’s how they ran into the driver shortages on South West Trains. There would be a signal failure at Wimbledon, the service would go awry, and then there weren’t the spare drivers to cope with it. There was a sort of arrogance among some of the newcomers.

“We took over GNER in April 1996 and made no changes to start with. By September, I was worried by Virgin CrossCountry appearing with new uniforms and the trains in new colours. But we waited until we got the product right. We were putting on new trains in two years, more staff on the trains in two years. So I think that’s how long it took for passengers to really notice the difference.

“South West Trains took longer. But after getting it so wrong, they learned. Under Graham Eccles they really started sorting it out. He once told me: ‘Never try to come between Stagecoach and a pound note!’

“After they got the new trains, they did a brilliant new timetable. So I suppose it took them closer to ten years on that network to really leave British Rail behind.”

 

Then and Now: Stagecoach UK Rail Managing Director Tim Shoveller

As South West Trains was privatised, Tim Shoveller was a 23-year-old duty manager at Waterloo International, working for Eurostar. After four years in charge of South West Trains, he has recently been promoted to lead all Stagecoach’s rail franchises.

“Eurostar captured a sense of potential for the UK railway - a chance to deliver really high-quality services with modern hi-tech trains and high-quality stations.

“While I was proud to work for BR, the distinction between the services that ran into Waterloo station was sharp and there was real nervousness about what privatisation would bring. We were told it must mean pay cuts, fewer trains, less investment. A gradual run-down seemed likely.

“The investment that followed, especially in the replacement of slam-door trains, has vastly improved the service we offer our passengers. And they have responded. We have seen enormous increases in passenger numbers and a step-change in what they expect.

“It was a very busy railway in 1996, with 1,022 carriages. Today, there are 1,449 plus a further 150 on order. This shows just how much growth has been accommodated on broadly the same infrastructure. It also explains why siding space is so hard to find!

“The industry’s approach to safety and our view of our responsibility for the environment have radically improved, too. There is no place for employees or passengers being hurt on a modern railway.

“We have made big steps on key issues for passengers, such as provision of information, but we have much more to do. We have barely started on the ticketing revolution, but by the time we reach the 25th anniversary of privatisation, I am confident that cardboard tickets will be a distant memory.

“This is a fabulous industry, which has had 20 years of high levels of political support from governments of every type. The opportunity I see for the next 20 years is limitless, but is dependent upon each and every organisation and employee focusing on what we are here for: our passengers.”

• This feature was published in RAIL 794.