British Rail Board: Provincial
A report on rail passenger services supplied by the Board
in Great Britain for which the Board's Provincial business
sector takes financial responsibility.
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Summary
On 11 April 1988 the Secretary of State for Trade and Industry
referred to the Commission certain questions concerning the
British Railways Board's Provincial business sector (see Appendix
1.1).
In this chapter we discuss the main issues arising from our
inquiry. It ends with a summary of our conclusions and recommendations.
BRB's Provincial business sector is the remainder of the national
railway network after the extraction of the other sectors,
InterCity, Network SouthEast (NSE), Freight and Parcels. Its
widely dispersed services range from the North of Scotland
to Cornwall and from lightly-used rural branch lines to busy
urban commuter services. The latter are not unlike those operated
by NSE. In addition there are long cross-country services,
which in some cases are closely akin to those
operated by InterCity. Before formation of Provincial in 1982
management of these resources was a marginal activity of the
Board's regional organization. In 1983, the first year for
which data for Provincial are available, fares on this residual
railway covered only about 25 per cent of its operating costs.
It would have been hard to imagine a less promising business.
Provincial's initial strategy was to give priority to cost
cutting, and was essentially resource-based. Investment in
relatively low-cost rolling stock was seen to be the most
important first step. Efforts to increase traffic came later
as the sector's organization and particularly its marketing
developed. This can be seen in the 7 per cent growth in passenger
miles between 1986-87 and 1987-88 (see
Table 10.1). This increase in traffic, combined with a real
growth in fares, has led to the proportion of Provincial's
costs covered by fares steadily increasing to some 30 per
cent in 1987-88 while the 1988 Rail Plan forecasts an increase
to 34 per cent in 1989-90 rising to 37 per cent in 1992-93.
Details of the consequent reduced call on public service obligation
(PSO) grant are set out in paragraph 1.9. This is very encouraging
and a clear endorsement of the concept of sectoral management
with its much sharper focus on marketing and on business results.
Provincial's drive to reduce costs has been based on its management
structure of sub-sectors, Profit Centre Groups and Profit
Centres. Such units can be held to account for the use of
resources. The Board emphasized to us that this was a key
element in achieving clarity of management accountability
for the business. The accounting conventions by which costs
are allocated have been refined over many years to provide
reliable and comparable financial information for these units.
We do, however, have a reservation. Provincial's customers
experience an individual service, not a Profit Centre, and
we see a danger that the decision not to take routine financial
analysis below Profit Centre level to individual services
or groups of services may result in unsufficient management
attention at the service level. We note, for example, that
there has been neither systematic collection of load factor
data by service across the sector nor systematic appraisal
of the limited amount of data that have been available. We
therefore see the need for a closer look at individual services
and as a first step in that direction we have recommended
that BRB should introduce the reporting of direct costs at
the level of individual services or groups of services. This
will enable their financial performance to be monitored and
management attention to be focused on areas where decisions
on investment, fares and restructuring of services may be
needed. We also believe that Provincial should now pay more
attention to the quality of services it provides, service
by service; we have made a number of recommendations to this
end. In particular we have recommended that Provincial should
give clear guidance to its sub-sectors on the frequency and
nature of passenger counts and the way in which the data produced
should be analysed; adopt a system of counts on all Rural
as well as Express and Urban services; and set and publish
load factor standards.
There is considerable variation between punctuality standards
presently set for different Provincial services. We have recommended
that Provincial should adopt one network standard for all
its services of 90 per cent, of trains to arrive within five
minutes of right time and aim to achieve this standard on
all routes. Where existing standards are lower than the new
network standard, Provincial should provide interim targets
for each route which represent the best that can be
achieved on particular routes with present facilities. Performance
should be moved progressively towards the higher achievement
represented by the new network standard which for some services
may require investment in rolling stock and infrastructure.
These internal local targets should be communicated to the
area Transport Users' Consultative Committees and interested
railway user groups with an explanation of how Provincial
intends to move the performance
of those services which are currently below it towards the
network standard.
We considered the effect on Provincial's performance of the
Government's Direction to BRB in December 1974 to operate
its railway passenger system so as to provide a public service
comparable generally with the one provided at that time. This
Direction so far as Provincial is concerned has effectively
been extended by the Direction of March 1988 (Appendix 2.1).
The Government compensates the Board for running unprofitable
services by means of a PSO grant.
Having played its part in the reduction of the total claim
by the rail passenger business for such compensation in the
period 1984-85 to 1986-87 by some 28 per cent in real terms,
Provincial plans to reduce its own call on PSO grant from
£432 million in 1986-87 to £384 million by 1989-90
in 1987-88 prices, a real reduction of some 11 per cent. Moreover
BRB has set Provincial an internal target for a call on PSO
grant of £336 million by 1992-93, also in 1987-88 prices,
which
would represent a further real reduction of about 13 per cent.
This latter target has been set prior to any formal PSO grant
target being set for BRB by the Government for the three years
to 1992-93.
The PSO Direction reflects Government policy on those parts
of the railway which the Government judges to need, and be
worthy of, support for social reasons. Local conditions and
required patterns of service change. It is unlikely that the
size of the network and the pattern of service thought suitable
in 1974 would be suitable indefinitely. The longer the passage
of time since 1974, the more likely it is that the underlying
rigidity of the Direction will result in socially
advantageous rail services being withheld or rail services
continued without adequate justification. The Transport Act
1962 (Amendment) Act 1981 allows BRB to open a station or
service 'experimentally', with consequent immunity from the
normal protracted closure procedures but, as we show in Chapter
10, the Act has had only a very limited impact on Provincial's
provision of services.
We therefore considered whether there would be any benefit
in increasing the involvement of local authorities in the
provision of services now sponsored by Provincial. Services
sponsored by Passenger Transport Executives (PTEs) are subject
to a separate, potentially more flexible financial regime
through the block grant system of local authority finance.
We were favourably impressed by the way Provincial and the
PTEs had co-operated in providing rail passenger services
within the major provincial conurbations in Great Britain.
We also had evidence of the successful renaissance of rail
travel in the Cardiff Valleys area of South Wales, largely
brought about by co-operation between Provincial and the county
councils of Mid and South Glamorgan. These examples show that
the close involvement of local authorities in the provision
of local rail transport can be very effective in providing
attractive levels of service.
We discussed the potential for increasing the involvement
of local authorities in the provision of local rail transport
with the Association of County Councils (ACC), the Passenger
Transport Executive Group (PTEG), and with BRB itself. It
was not a matter we could pursue very far within the scope
of this inquiry but we were encouraged by the positive response
from all three parties
despite the difficulties which they, and indeed we ourselves,
can foresee.
We have already noted that the services provided by Provincial
are very diverse. Of its three broad categories of services,
Express, Urban and Rural, we believe it would be practicable
for local authorities to be more closely involved only in
Urban and Rural. Here there would be advantage in a new system
which coincides with Provincial's devolved style of management.
Express services,
however, may cross several counties or in the case of Scotland
several regions and it is unlikely that these authorities
would invariably have sufficient common interest in a particular
service to generate an appropriate level of co-operation.
We recognize the need to demonstrate a clear incremental benefit
from any change in the system of support for Provincial's
services to compensate for the increased administrative burden
on BRB of an increased number of PTE-type arrangements. Responsibility
for maintaining continuity of rail services would also need
to be clearly defined and there is a limit to the number of
authorities with
which BRB could be expected to negotiate for financial support.
NSE's progress towards independence from PSO grant is likely
to leave Provincial as the only supported sector. It would
therefore seem to us to be particularly appropriate to re-consider
the arrangements for funding Provincial's services. We saw
in the evidence submitted to us a strong desire for improvement
in Provincial's services both in quantity and quality. There
could be substantial benefit to local communities, to BRB
and not least to the taxpayer in a close local
involvement in responding to such desires and paying for their
satisfaction. Like the existing PTEs, the counties and regions
could be expected to have a more positive remit than simply
to provide a public service comparable to that provided in
1974 and therefore to be in a position to respond more flexibly
to changes in the patterns of demand which have taken place
and will inevitably continue to take place. In this context
there could also be an expansion of the role of the Scottish
and Welsh Offices. They might be the co-ordinators for financial
support on the one hand and the standard of service on the
other in Scotland and Wales. We should expect to see a better
Urban and Rural railway as a result.
We have therefore recommended that BRB should consult with
relevant Government departments and such other bodies, not
excluding the private sector, as may be necessary to consider
the question of:
(a) increasing the present number of Passenger Transport Authorities
(PTAs) to cover areas such as the East Midlands, Cardiff and
the Valleys, and Avon;
and
(b) transferring financial responsibility for supporting non-PTE
Urban and Rural services serving smaller urban areas and rural
communities to counties and regions or groups of those bodies.
[The Assessment and Summary continues in the chapter linked
below]
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