Network Rail takes direct control of maintenance work

'Creeping re-nationalisation' of system grows as Amey loses contract, writes Michael Harrison

Network Rail, the government-backed operator of the national rail system, yesterday took back direct control of track maintenance from the troubled private contractor Amey in a further example of the "creeping re-nationalisation" of the railways.

The company, which replaced Railtrack last October, also warned that other private sector firms could lose their maintenance contracts when they come up for renewal. The move follows an alarming escalation in the costs of rail maintenance under private operators and a series of fatal accidents blamed on poor maintenance.

Network Rail will take charge of Amey's £50m-a-year contract to maintain the track in the Reading area and its 500 staff when the contract expires at the end of March. The contract area includes commuter lines and the First Great Western inter-city line into Paddington station, scene of the Ladbroke Grove disaster in 1999.

John Armitt, the chief executive of Network Rail, denied that the move was tantamount to renationalisation of rail maintenance. He said the aim was to give Network Rail a better feel for its maintenance costs which are now running at £1.2bn a year or a third of its total budget.

"If we could get 20 per cent out of maintenance costs in the next three of four years, then that would be a real achievement," he added. "But I am not doing this simply so that we can make the Reading area the lowest cost unit on the network. My objective is to get a better handle on the costs and to understand where the money is going. Who knows, if we can get a better feel for the constraints the contractors are working under and some of the horrors they face, then perhaps we will be more sympathetic in future."

When the rail industry was privatised in the mid 1990s, maintenance was handed over to seven private contractors. Apart from Amey, they include Amis, Jarvis, Balfour Beatty, Serco, Carillion Rail and First Engineering.

Network Rail has subsequently split the country into 20 maintenance contract areas. Mr Armitt rejected suggestions that Amey had been singled out because of its ongoing financial and managerial crisis or because of safety concerns. He said the Reading area represented a good cross-section of the network since the track in that region was used by inter-city, commuter and regional train companies as well as freight operators and a "premium service" in the shape of the Heathrow Express.

Network Rail said it was considering taking one or two other contract areas back in-house although it had not decided which ones. Industry sources said this was a means of "waving the big stick" at contractors by warning them that unless performance improved they could lose their lucrative contracts. "The specific object is not to put the frighteners on other contractors but if it results in them sharpening their act, we are not going to complain," Mr Armitt said.

The Association of Train Operating Companies welcomed Network Rail's announcement. "We see this as a positive move towards gathering a first hand understanding of the issues faced by maintenance contractors," ATOC's director general, George Muir, said. "This should help in Network Rail's overall management of maintenance across the country which should benefit train operators and most importantly passengers."

Network Rail's move is a further example of the way the Government is re-asserting control over the rail system after the failed experiment with privatisation. Richard Bowker, chairman of the Government's Strategic Rail Authority, has already taken a much tighter hold of the purse strings of the train operators, dictating how much profit they can make and bailing out failing operators such as Connex South Eastern with increased subsidies. He has also shortened franchises in a number of instances and taken direct control of big enhancement projects away from train operators. Go-Ahead, for instance, has seen its 20-year South Central franchise cut to seven years. It has also been stripped of responsibility for a £1bn upgrade of commuter services from London to the south coast.

Likewise, Mr Bowker has cut Stagecoach's South West Trains franchise from 20 to four years and taken charge of a hugely ambitious £2bn upgrade of services into Waterloo station which was to have involved the introduction of double-decker trains and the rebuilding of Clapham Junction station.

The SRA is also taking a much more direct role in wage negotiations, telling both Arriva Trains Northern and Wales and West how much it is allowed to pay its drivers. "All in all, the industry is beginning to look increasingly like British Rail again," one seasoned observer said.