Is there any hope for Britain’s beleaguered rail passengers? We have some of the highest fares in Europe, industrial relations are at an all-time low, and cancellations and delays bedevil the network. Britain’s railways are fractured, rudderless and without clear purpose or plan.
With an election looming in which Labour is the clear frontrunner, passengers have been eagerly awaiting the party’s proposals. Its Getting Britain Moving plan was finally released on Thursday, promising to fix Britain’s broken railways and “usher in a decade of growth, innovation and service improvement” through a series of reforms.
Headlines claim that Labour is going for “renationalisation”. It’s an obvious vote-winner: opinion polls consistently show that the renationalisation of railways would be a very popular policy, even among Tory voters. But what does it amount to here? Labour proposes to gradually bring private train operators into public ownership during the length of the next parliament. And, as has already been announced by the current government, services will be planned and operated by a new, arm’s-length public body, Great British Railways, which would also incorporate the already publicly owned infrastructure operator, Network Rail.
This is a good idea: private ownership of train operations increases costs and creates disorganisation. Private operators don’t make huge amounts of money – some estimates put their profit margins at about 2% of revenue – and six out of 20 companies are already state-owned. More significant are the costs of fragmentation they create: the duplication of management structures, and the costs associated with contracting and commercial disputes. The government estimates these costs at about £1.5bn a year, or 7% of the industry’s operational income.
Any private company operates in the railways to make a profit, which must be extracted from a system whose only source of revenue is fares, freight charges and government subsidy. When private companies are involved, it increases the costs you and I pay. The private wealth extraction and fragmentation that privatisation created has contributed significantly to a real-terms trebling of state subsidy since the privatisation of the network in 1994.
But Labour has chosen not to address the biggest source of corporate excess profits: the private rolling stock companies, who lease the trains to operators. Although their finances are typically hidden by the use of tax havens and complex company structures, well-evidenced research by the RMT union into three of the biggest companies found that in six years they had passed £1.2bn to their parent companies – equivalent to the dividend payments of all the train operators put together over five years.
In its plan, Labour claims that compensating rolling stock companies’ shareholders for renationalising them would cost too much. Yet there are other options, such as creating a publicly owned not-for-profit train manufacturing and supply company, which could undercut the private companies in the long term, and save thousands of skilled jobs in the process.
Worst of all, none of the good intentions of the plan will be realised if Labour is going to keep to its commitment to not significantly raising taxes on the wealthy, and to adhere to austere borrowing rules.
For example, while the plan promises reform on rail tickets, without extra subsidy this will at best be a rebranding exercise, with few overall savings for the average passenger. Fares remain, to a degree, protected by regulation rules, which keep some prices within the realm of reason. Recent experiments in changing those rules, which Labour seems to propose to expand, have led to steep price increases for many passengers. Not increasing public subsidy will also mean capacity, track maintenance and speed improvements cannot be delivered, all of which are crucial to ease overcrowding and tackle reliability issues.
The Labour leadership’s supporters will argue that it is “sensible economic management” not to overcommit on public spending, but this ignores that, in many respects, the next government will be operating in a financial environment created by Labour itself in the noughties. After the meltdown of the privatised rail industry in 2000, caused by the Hatfield train crash, Tony Blair’s government eschewed renationalisation, but instead launched one of the biggest private finance initiatives in British history to get the railways back on their feet.
Despite essentially being a government-controlled company, Network Rail was allowed by New Labour to accumulate £34bn in debt, owed to international financial markets, to pay for the railways’ reconstruction and expansion, with no realistic plans to repay it. That debt, along with the company itself, was eventually forcibly renationalised in 2014, saddling the company with huge financial costs. It now spends more on debt repayments than it does on maintaining the track, and 19% of total public subsidy is recycled to the government, in a large part to pay for past private finance excesses. Given that context, it almost beggars belief that the current Labour plan envisages, for example, a “partnership with private capital” as central to its rolling stock strategy.
Moreover, rather than simply counting the cost of investing in the railways, what are the costs of not doing so? Moving many car journeys to rail, bus and active travel will be essential to decarbonisation efforts, and the economic costs of failing to slow the climate crisis would dwarf anything currently under discussion. Yet, the word “climate” is only mentioned once in the report. Contrast this with Labour’s support for real terms cuts to car fuel duty.
Is there light at the end of the tunnel? In 2015, it was clear that there was a government plan to remove guards from many services. Last year, the government proposed to close nearly all of the ticket offices in England. In both cases, a combination of strikes by rail workers, and protests and petitions by passengers, defeated these cuts.
In other words, we can get Britain moving again, but we may need to do it ourselves.
Tom Haines-Doran is a policy fellow based at the University of Leeds and the author of Derailed: How to Fix Britain’s Broken Railways
