Christian Wolmar: On the wrong track: Labour's biggest failure

Transport ministers are on the warpath over the railways. Suddenly, the scale of the money pouring into what seems like a black hole has dawned on them and, as yesterday's Independent reported, they are taking out their anger on the Strategic Rail Authority, the body created by John Prescott to oversee the industry. While the SRA certainly deserves a kicking, the Government needs to do a lot more than simply bashing its own baby in order to get to grips with what is happening on the railways.

A few numbers will help us. This year, the railways are receiving a staggering £3.8bn pounds in subsidy. So while the fact that one billion passengers were carried on the system for the first time in over 40 years may have been cause for celebration, the party spirits are rather dampened by the fact that every journey was subsidised to the tune of £3.80.

And here is a figure that really hurts. Remember old, inefficient, unexciting British Rail? Well, at the last cyclical peak in demand, in 1989, when 822 million passengers were carried, the average subsidy, at current prices, was just £1.21 per journey, according to Roger Ford in Modern Railways.

Let's put this in perspective. In the debates over university top-up fees, the controversy centres on various proposals to soften the blow that are costed in the £100m to £500m range - indeed, the total income from the fees is a mere £600m. This is the biggest domestic political controversy of the moment and it centres around sums that look trifling in comparison with what the railways are devouring.

So why have the politicians not tackled this issue before? Put simply it is because the railways are one of Labour's unmitigated failures - and they have been wary of attracting attention. Everyone in the Government agrees that the privatisation was flawed but they have refused to address the problems with this inherently dysfunctional structure and tinkered with the detail - hoping that it would improve things just enough to avoid any real overhaul. But the tinkering has made matters worse. Despite the record level of subsidy, performance is at an all time low with one out of five trains arriving late.

It's a grim picture, but it would be just about acceptable if we were going to get the super new railway that those in charge keep telling us is on the way. But none of the subsidy is going on major new projects. It is simply for routine maintenance and renewal, the costs of which have soared.

Nor does the argument that Network Rail is addressing a backlog of underinvestment hold water. Tom Winsor, the rail regulator, managed to get Network Rail's spending plans down from £34.5bn over a five-year period, to £22.2bn but, as Winsor's detailed report shows, much of the current spending is simply wasted: lines are temporarily closed for repair work that is never carried out; the cost of work in one part of the network is several times that of the same job elsewhere; and so on.

It is not that privatisation has flaws - it is that the concept was based on an impossible premise: a relatively efficient industry which required considerable subsidy was broken into 100 privatised components each expected to make a profit. The need for regulating these private companies has meant that an enormous bureaucracy has had to be overlaid onto this complex structure. And then there is Network Rail, which is in effect state-run, given that all its money comes from Government.

Privately, ministers are wondering what all these organisations are for and even hankering for a return to the simple days of British Rail. Alistair Darling was given the job of Transport Secretary 18 months ago to get the railways off the front pages, after the stormy days of Stephen Byers who had just killed off Railtrack without working out what should succeed it. He kept the lid on the issue in the short term by making safe decisions, such as allowing the not-for-profit Network Rail to replace Railtrack, rather than going for a root and branch reform of the industry. Now officials and ministers are having a rethink, brainstorming the possible alternatives.

Labour does not want to be accused of trying to bring back British Rail. But every feasible solution involves putting some of the pieces of the industry back together, most importantly operations, which are run by 25 different companies, with the infrastructure controlled by Network Rail. The latter has already brought maintenance work back in-house and now commissions its own signalling projects, rather than handing the job to private companies.

There is an inexorable logic about railway operation that requires integration. The best railways in the world, the Swiss and the Japanese, both make use of the private sector but they employ integrated companies.

Unfortunately, such a solution would require primary legislation and would not deliver anything in time for the next election. But any move towards reversing the crazy privatisation would be welcomed by both the public and many parts of the rail industry itself. More importantly it would show that Labour is prepared to be genuinely open-minded about doing, as Tony Blair put it, "what works".

xian@pro-net.co.uk

Christian Wolmar's 'On the Wrong Line' will be published later this year by Aurum Press