Chapter 2

The Corporate Structure of the West Somerset Railway

Introduction

After the excitements of the introductory chapter, this one will be rather more pedestrian but no less important in understanding events. You may need to refer back to it as events unfold in later chapters.

The WSR has a ‘bad’ and dysfunctional structure when judged against the ideal for a heritage railway. It is sub-standard in financial and governance terms, particularly. The solutions are, frankly, simple and readers should examine carefully those who resist them, as they cannot, in my view, have the best of the organisation in mind. In the past, when all the structures were populated by persons of goodwill, with significantly overlapping memberships, trying to work together for the good of all, then the sub-standard structure was made to work. Since that ceased to be the case it has been the vehicle for oppressive behaviour.

The Ideal

There is a strong consensus in the heritage railway world that the ideal structure has a charity at the head, with a wholly-owned operating company below it to employ staff, buy the coal and sell the tickets.

This structure has many advantages, not least that the whole operation is charitable, opening the way to much more and much easier grant funding, and, of course, gift aid. There are also governance advantages in the those ‘at the top’ have to be suitable to be charitable trustees and although the charity commission is not the most active regulator, the explicit responsibilities that charitable trustees have at least sets some governance standards and consequences if they are not followed at a rather more stringent level than company directors.

Whether a heritage railway should have separate boards of Trustees and Directors of the operating company seems to depend on the size of the operation.

The WSR - Its different in Somerset

The WSR is saddled with a structure different from the above, and a little history is needed to explain why.

The WSR was one of those early heritage railways which was set up with the primary purpose of providing a public transport service – not a charitable operation - and the company raised share capital to do this.

It was thought that there might be a market for summer-only steam operation on a limited basis for tourists and the West Somerset Steam Railway Trust (WSSRT, now renamed West Somerset Railway Heritage Trust WSRHT) was established to provide this education / recreational activity – a charitable operation.

At an early stage a supporters’ organisation, the West Somerset Railway Association (WSRA) was also established. Its early activities largely consisted of being camped at Bishops Lydeard, publishing a newsletter, criticising the WSR plc (then and now camped at Minehead) but bailing the WSR plc out with cash injections as various crises occurred.

Of course, the public transport objective soon failed on the multiple rocks of not being able to offer a service to Taunton; the hourly or two hourly bus being a better and cheaper option; and the consequent inability to make ends meet. In a short time the WSR plc started to concentrate on tourist-orientated steam services and the WSSRT became redundant and moribund. The WSRA continued to inject cash at times of crisis and received shares in return.

The moribund WSSRT was revived when Peter and Ginny Barnfield created the Blue Anchor Railway Museum for GWR 150 in 1985. It has gradually accreted to itself more ‘heritage’ projects on the line.

In 1990, with matters like gift aid flashing in their eyes, the directors (as they then were) of the WSRA achieved charitable status. It was intended that they merge with the WSSRT but at the last minute the then chairman of the WSRA, John Pearce, decided that this was a bad idea and the merger did not go ahead (sigh!). Having charitable status has since restricted the WSRA’s ability to just dump cash into the WSR plc as it must spend it’s funds on charitable purposes.

Shareholdings

At the time of writing, both the WSRA and the WSRHT own around 9% of the WSR plc shares. The rest are in ‘penny packets’ with small shareholders who have in reality donated money over the years by buying shares. A certain level of shareholding entitles the shareholder and their guests to free travel on the line.

Around 50% of the shareholding is dormant (the owners are probably dead) in that they do not respond to correspondence. That means that the ‘block’ of shares owned by the charities of around 18% is in fact 36% of the shares and is an effective controlling interest if the charities merged or worked together.

Disadvantages of the present structure

There is no effective control or review of the WSR plc’s actions. The small shareholders believe what they are told by the communications controlled by the company, the charities have not worked together to control the excesses of the company under its present chairman and there seems no prospect of that happening.

The WSR plc and the charities compete for funds. If a donor buys shares, the Railway as a whole loses out on the 25% gift aid uplift that would attach to a donation via the charities. Many grants are not available for the Railway’s activities which would be were it to be wholly charitable.

This should be set against the work of (now resigned) WSR plc director Martin Brown, who’s view was that the Railway needed to attract inward investment of the order of £1M a year to maintain its infrastructure for the future. Only a tiny fraction of that is being achieved and so the infrastructure degrades gradually each year. Whilst the Railway may limp along covering operating costs, it is plainly not generating the income to cover infrastructure costs. The WSR plc also faces significant costs like the 10-year overhauls of its engines and S&D 53808 and it is not clear what provision has been made for these, if any. I understand that the trustees of the WSRA and WSRHT do not have that information on which to base an assessment of the viability of the WSR plc in the medium term.

The all leads to a rather bleak future unless things change.

The Roostery

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