Getting back on track: an alternative to private railways

There is a growing consensus that rail privatisation has failed, but an alternative doesn’t have to mean a new centralised bureaucracy, writes Paul Salveson

October 1, 2013
7 min read

train

The British experiment with rail privatisation has failed. It has not delivered lower costs or better services. Instead the total cost of running Britain’s railways has spiralled – it costs about three times as much to run them now as it did under British Rail. It isn’t just the rail unions that are saying enough is enough; rail passengers and transport professionals are questioning the future viability of a privatised system.

We have a rail network that costs far too much to run and is expensive to use. Short-termism, private profit and control by a remote and increasingly demoralised civil service have been a very bad combination. In a highly professional management and workforce it is increasingly difficult to find anyone, from senior management downwards, who thinks the current system is right. They know they could do so much better if the shackles of privatisation were removed.

So what’s the alternative? The option of going back to the old BR has its attractions. Some aspects of running a railway need a strong degree of central control. But there are downsides. Britain is a very different place than in it was 1993 when the Railways Act was passed. Scotland, and to an extent Wales and also Merseyside, have a strong degree of control over their own rail networks. Northern local authorities are looking to get the sort of control over local and regional services that Scotland now enjoys. Devolution has delivered for rail, with investment in electrification, new trains and line re-openings.

Taking back the power that Scotland, Wales and – soon – the north have over their ‘domestic’ rail services would be a huge backwards step. A centralised, state-owned railway would be a Treasury-controlled railway and this seldom did BR any favours. The most successful operations in the past 20 years have been relatively small, tight-knit franchises such as Merseyrail, Chiltern, Scotrail, London Overground and TransPennine, where management has a clear focus on their business and – in most cases – a degree of long-term stability in the franchise. There is also a close and broadly positive relationship with the public body managing the franchise, in many cases a devolved authority (Merseytravel, the Scottish Government and Transport for London).

There are other options. Let’s start with infrastructure, which is owned and managed by Network Rail, a not-for-dividend company established during the last Labour government in the wake of Railtrack’s collapse. It is developing a stable, dynamic programme of investment in the railway infrastructure and the last thing it needs is another radical structural change. It needs to be more accountable and play a strong part in developing a long-term vision for rail.

The key changes should be in the delivery of passenger services and rolling stock provision. The vast majority of passenger services are delivered through franchising, which has done little more than add to the costs of running trains and inject major instability into the system. Following the west coast main line fiasco (a term now used by virtually everyone in the industry) the government has shunted the programme of re‑franchising back by as much as four years. Any new government after the 2015 election would need to do nothing more than take each franchise back into the public sector when it comes up for renewal, at no extra cost to the taxpayer.

For the ‘regional’ franchises such as Northern Rail and TransPennine Express, responsibility for managing a combined network should be given to the emerging ‘Rail in the North’ group of local authorities. They should have the power to create an arms-length, not-for-profit operation or contract its operation to a social enterprise. That would give the right level of strategic management of regional services, not controlled by unaccountable civil servants in London. In the case of InterCity, where there is clearly a need for a UK-wide approach, the structure is already there, in the form of Directly Operated Railways (DOR). This is the state-owned body currently operating East Coast, which the government is now rushing to privatise.

The government would need to do nothing more than take each franchise back into the public sector when it comes up for renewal, at no extra cost to the taxpayer

DOR was set up by the government as the ‘operator of last resort’ in the case of a franchise going bust. However, it has the expertise to develop into an ‘InterCity UK’ business operating a re-unified intercity network, bringing each InterCity franchise (West Coast, East Coast, parts of Great Western and Greater Anglia, Cross Country) into a single body as franchises expire. It should have strong and inclusive governance with representation from the Scottish and Welsh governments, passenger and employee interests.

A major cost under privatisation has been rolling stock. Most trains are now owned by the banks, which have extorted a huge rate of profit from leasing them to train operators. The government needs to place a cap on rolling stock leasing company profits (which currently can be as high as 50 per cent) or set up new, not-for-profit companies to own trains. There should be incentives to operators to own their own fleets, if the short-termism and instability of franchising comes to an end.

This approach could be delivered without major upheaval and at no extra cost. It would provide a structure in which the proceeds from the growth in passenger numbers could be reinvested to make a better railway for everyone.

Paul Salveson’s book Railpolitik: bringing railways back to communities is published by Lawrence and Wishart


Making rail pay

Rail companies’ profits depend on huge public subsidies, writes Andrew Bowman

As Paul Salveson makes clear, there are many compelling reasons to consider alternatives to the privatised railway system. But there is one fundamental problem that these alternatives must confront: the railways don’t make money. A hugely capital intensive industry, which delivers broad economic and social benefits, is supposed to pay its way from fares and can’t.

Under the privatised rail system, as the recent report The Great Train Robbery (available free from the Centre for Research on Socio-Cultural Change) demonstrates, a grand accounting fiddle conjures the illusion of private profits through a series of huge direct and hidden state subsidies.

Loss-making, low-population density regional franchises frequently receive around half their revenue as state subsidy. Even for the apparently successful franchise of Virgin’s West Coast Mainline, £2.5 billion of direct state subsidy was required to allow the company to take away £500 million in dividends between 1997 and 2012 and present itself as a profitable private enterprise.

But most important for this simulacrum of capitalism is the hidden subsidy delivered through Network Rail, the infrastructure company. Through a ballooning of state-guaranteed debt to about £30 billion, train companies have enjoyed both upgraded infrastructure and reduced track access charges, which have fallen in real terms from £3.2 billion in 1994 to £1.6 billion today. Without such a generous landlord, we would have no private rail system.

Dismantle this set-up and return it to a form of public ownership, and it will become, once again, a ‘loss making industry’ and ‘burden on the taxpayer’. It will become an easy and obvious target for cuts, leading to the same spiral of underinvestment that afflicted British Rail.

At present, fares make up 65 per cent of the revenue needed by the railways each year. A £10 billion funding gap is plugged by £4 billion of direct cash subsidy and £6 billion of public liability via Network Rail. At best estimates, stripping out the inefficiencies created by the complex private system would save £1.2 billion per year – less than it costs simply to service Network Rail’s debt.

Ultimately, any alternative to privatisation, particularly on a regional level, may live or die on finding a new funding mechanism to tap the diffuse social benefits that rail creates. These include the rises in property values and the advantages to businesses whose operations are smoothed by good transport connections. The south east’s Crossrail scheme, for example, is estimated to be worth £5.5 billion in terms of increased property values within one kilometre of the route. Find a way to tap this sort of unearned increment that the railways deliver and the alternatives may have a chance.


✹ Try our new pay-as-you-feel subscription — you choose how much to pay.

Greece’s heavy load
While the UK left is divided over how to respond to Brexit, the people of Greece continue to groan under the burden of EU-backed austerity. Jane Shallice reports

On the narcissism of small differences
In an interview with the TNI's Nick Buxton, social scientist and activist Susan George reflects on the French Presidential Elections.

Why Corbyn’s ‘unpopularity’ is exaggerated: Polls show he’s more popular than most other parties’ leaders – and on the up
Headlines about Jeremy Corbyn’s poor approval ratings in polls don’t tell the whole story, writes Alex Nunns

The media wants to demoralise Corbyn’s supporters – don’t let them succeed
Michael Calderbank looks at the results of yesterday's local elections

In light of Dunkirk: What have we learned from the (lack of) response in Calais?
Amy Corcoran and Sam Walton ask who helps refugees when it matters – and who stands on the sidelines

Osborne’s first day at work – activists to pulp Evening Standards for renewable energy
This isn’t just a stunt. A new worker’s cooperative is set to employ people on a real living wage in a recycling scheme that is heavily trolling George Osborne. Jenny Nelson writes

Red Pepper’s race section: open editorial meeting 24 May
On May 24th, we’ll be holding the third of Red Pepper’s Race Section Open Editorial Meetings.

Our activism will be intersectional, or it will be bullshit…
Reflecting on a year in the environmental and anti-racist movements, Plane Stupid activist, Ali Tamlit, calls for a renewed focus on the dangers of power and privilege and the means to overcome them.

West Yorkshire calls for devolution of politics
When communities feel that power is exercised by a remote elite, anger and alienation will grow. But genuine regional democracy offers a positive alternative, argue the Same Skies Collective

How to resist the exploitation of digital gig workers
For the first time in history, we have a mass migration of labour without an actual migration of workers. Mark Graham and Alex Wood explore the consequences

The Digital Liberties cross-party campaign
Access to the internet should be considered as vital as access to power and water writes Sophia Drakopoulou

#AndABlackWomanAtThat – part III: a discussion of power and privilege
In the final article of a three-part series, Sheri Carr gives a few pointers on how to be a good ally

Event: Take Back Control Croydon
Ken Loach, Dawn Foster & Soweto Kinch to speak in Croydon at the first event of a UK-wide series organised by The World Transformed and local activists

Red Pepper’s race section: open editorial meeting 19 April
On April 19th, we’ll be holding the second of Red Pepper’s Race Section Open Editorial Meetings.

Changing our attitude to Climate Change
Paul Allen of the Centre for Alternative Technology spells out what we need to do to break through the inaction over climate change

Introducing Trump’s Inner Circle
Donald Trump’s key allies are as alarming as the man himself

#AndABlackWomanAtThat – part II: a discussion of power and privilege
In the second article of a three-part series, Sheri Carr reflects on the silencing of black women and the flaws in safe spaces

Joint statement on George Osborne’s appointment to the Evening Standard
'We have come together to denounce this brazen conflict of interest and to champion the growing need for independent, truthful and representative media'

Confronting Brexit
Paul O’Connell and Michael Calderbank consider the conditions that led to the Brexit vote, and how the left in Britain should respond

On the right side of history: an interview with Mijente
Marienna Pope-Weidemann speaks to Reyna Wences, co-founder of Mijente, a radical Latinx and Chincanx organising network

Disrupting the City of London Corporation elections
The City of London Corporation is one of the most secretive and least understood institutions in the world, writes Luke Walter

#AndABlackWomanAtThat: a discussion of power and privilege
In the first article of a three-part series, Sheri Carr reflects on the oppression of her early life and how we must fight it, even in our own movement

Corbyn understands the needs of our communities
Ian Hodson reflects on the Copeland by-election and explains why Corbyn has the full support of The Bakers Food and Allied Workers Union

Red Pepper’s race section: open editorial meeting 15 March
On 15 March, we’ll be holding the first of Red Pepper’s Race Section open editorial meetings.

Social Workers Without Borders
Jenny Nelson speaks to Lauren Wroe about a group combining activism and social work with refugees

Growing up married
Laura Nicholson interviews Dr Eylem Atakav about her new film, Growing Up Married, which tells the stories of Turkey’s child brides

The Migrant Connections Festival: solidarity needs meaningful relationships
On March 4 & 5 Bethnal Green will host a migrant-led festival fostering community and solidarity for people of all backgrounds, writes Sohail Jannesari

Reclaiming Holloway Homes
The government is closing old, inner-city jails. Rebecca Roberts looks at what happens next

Intensification of state violence in the Kurdish provinces of Turkey
Oppression increases in the run up to Turkey’s constitutional referendum, writes Mehmet Ugur from Academics for Peace

Pass the domestic violence bill
Emma Snaith reports on the significance of the new anti-domestic violence bill


92