British Railways Board

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British Railways Board

Euston House
24 Eversholt Street
Post Office Box 100
London NWl lDZ
United Kingdom
(071) 928-5151
Fax: (071) 922–6994

State-Owned Company
Incorporated: 1963 as British Railways Board
Employees: 136,200
Sale: £3.08 billion (US$5.76 billion)

British Railways Board administers British Rail (BR), which maintains a rail network of about 10,300 route miles, over which it operates passenger and freight train services. This comprises the entire rail network within the United Kingdom, apart from some urban transport systems—the largest of which is London Underground—and a number of small privately owned railways, many supported by preservation societies. The BR network consists of very slightly more than half the route-miles formerly owned by the private railway companies nationalized by the Transport Act of 1947.

It was not because of bankruptcy that the railways were nationalized; in their first year of public ownership, they had net receipts of £22 million and surpluses rose to a peak of £37 million in 1952. However, they disappeared by 1955, to be followed by deficits. The Labour government of 1945 to 1951 nationalized the railways as part of a plan to integrate all public inland transport under a British Transport Commission owning the railways. London Transport, the ports and canals, and public road transport whether by bus or by haulage companies. Each of these forms of transport was to be managed by an Executive responsible to the commission.

Under the central, and centralized, management of the Railway Executive, British Railways took the form of six regions, largely based on the systems of the former private railway companies, although Scotland was a single unified region. There was no general management at regional level—functional lines of authority came directly from the executive, which concentrated upon the subordination of former company loyalties to enable new standard practices to be introduced. In this it met appreciable opposition.

The lifetime of the Railway Executive, though not one of serious financial difficulty, was marked by friction between the British Transport Commission and the Executive partly due to a clash of temperaments between their respective chairmen, Sir Cyril Hurcomb, a former civil servant, who became Lord Hurcomb in 1950, and Sir Eustace Missenden, a career railwayman. Missenden’s retirement in 1951 and his replacement by John Elliot—Sir John Elliot from 1953—eased the tension, but the awareness of disharmony between the Executive and both the regions below it and the commission above it was a factor in the decision by the Conservative government, which came to office in 1951, to abolish the Executive.

The Transport Act of 1953 retained the commission but removed the duty of integration. It abolished the Railway Executive, and British Railways now came directly under the British Transport Commission (BTC), which acquired new members and a formidable new chairman, General Sir Brian Robertson. The BTC considered that the past had been marked by overemphasis on standardization and a lack of innovation. Area boards were set up, as was required by the 1953 act, and regional general managers were given significant authority.

For a time, under the policy of decentralization enjoined on the BTC by the government, the regions had greater autonomy. Planning from headquarters was less decisive, and the area boards shared to some extent in policy-making. However, the BTC still had very large non-railway interests and was organized by its new chairman in a complex web of coordinating bodies. Meanwhile, the financial situation was deteriorating as the postwar recovery from austerity enabled competing private road transport to expand. In 1955 the railway deficit was £39 million. Government anxiety about the position was temporarily allayed by the announcement in that year of a modernization plan designed both to attract new rail traffic through better service and to reduce working costs. The plan proposed expenditure of £1.24 billion, soon revised to £1.5 billion, spread over a 15-year period.

The plan’s most striking feature was the complete replacement of steam by diesel and electric traction. Its weakness lay in a failure to assess the market correctly, in respect of either the “container revolution” impending on the freight side or the explosion in private car ownership on the passenger side.

The continuing rise in the deficit, despite the temporary euphoria created by the plan, caused two major inquiries to be launched—a public inquiry by the House of Commons Select Committee on the Nationalised Industries, chaired by Sir Toby Low (later Lord Aldington), and a private inquiry by a group chaired by the industrialist Sir Ivan Stedeford, reporting direct to the Conservative minister of transport, Ernest Marples. Both bodies reached broadly the same conclusion: that the headquarters organization of the BTC was too cumbersome for effective management of the railways and that commercial and social objectives had become confused.

Marples accepted this general conclusion and the Transport Act of 1962 broke up the BTC into several component boards directly responsible to the minister. The railways from 1963 came under a British Railways Board (BRB) with its own capital structure and statutory objectives. Part of the BTC’s capital liabilities were allocated to the new BRB as a commencing capital debt to the minister of £1.562 billion, of which only £857 million was interest-bearing, the remainder being suspended debt—that is, debt upon which payment of interest and repayment of principal were indefinitely suspended.

The first chairman of the BRB, Richard Beeching, had been a member of the Stedeford Special Advisory Group-appointed by Marples to “examine the structure, finance, and working of the organizations at present controlled by the Commission”—where he had impressed the minister. Marples and Beeching had agreed that the BRB’s immediate task was to eliminate the deficit and in the process bring in new blood from the business world to stimulate the performance of the professional railway managers.

Beeching rapidly set in motion studies designed to identify loss-making activities. Data collected from the regions were analyzed by a team at headquarters and presented to Beeching. The conclusions he drew were published in a 1963 report “The Re-Shaping of British Railways,” which caused a furor. While it made Beeching a celebrity overnight, it created widespread alarm and controversy. To carry out all the suggested closures and service withdrawals was politically impracticable, yet publishing lists of this kind accelerated a flight of traffic away from the railway, even on lines that in the event were to remain open.

The re-shaping report was, however, followed by another, “The Development of the Major Trunk Routes,” in which Beeching called for rationalization through elimination of duplicate routes and substantial investment in the survivors. It also foreshadowed the Freightliner Company network of fast train-load container services and the bulk trainload services to coal-fired power stations.

Neither report was to be implemented in full. Marples, in any case, was succeeded by a Labour minister of transport in October 1964, Tom Fraser, with whom Beeching could not have such a continuing understanding. Beeching, therefore, left in June 1965. He was followed by Stanley Raymond, knighted in 1967, who had been one of his chief lieutenants in formulating the closures policy. Raymond was energetic, abrasive, and not good at delegating. During his short tenure of office it became clear that line closures and withdrawals alone were not going to solve BR’s financial problem. In any case, even under Marples, ministerial consent to closure had been refused in politically sensitive areas.

The next (Labour) minister of transport, Barbara Castle, was determined to implement a new transport policy incorporating a modified form of integration and also to improve the structure and performance of the BRB. A joint steering group was set up, comprising ministry, BR, and outside experts, which met many times and reported at length. Raymond clashed with Castle on several issues, including charges and industrial relations, and she dismissed him at the end of 1967. He was succeeded by H.C. Johnson, a career railwayman who had been a successful regional general manager and a board vice-chairman and who received a knighthood in 1972.

Johnson, a shrewd affable man, had built his career on his ability to be in the right place at the right time. His three-and-three-quarter years as chairman were marked by several factors that worked to his advantage. Castle’s Transport Act of 1968 had removed the loss-making “Sundries”—small consignments by freight train—business from BR and placed it under a new National Freight Corporation (NFC). The act also created passenger transport authorities and executives in the major conurbations, ultimately seven, which were empowered to pay British Rail to provide otherwise loss-making services in their areas. Furthermore, the government took power to make grants to BR for the maintenance of individual socially necessary train services. BR’s “suspended debt” was extinguished and the “live” or interest-bearing debt was reduced to £365 million.

As a consequence, BR showed overall surpluses both on railway operating accounts and in the corporate field, allowing for interest and net income from other activities, both in 1969 and 1970.

The line closures and service withdrawals that had begun before the re-shaping report but that had been greatly accelerated by it, then were shrinking, partly because the most obvious cases had been dealt with, partly because of ministerial refusals to approve politically sensitive proposals.

One legacy of the Beeching era, the concept of fast container-carrying trains in fixed formation running on a schedule between major roadrail transhipment centers, had been realized in the setting up of the Freightliner Company, though to BR’s chagrin a majority share had been vested by the 1968 act in the NFC—a decision reversed in 1978.

By 1970 many fruits of the 1955 modernization plan had been realized, despite some miscalculations such as the proliferation of diesel locomotive types and overinvestment in freight facilities that quickly became redundant. The last steam train ran in 1968, which was also the year in which the busiest main line, from London to Birmingham, Manchester, and Liverpool came into full electric operation. Electric traction had reached Dover in 1959 and Bournemouth in 1967.

There were other forces at work not apparent to the public. Inside the BRB long debates raged, fueled by reports from the joint steering group and by consultants, regarding the correct form of organization both at headquarters and in the regions. Changes followed—such as the appointment of a chief executive—only to be reversed in many cases. In the regions, geographical districts gave way to larger geographical divisions though system-based lines had existed for some years in the eastern and southern regions, and partially elsewhere.

The eastern and northeastern regions were amalgamated as an economy move in 1967. In 1971, consultants McKinsey & Co., working with a team of BR officers, produced a scheme for replacing the regions with eight territories having revised powers and responsibilities. After much open trade union, and covert managerial, opposition, this Field organization proposal, as it had been called, was abandoned in 1975.

Changes that took firm shape and were ultimately to assist privatization, were embodied in the progressive detachment of the non-railway businesses such as shipping, ultimately to become Sealink U.K.; the workshops, eventually British Rail Engineering Ltd.; and the hotels, which became British Transport Hotels Ltd. The road collection and delivery vehicles had passed to the NFC under the 1968 act. On the advice of consultants, the role of the BRB was defined as corporate, as distinct from the businesses, of which the railway was by far the most important. A BR corporate image, with the double-arrow logo and the trading name British Rail, was adopted.

Although the Beeching philosophy had sought withdrawal from nonprofit-making activities, it had increasingly become evident that this was not a final answer. Greater productivity in most aspects of the railway was essential. Single-manning of diesel and electric locomotives and withdrawal of guards from power-braked freight trains were obvious examples of the scope for economy that existed also in profitable activities.

An experienced industrial negotiator, Leonard Neal, was recruited from Esso in 1967 and his skill and patience eventually turned the railway trade unions’ opposition into a modicum of cooperation, starting in 1968 with the so-called Windsor and Penzance agreements, which were concerned with pay awards, regrading of staff, new working practices, and other matters. He was knighted in 1974.

Johnson retired in September 1971 on what may be considered the crest of the wave. His successor was Richard (Sir Richard after 1976 and Lord after 1981) Marsh, who had been minister of transport in the Wilson Labour government but had left politics for private consultancy. It was a surprising appointment by a Conservative government.

Marsh’s term of office was marked by difficulties. The brief financial honeymoon following the 1968 act ended, due mainly to the inexorable effects of the expansion in motor vehicles coupled with the motorway building program.

Under the Railways Act of 1974 the individual grants for unremunerative rail services were replaced by a consolidated Public Service Obligation payment. Increasing deficits, however, caused the imposition of tighter controls over investment, about which Marsh complained publicly. Unlike his predecessors, he was a strong supporter of the channel tunnel and was disappointed when in January 1975 the Labour government abruptly cancelled the project, upon which much planning had been carried out. He openly expressed regret that the British government’s attitude to railways was so different from that in, for instance, France and Germany.

Marsh was succeeded in 1976 by Peter Parker, an industrialist of liberal views who had been approached to take on the chairmanship by Castle in 1967 but then had declined as the Cabinet refused to approve the salary he required. Parker, who was knighted in 1978, had a gift for public and personal relationships, though disclaiming special expertise in railway matters.

The 1970s saw a decline in rail traffic. Despite much-reduced staff numbers, railway costs remained high in relation to receipts, yet attempts to obtain authority to raise charges in 1973 were rebuffed by the Labour government. Investment was restricted; at constant 1948 prices it averaged £71.1 million annually from 1954 to 1962, but only £37.7 million from 1963 to 1973. Two electrification schemes of importance were carried out—northwards to Glasgow, and on the King’s Cross suburban services—but some other projects were set aside.

The BRB was exercised over the problem of making rail services more competitive through higher speed. In Japan, France, and elsewhere, governments were investing heavily in infrastructure for new high-speed railways. There was no prospect of this in Britain, and BR put much money and effort into developing the so-called advanced passenger train with high speed capacity, using existing infrastructure through a body-tilting mechanism. After years of testing, the project was abandoned on account of mechanical unreliability; a commercial disaster was averted by exploiting a more conventional diesel high-speed train, brand-named lC 125, introduced in the mid-1970s, for Inter-City, changed to InterCity in 1984, expresses.

The arrival of a Conservative government in 1979 put pressure on the BRB to eliminate or at least reduce drastically the public service obligation payment. A rapid succession of ministers of transport, later secretaries of state, began to forecast the eventual privatization of BR. This would, it was hoped, conclude a process that was initiated with the enforced disposal by the BRB of its hotels, Sealink U.K., and the construction workshops of British Rail Engineering Ltd., the latter by a partial management-staff buy-out. A second Beeching era appeared to dawn when in 1983 Sir Peter Parker was followed as chairman by Robert Reid, a professional railwayman who nevertheless found no great difficulty in cooperating with the Conservative government’s ideology as applied to transport. Reid was knighted in 1985.

The period of Reid’s chairmanship was marked by two factors. Externally the tide changed, and rail traffic increased both in line with the general economic recovery and because of the perceived effects of road congestion. The revival of the channel tunnel project, with opening scheduled for 1993, was another encouraging commercial prospect. Internally, a process of identifying separate businesses within the structure of the railway itself—as opposed to the non-railway activities already dealt with—which had begun in the 1960s with the appointment of executive directors, was pushed further. Decentralization had been by function from 1948 to 1953; since 1953 it had been chiefly by territory, or regions; then it was to be by product. The phrase “the business-led railway” was used to promote the emergence of sector directors for InterCity, Freight, Parcels, London and South-East (later Network SouthEast), and Other Provincial Services (later Regional Railway).

Starting as marketing concepts after 1982, the sectors rapidly acquired the status of financial entities with separate receipts, costs, and end-results. There had, however, to be certain accounting conventions regarding in particular the apportionment of infrastructure costs. For a time the organization provided that sector directors set standards of service, pricing, and revenue budgets, while regional general managers were responsible for meeting these requirements. Overlapping, however, was inherent in this system and before long sector directors were given powers to control resources directly in order to discharge their responsibilities. The dedication of rolling stock and locomotives to sectors followed and the eventual disappearance of regions could be planned, with staff controlled by either the sectors or the engineering services used by the sectors in common.

This process identified the Freight, Parcels, and InterCity businesses as inherently profitable, while Network SouthEast and the Provincial (Regional Railways) sector needed substantial subsidy. Investment had to be provided largely from internal sources since an external financing limit was imposed by the treasury. Cash flowed from property sales and development, which expanded greatly in the 1980s. Electrification revived with the opening of the St. Pancras-Bedford line in 1983, lines to Hastings in 1986 and Norwich in 1987, and the full opening of the East Coast Main Line in 1991.

By the end of 1989 the then secretary of state for transport Cecil Parkinson was able to write to Reid giving specific financial targets for each sector business—for instance, Inter-City was to earn £95 million profit in 1992–1993. Rail Freight’s surplus target was to be 4.5% return on assets employed, and Parcels was to earn £9 million surplus. Network SouthEast was to provide a “commercial rate of return by 1995–1996.”

Such targets involved a continued severe downward pressure on costs, particularly on staff numbers, which could not easily be reconciled with an injunction in the same letter to observe high standards of service and safety.

When Reid was succeeded early in 1991 by his namesake, Sir Bob Reid, recession was setting in and the worsened financial result for 1990 and 1991 made the Parkinson financial targets and dates appear unrealistic. While InterCity broke even, Rail Freight lost £70 million. The final loss, after allowing for interest payments and income from extraordinary activities, was £11 million. This cast serious doubt on the government’s expectation that before long British Rail could be privatized, at least in part.

In any case, the method of privatization was still the subject of debate. As a starting point, the reorganization phasing out the regions had eliminated the option of breaking up the system into something resembling the former railway companies. The chief remaining options were floating the profitable sectors as companies, with the state retaining the infrastructure and the unprofitable sectors, or disposing of the infrastructure to a separate body. This body could charge for usage by the sectors, themselves reorganized as companies, some of which would be assisted by grants—centrally or locally—for a certain period. However, the imminence of a general election not later than 1992 gave BR management a breathing-space within which to cope with yet another of the many internal reorganizations since 1948.

In the 43 years following nationalization of the railways, there have been ten chairmen. Their short terms of office have, however, been nearly twice as long on average as those of ministers or secretaries of state for transport. The history of British Rail shows the effects of frequently changing objectives, especially when politically motivated.