Another rail report chugs past like an empty freight train bound for the sidings
Sir Roy McNulty’s report on the state of Britain’s railways chugged by last week like one of those unmarked freight trains that sometimes pass through stations. ‘Stand well back from the platform,’ says the announcer, making us wonder whether the wagons are full of explosives. But such is the inefficiency of our rail system that they’re more likely to be being shunted empty from one siding to another — which is what will happen to McNulty’s ‘Rail Value For Money Study’ if unions and other vested interests have their way.
McNulty found that many European train services are 40 per cent cheaper to operate than ours, and that it ought to be possible to find £1 billion a year in efficiency savings by 2019. But meanwhile, as trains become increasingly overcrowded, fares will continue rising at 3 per cent above inflation. The roots of this unsatisfactory state of affairs are plain to see.
The fragmented, Treasury-designed privatisation scheme pushed through by John Major’s government built in excessive costs and made it tough for franchisees to generate decent returns, discouraging long-term investment. The health-and-safety regime became increasingly burdensome after the Hatfield crash in 2000, but everyone is so afraid of being sued or prosecuted that no one dares rein it back. And Bob Crow of the RMT union thinks he’s living in an episode of Life on Mars set in 1973. Against that background, don’t expect much from a new top-level working group, formed in response to the McNulty report, which aims to ‘lead the industry forward in delivering a higher performing, more cost effective and sustainable railway network’.
But here’s one issue they could tackle immediately. Fares are now so exorbitant, ticket restrictions so complex, automated barriers so ineffectual and passengers so short-fused that rail companies routinely impede access to trains with phalanxes of aggressive ‘revenue protection’ officials. Their task is to prevent you boarding with an invalid ticket and then trying to argue it out with a conductor whose orders are to sting you for the full fare or have you escorted off by police at the next stop. Simplification of fare structures would help defuse these ugly encounters. But why not avert them altogether by providing idiot-proof ‘Check your fare before you board’ displays on platforms and having all non-advance tickets (those not including a pre-booked seat on that specific train) sold only on the train itself, by a conductor who is obliged to offer you the cheapest fare for your journey?
Of course it’s a bubble
How can any company with annual revenues of $243 million — and profits of just $15 million that are unlikely to be sustained — be valued at $9 billion? That’s what happened to LinkedIn, the online professional social network, when its share price doubled in its first day of trading in New York last week. By the standards of the social media world, LinkedIn has a serious business model, offering a platform for grown-ups looking for work and business contacts — and it claims to be increasing its 100 million-plus membership at the rate of one per second. But the valuation is so bonkers as to make the much-asked question ‘Is this a new dotcom bubble?’ look futile. Of course it’s a bubble, and a particularly febrile one in which a scarcity of new issues leaves excitable punters chasing relatively few shares.
The flotation of Renren, a Chinese social network, produced an even wilder result recently, and estimates of the value of Facebook when it floats next year now range up to $80 billion. The trouble with social media, however, is that users migrate en masse to networks that are suddenly the rage, Twitter being the prime example. So attracting big-buck investor attention today is no guarantee that you will still be hot in five years time. Remember MySpace, which looked like the future when it was snapped up by Rupert Murdoch in 2005, but is now almost forgotten; or Bebo, sold to the media giant AOL for $850 million in 2008 and dumped this year for less than $10 million. Share valuations are always fickle indicators of the future, but for social media brands in such a narrow market, they tell us nothing at all.
Court circular
The Court of the Bank of England is under attack. A posse of ‘senior bankers and politicians’, unidentified except for Andrew Tyrie MP, chairman of the Treasury select committee, was given prominence in Monday’s Financial Times to express the view that the Bank’s quaintly titled board of directors is not up to its job. The message is that the current Court — the Governor and two deputies, plus eight non-executives and one vacancy — is not strong enough to manage the conflicts that might arise when the Bank reassumes responsibility for financial stability in addition to its core task (which critics say it has mishandled) of wrestling with inflation through monetary policy.
The question of who is behind this attack is more intriguing than the technocratic question of whether its thrust is correct. But it has to be said that the Court of 2011 looks significantly less impressive than the Court of 25 years ago, of which my father was a member. The dozen non-execs in the picture that hangs on my wall really were the captains of industry and City grandees of their day. They saw it as their principal role to offer views from their own sectors rather than to tell the Governor how to run his Bank. Despite the stately proceedings and the size of the egos at the table, my father found their debates well focused, well chaired and high-powered.
Today’s Court still has a couple of captains, Sir David Lees of Tate & Lyle and Sir Roger Carr of Centrica. But the rest are a grey lot: a trade unionist, a Scot who happens to be female, a couple of insurance men and an unexplained Australian. Perhaps — contrary to modern trends and the intention of the FT snipers — the Court needs to regain its former grandeur in order to offer the Bank a broader view of the real world.
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