Top table dinner: The future of rail operations (part 2) – Robin Gisby – Top ten takeaways
Wednesday 15 January saw a room of enthusiastic representatives from across the railway industry gather for the second in our series of top table dinners focussed around the future of rail operations, co-hosted by Stephenson Harwood LLP and AtkinsRéalis. The top 10 takeaways from the first in the series with Alex Hynes can be found here.
We were joined by Robin Gisby, the CEO of the DfT Operator. Robin heads the organisation that operates the current nationalised train operators and will bring other operators into the fold during 2025 and onwards – and that was a key theme for discussions. We set out below our top ten takeaways from the evening.
To those who joined us, thank you for doing so and we hope you enjoyed the evening. To those who weren't able to join, we hope you find the takeaways helpful and hope you'll be able to join us at a future dinner.
- Government policy: Nationalisation of the railway is a signature Government policy that is popular with the electorate. Bringing track and trains together under one organisation will result in a completely different railway that should operate in a more straightforward way. However, it is not yet clear what structure a reformed Great British Railways will take. Will track and trains remain as separate business divisions under one overall umbrella organisation, or will they join together in a fully integrated organisation? What is clear is that the organisational structure will entail some kind of trade off because it is impossible for GB Rail to be a one-size-fits-all organisation. The Government should not be afraid to set out what it wants GB Rail to achieve when it sends out its White Paper on rail reform shortly; and likewise, the industry needs to have its vision and mission clear so that this can be implemented across the piece.
- Funding and treasury: Funding is a significant concern as for public sector operations within GB Rail to truly deliver on its objectives and provide certainty to supply chain operators there needs to be a committed funding obligation and the interface with the treasury will be key to this. The consensus in the room was that it would be beneficial overall if GB Rail's structure and operations were streamlined such that it could attract and sustain third party funding for major infrastructure as a way of reducing the need for public subsidy and supplementing fare and access revenue. Key is to just move forward and earn the trust of treasury so that the industry can reach a place where it is not micromanaged by the DfT and can really deliver. When setting up funding for the railway, certainty is needed – for operations, but also for the supply chain.
- Who does what in the new structure?: A suggestion was made that the Department for Transport should concentrate on securing funds for the integrated passenger operations and GB Rail by driving its business case forward with HM Treasury and implementing general policies aimed at stimulating passenger demand (e.g. for long distance role by implementing taxes on domestic flights) but otherwise leave GB Rail responsible for its own delivery and spending. However, there were concerns in the room that the Department for Transport role will fall victim to typical political cycle thinking, especially in the event of a change of Government where new priorities will emerge. Other structural issues will include how the infrastructure manager and passenger operator roles will be separated along with the role (if any) for the ORR following nationalisation. There was also a good debate around which elements of passenger operations should move to a more centralised function at "holding group" level and which should stay at the operator level. It was also worth acknowledging that although many of the passenger operators will fall within the remit of the DfT Operator after nationalisation, there is a proportion that will not – including the Scottish and Welsh operations, and local operations like Transport for London and Merseyrail. See also notes below on devolution and the role of local authorities and mayors.
- Where will efficiencies and costs savings come from?: An integrated organisation should have a sufficient scale of buying power to generate savings in supply chain costs. Although privatisation should not be regarded as a failure, it did result in some fragmentation – most notably with regard to back-office functions such as corporate services, human resources and revenue protection – so there is an opportunity for an integrated operations to achieve efficiencies by centralising such functions, for example by using one provider or via a centralised in-house support team. Although it was felt that procurement should probably be a centralised function, it was acknowledged that procurement should have some kind of interface with devolved bodies and mayoral authorities due to the impact that procurement could have on local businesses. There was general agreement that day-to-day operations, however, should be organised on a regional basis in order to be more responsible to local passenger needs. The size and national scope of integrated operations means that it should also look to leverage a national rolling stock plan (i.e. looking to purchase trains for use across England, rather than a specific region), which should form part of the United Kingdom's overall decarbonisation strategy. It was noted that the railway industry's supply chain needs to know what this long term plan is in order for it to build the investment needed to support in the delivery.
- Accountability and involvement of devolved authorities: For and integrated operations within GB Rail to deliver for passengers there needs to be an understanding of accountability. The existing KPI model as is currently used for both privatised and OLR operators will potentially not have the same impact on a nationalised operator because it would be meaningless to apply financial penalties, and it was questioned whether achieving KPIs was even something that passengers and the electorate cared about in any event. It was discussed whether there was a potential role for mayoral authorities with regard to accountability in regional services, including in terms of setting KPIs for regional performance or even through some kind of funding deal whereby mayoral authorities could put in money from their transport budgets to generate improved performance and reliability but would receive pay outs for poor performance/reliability. Any such involvement would need to be carefully structured in order to avoid such accountability producing an additional layer of bureaucracy and fragmentation that reduces potential efficiency savings by increasing management costs to address both regional and central government demands.
- Workforce integration: It was agreed that nationalisation will require a process of workforce integration and rationalisation of employee terms and conditions - including with regard to pay – but doing so will require trade union buy-in. A number of people wondered whether agreeing with the trade unions now a nationalised set of pay, terms and conditions for staff that would apply from day one for all new recruits while allowing existing staff to remain segmented may be a way of achieving that buy-in. What will be vital is incentivising staff to put performance first, which could be done through structuring bonuses or other benefits such that they are tied to delivery (albeit this would have to be done with trade union buy in and carefully structured so that the wrong behaviours are not accidentally generated). Attendees wondered if adopting a John Lewis-style employee ownership model would be worth exploring on the basis that employees who are given a stake in the entity identify with it more closely and are therefore invested in its success. Although there would inevitably be challenges in implementing such a model, it may help employees who it was felt tend to perform better when they identify with their employer, its mission statement and objectives.
- Talent attraction and retention: One area that would offer an opportunity to an integrated operator within GB Rail, is the ability of the organisation to attract and pool talent via recruitment platforms to bring in fresh ideas and having a clear mission statement and objectives allowing the workforce to want to be involved in changing and reforming the railways; helping to attract new talent, not least because the railway offers both long term career development and stability, which is increasingly attractive to young people. There is an opportunity to redeploy staff currently engaged in infrastructure dispute allocation to other functions with gaps in train planning and train crew management being identified as needing specific attention. There is an opportunity to create an agile employer with a strong identity which allows its people to move and explore other opportunities in the industry and to really feel that they have added value. GB Rail can also be more proactive in terms of monitoring manager performance and removing those who fail to deliver.
- Open access and freight: It will be critical to understand the opportunities and challenges for open access and freight operators once GB Rail is operational and rail reform has been achieved – particularly where the nationalised operators are under one roof and open access and freight are "competing" for train paths. Attendees were concerned that access should be allocated in a fair and proportionate way and that GB Rail – if it is an arms-length body – should not be subject to political or HM Treasury pressure when it comes to competition on the rail. The role and powers of the regulator will be critical here for ensuring that open access and freight operators are treated fairly. It was pointed out that while the public sector operator would be concerned about the potential for open access operators to reduce revenue, such competition should in fact be welcomed because of its ability to drive service improvements. Attendees noted that open access operators are able to open new markets to new communities and because of their agility are able to serve as guinea pigs when it comes to service and pricing ideas and as such open access should be viewed as complementary to the public sector operators and not just as competitors. Likewise, the freight industry is key in other areas of the economy, in particular getting goods around the country in a green way, and whatever happens with reform cannot impact on this.
- Innovation: Public sector operators should not be afraid to experiment or be punished if an initiative does not deliver as this will stifle innovation and service delivery. Although GB Rail will need to be systematic in how it tries to achieve best practice, it should be prepared to engage in pilot schemes for new ways of working in an integrated way, e.g. by teaming up with mayoral authorities to secure complementary or seamless interchanges with bus and/or tram networks. The UK government has signalled its desire to utilise artificial intelligence within the public sector and GB Rail should explore whether artificial intelligence could bring benefits to its organisation and delivery model. However, doing so will require organisational agility and innovative thinking within the management structure. Technology can be transformative but it is not a panacea and first and foremost it requires an astute diagnosis first of the problem or issue that needs addressing and must be done alongside delivering the fundamental basics – a train that runs on time.
- What can we do now?: Nationalisation of train operations will start in earnest in 2025, and continue for a number of years. At the same time, the government will bring forward legislation related to the formation of GB Rail and how that is intended to operate. Although there may be some time until we are at an end state, having a vision and a mission expressed now so that we can work towards that will be key, as well as the development and implementation of one or more long term plans, with common industry goals. These can be flexed if required as the industry developed, but without them there was a fear that nothing would happen. This will also help with people in the industry – both within the public sector operations as well as in the predominantly private sector supply chain. It is clear that the industry will be in state of change over a number of years – but we cannot wait until everything is in place to start making changes and improvements for the railway to regain the trust of the travelling public and to have credibility, including with the supply chain.
