Chris Grayling isn’t privatising the railways – but his weird partisanship will hurt them all the same

We couldn't bring ourselves to use a picture of Chris Grayling for the third day running. Image: Getty.

Transport Secretary Chris Grayling this week announced that he was going to give UK rail infrastructure body Network Rail a whipping. Its Oxford-Cambridge East West Rail project will now be built by a separate organisation, and future rail franchises will be more “vertically integrated”, with “joined-up teams” running tracks and trains.

The news was reported as a return to private control of infrastructure, much to the Telegraph’s glee and the Guardian’s horror. But to understand what this means requires a quick recap on how the railways in Great Britain work.

I’ve written about this in these pages before, but here’s the quick version. Network Rail owns and runs the tracks. Grayling’s Department for Transport (DfT) is in charge of franchised train operating companies (TOCs), which compete by tendering – like an auction – for the obligation to run a level of service defined by the DfT on a set of routes defined by the DfT, in exchange for a monopoly of services on those routes. TOCs pay Network Rail to use its tracks. Some tracks are only used by one TOC; the busiest tracks are used by several TOCs at the same time.

Freight and open-access operating companies, which are all for-profit, just pay Network Rail directly to use its tracks. All freight and open access services run over track that’s also used by one or more TOCs. Network Rail is in charge of the links between the different companies involved: it manages the national timetable; it calculates who’s running trains where and how much they need to pay; and ,when things go wrong, how much it costs and whose fault it is.

Like Newton’s laws, this simplified model is wrong in various ways that don’t matter here. The only important one, which I’ll come back to, is that some TOCs are commissioned by the devolved governments, rather than the DfT.

This system, which has been going in its current form for about 15 years, has various advantages and disadvantages over the previous ways that railways in GB have been structured.

Its advantages over the immediately previous system with TOCs and privately-owned tracks are extremely clear. The infrastructure is no longer owned by property developers, but by a public sector body; Network Rail has tended to be safety- and performance-led rather than financial results-led; and it has rebuilt the nationwide operational expertise and leadership that was lost under Railtrack.

Its advantages over the system before that, where British Rail was a single national public sector operator, are harder to judge, thanks to the major changes in technology, costs, rider numbers and public expectations over the last 25 years. But we do know that it’s moving far more people, making them much less late, and killing or injuring them much less, than British Rail did, while also carrying more freight.

(As an aside, it’s also paying its staff much better than they were paid in the BR days. My personal view is that this is a positive: good pay is entirely fair enough for a highly skilled, safety-critical industry that requires deeply antisocial hours. It’s noticeable that very few of the people who claim otherwise tend to follow through and quit their 9-5s for railway jobs.)


The main problem is that the current setup is expensive. Net government subsidy paid – although it’s fallen a lot over the last few years – is still much higher than for British Rail. And although services run well, that isn’t much comfort for delayed commuters paying high fares (even though those fares are high mostly because the subsidy remains low compared to other countries).

So how will Grayling’s plans help? The short answer is they won’t do much at all. Aligning NR and TOC operating teams has been tried on South West Trains and in Scotland, with uninspiring results; and it’s unlikely the new initiative will be much different. Although old hands drone on about vertical integration, the track operator must be able to work with multiple train operators, and NR is set up to do this as efficiently as possible

Similarly, the East West Rail announcement is being spun as a change – but as a separate agency with some public and some private funding, it’s actually similar to most major new-build projects like HS1, Crossrail and HS2. It’s likely that, as with HS1, Network Rail will take over operations once the line is complete.

The most worrying part of Grayling’s speech was actually rather hidden: he has ruled out further devolution of franchise commissioning to local governments. This change has had a positive impact on services wherever it’s been carried out, most noticeably London and Scotland – so why would anyone oppose it?

The answer was revealed starkly in London’s Evening Standard in a leaked letter Grayling wrote to former London mayor Boris Johnson in 2013: because he doesn’t want Labour to get control of things, and most English cities are Labour-supporting, most of the time.

So the lack of reality behind Grayling’s latest Network Rail announcements is a relief. But his pettiness and spite is far more worrying for the long-term future of the industry.

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Space for 8,000 new homes, most of them affordable... Why it's time to demolish Buckingham Palace

Get a lovely new housing estate, there. Image: Getty.

Scene: a council meeting.

Councillor 1: They say it’s going to cost £369m to repair and bring up to modern standards.

Councillor 2: £369m? Lambeth balked at paying just £14m to repair Cressingham Gardens. They said they’d rather knock it down and start again.

Councillor 1: Then we’re agreed? We knock Buckingham Palace down and build new housing there instead.

Obviously this would never happen. For a start, Buckingham Palace is Grade I listed, but… just imagine. Imagine if refurbishment costs were deemed disproportionate and, like many council estates before it, the palace was marked for “regeneration”.

State events transfer to Kensington Palace, St James’s and Windsor. The Crown Estate is persuaded, as good PR, to sell the land at a nominal fee to City Hall or a housing association. What could we build on roughly 21 hectares of land, within walking distance of transport and green space?

The area’s a conservation zone (Westminster Council’s Royal Parks conservation area, to be exact), so modernist towers are out. Pete Redman, a housing policy and research consultant at TradeRisks, calculates that the site could provide “parks, plazas, offices, cafes and 8,000 new dwellings without overlooking the top floor restaurant of the London Hilton Park Lane”.

Now, the Hilton is 100m tall, and we doubt Westminster’s planning committee would go anywhere near that. To get 8,000 homes, you need a density of 380 u/ha (units per hectare), which is pretty high, but still within the range permitted by City Hall, whose density matrix allows up to 405 u/ha (though they’d be one or two bedroom flats at this density) in an area with good public transport links. We can all agree that Buckingham Palace is excellently connected.

So what could the development look like? Lewisham Gateway is achieving a density of 350u/ha with blocks between eight and 25 storeys. On the other hand, Notting Hill Housing’s Micawber Street development manages the same density with mansion blocks and mews houses, no more than seven storeys high. It’s also a relatively small site, and so doesn’t take into account the impact of streets and public space.

Bermondsey Spa might be a better comparison. That achieves a density of 333u/ha over an area slightly larger than Lewisham Gateway (but still one-tenth of the Buckingham Palace site), with no buildings higher than 10 storeys.

The Buck House project seems perfect for the Create Streets model, which advocates terraced streets over multi-storey buildings. Director Nicholas Boys Smith, while not enthusiastic about bulldozing the palace, cites areas of London with existing high densities that we think of as being idyllic neighbourhoods: Pimlico (about 175u/ha) or Ladbroke Grove (about 230u/ha).


“You can get to very high densities with narrow streets and medium rise buildings,” he says. “Pimlico is four to six storeys, though of course the number of units depends on the size of the homes. The point is to develop a masterplan that sets the parameters of what’s acceptable first – how wide the streets are, types of open space, pedestrian only areas – before you get to the homes.”

Boys Smith goes on to talk about the importance of working collaboratively with the community before embarking on a design. In this scenario, there is no existing community – but it should be possible to identify potential future residents. Remember, in our fantasy the Crown Estate has been guilt-tripped into handing over the land for a song, which means it’s feasible for a housing association to develop the area and keep properties genuinely affordable.

Westminster Council estimates it needs an additional 5,600 social rented homes a year to meet demand. It has a waiting list of 5,500 households in immediate need, and knows of another 20,000 which can’t afford market rents. Even if we accepted a density level similar to Ladbroke Grove, that’s 4,830 homes where Buckingham Palace currently stands. A Bermondsey Spa-style density would generate nearly 7,000 homes.

There’s precedent for affordability, too. To take one example, the Peabody Trust is able to build genuinely affordable homes in part because local authorities give it land. In a Peabody development in Kensington and Chelsea, only 25 per cent of homes were sold on the open market. Similarly, 30 per cent of all L&Q’s new starts in 2016 were for commercial sale.

In other words, this development wouldn’t need to be all luxury flats with a few token affordable homes thrown in.

A kindly soul within City Hall did some rough and ready sums based on the figure of 8,000 homes, and reckoned that perhaps 1,500 would have to be sold to cover demolition and construction costs, which would leave around 80 per cent affordable. And putting the development in the hands of a housing association, financed through sales – at, let’s remember, Mayfair prices – should keep rents based on salaries rather than market rates.

Now, if we can just persuade Historic England to ditch that pesky Grade I listing. After all, the Queen actually prefers Windsor Castle…

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