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Rail has never enjoyed a level playing field with road

John Helm Chatham ME4
05 January 2018
 

In his latest anti-rail rant, Paul Withrington (Letters LTT08 Dec 17) invokes the ghost of Dr Beeching to justify dismemberment of the system. While it is true that a small part of the network will generate a disproportionately large amount of traffic, that truism is also applicable to transport networks generally, regardless of mode. Should we, for the sake of argument, close underused minor roads because the cost of maintaining them outweighs the benefits they bring to local communities? That would be the logical outcome if decisions were made on purely economic grounds alone. But no one is seriously suggesting that.

We should not forget that Beeching was appointed by Ernest Marples, a minister with a vested personal interest in a rival form of transport (road construction). 

To be fair to Beeching, trying to make BR profitable was an impossible task given the extent of road competition; the costs of rail transport were directly born by the user, whereas road costs were funded indirectly by the taxpayer. It was not a like-for-like situation. There was no level playing field then, and there isn’t one now.

The Beeching Plan contained many useful insights but it was flawed in a number of respects: it was a diktat – there was no discussion, no consultation, no examination of other options, and no independent audit of the financial claims he made. No one had thought of competitive tendering then, and state subsidy of unremunerative services was only acknowledged in 1968.

There were many reasons for BR’s poor financial state but they are too numerous to list here. Suffice is to say that upon nationalisation in 1948 the BR-dominated British Transport Commission was lumbered with a commencing capital debt of £1,067m, upon which a guaranteed 3% annual interest was charged (initially redeemable in 1978/88). This was compensation for the private owners and it was payable whether or not BR made a profit. Further debt was incurred to fund the 1954/55 modernisation programme so that by the end of 1962 the capital debt had more doubled to £2,437m. Another important factor was that railway charges were still subject to a statutory maxima, which meant that fares and charges generally lagged behind increases in labour and material costs.

BR returned a ‘profit’ on the operating account in the period 1948-1955. The best year was 1952 with an operating ratio of 90 (i.e. expenditure expressed as a percentage of revenue). But this contrasted unfavourably with the interwar years average (of the Big Four groups) of around 80, and the 1913 average (of the major companies) in the lower 60s. The Beeching economies did not return BR to profit. In fact, by 1967 the (negative) operating ratio had increased to 121, which was only slightly less than the worst ever recorded figure of 122 in 1962.

Whenever the subject of Beeching is discussed – whether by pro or anti – it is nearly always about the impact on passenger services, and the argument revolves around branch lines and duplicated main routes, etc. Freight hardly gets mentioned. Yet it was the contraction of this traffic that probably did more damage to BR than anything else. Historically, freight had been more important than passenger traffic. Freight accounted for 53.9% of total BR revenue in 1948 but had dropped to 48.3% in 1962. Between 1955 and 1962 passenger revenue actually increased by 36.4%, but all three freight revenue categories suffered setbacks: merchandise (down 19.5%); minerals (down 24.5%); and coal & coke (down 13.4%). And the downward trend has continued ever since – as did BR finances.

To quantify this loss in today’s terms, rail freight now accounts for less than 1% of Network Rail revenue. The latest Network Rail results show an annual revenue of £6,259m, but freight contributed a measly £53m. Network Rail even makes more money from property rental income (£293m, or 4.7%). Beeching at least recognised the importance of rail freight, and its loss is probably responsible for much of the current financial situation. Lord Adonis (‘Switching freight from rail to HGVplatoons will allow more passenger services – Adonis’ LTT08 Dec 17) should take note of what the Doctor said: “Without freight the main network could not exist. Although passenger trains can be operated profitably over main routes where they have to contribute only a part of the route cost, they would, on their own, be capable of supporting only a small fraction of the existing route mileage outside the London suburban area.”

There appears to be some correlation between the declining freight and increasing losses. But Philippa Edmunds from campaign group Freight on Rail (Viewpoint LTT 08 Dec 17) probably knows too well the old adage that, ‘there are no votes in rail freight’  (unlike passenger trains of course).

 
 
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