Why we're still being taken for a ride by our train companies

There are too many "vested interests" to keep happy.

This week, two stories broke regarding the rail industry. On Tuesday it was the fact that fares are set to rise in January by up to 11 per cent on some journeys. That pushed the second to the very top of the news agenda: today's news that First Group has beaten off Virgin’s bid for the West Coast Main Line franchise.

The rise in fares was as predictable as death and taxes, and slightly more depressing than both. In real terms, they're now up a fifth since 1995. An annual ticket from London to Brighton now costs as much as a second-hand VW Golf, and that leaves change for some go-faster stripes for the seafront. Our trains are among the most expensive in Europe. Why?

If the train business doesn’t seem like any other industry, that’s because it’s not. Successive governments have never quite decided whether they’re a business or a social necessity – and they know full well there’s a decent case for the latter, because they’re clean, and thousands of people don’t die on them every year, which they do on the roads.

That means that under the current model you’ve got three competing obligations: quality (which takes investment), affordability and shareholder dividends. You can’t meet all three without money – so the burden for this was supposed to be split between the taxpayer and the passenger. That split used to be roughly 50/50, but the burden on passengers has crept up and up for the last 10 years towards 75 per cent passenger input.

You might say this could pose a few conflicts of interest, and you’d be completely understating the case. According to the Department for Transport the case for structural change has not been made. And this is true, assuming you discard countless industry experts, analysts and, um, the government’s own command paper on the subject.

It’s hard to know where to start. Fares can’t continue to rise at this rate, or the only people taking the train will be Lakshmi Mittal and at a push the Queen, assuming she can get an old person’s rail card. But the government hasn’t given any indication as to when the fares will stop going up. Given that it’s committed to £18bn of investment on goodies like Crossrail and Thameslink, not saying anything is probably a good idea, because it's going to be a decade at least.

But to be honest this is less of a problem than a point raised in the aforementioned command paper: the way the current system heaps the risks on taxpayers while giving fat payouts to shareholders, like the £88m pocketed last year by Stagecoach’s two founders (the polite euphemism in such reports is of “incompatible incentives”). This is due to the fact Labour (unchallenged by the other parties) brought in “revenue support” clauses, which guarantee taxpayers cover 80 per cent of shortfall between franchisees' forecasts and their actual revenues.

They’re not small, these sums of money. To pick an example entirely at random: despite paying out £340m to its shareholders last year, Stagecoach - the company with the directors who presumably keep their earnings in a pit with a diving board like Scrooge McDuck - also received £68m in bailout funds for the third South West Trains franchise a year ahead of schedule, after taking legal action against the government. At least RBS waited for things to really go belly up before they shafted us. This sort of thing might annoy those readers who think the railways should be publicly funded, but there’s something for everyone here, because ever since the railways were privatised the subsidies have flown up.

They might be siphoning cash straight out of the exchequer, but don’t worry, these companies are rummaging around in your pockets for loose change at the same time. Ever wondered why buying a ticket from a machine is like attempting to deal in equity derivatives while a 30-strong, tutting queue builds up behind you? Why you can get a “group save” in some places but not others, why you never seem to know for sure if your advance ticket is valid for the journey you’re trying to take, what constitutes "off peak", when “anytime” actually is?

You’d think the train companies would realise there’s an issue, what with successive reports on the subject by the Office of Rail Regulation and Which? pointing out that we all find the labyrinthine systems confusing, but maybe the message hasn’t got through. Either that or overpayments and fines are a nice little sideline.
 
Still, some friendly ticket office staff can help us, can’t they? Well, this leads us back to First Group’s bid for the West Coast rail franchise. It prompted Richard Branson to write to David Cameron, reminding him that the East Coast line had been handed to GNER and then National Express, both of whom hadn’t been able to deliver on their promised plan. Branson was apparently writing from the moral highground despite the fact Virgin has received £1.4bn in subsidies after, well, failing to deliver on its plans for the franchise. Sounds ludicrous? Well done; you're getting the hang of this.

What makes First Group more attractive? The fact it promises to run the line for less. How will it do that? Assuming you don't buy the growth predictions of eight per cent (generous), there’s only one way, and that’s by cutting jobs. This is assuming it does run the line, and doesn’t hand back its contract after promising to pay overly-ambitious premiums, as it did with another last year (which actually meant it was able to keep running the franchise for a few months without paying for it - result!).

The great irony is that somehow all this mess hasn't created that terrible a service. Anyone who thinks renationalisation is a silver bullet hasn't spent six hours in the waiting room at a provincial station on the Continent with no air conditioning and nothing but the town lunatic's thousand-yard-stare to keep you company; pretty much my summer of Interrailing in microcosm. But then anyone who thinks something good can come out of bodies that aren't competing in any normal way probably wasn't watching the women's badminton at the Olympics. The fact is, no one wins.

Actually, that's not quite true. Take a deal like Chiltern Railways' promise to invest £250m to cut journey times between London and Birmingham and provide an alternative route between Oxford and London. It's borrowing the money from Network Rail, which owns the infrastructure. Network Rail can do this because the government guarantees all its debt. The government has promised that Chiltern's successor will pay the outstanding amount once Chiltern's franchise ends, thus guaranteeing a loan from funds it's already underwriting. Have you got that? No, me neither. And such arcane deals require a veritable army of lawyers and consultants; an army that's deliberately complicated the various bidding processes in order to make itself ever more needed.

If Labour don't opt for renationalisation after its policy review, let's hope it looks seriously at simplifying the system - one train operator; one provider of infrastructure. It probably won't happen: there are a lot of "vested interests" (the same ones who were the party's corporate partners only a few years ago) to keep happy. There are all sorts of other ways of getting value for money out of the railways which haven't been explored like developments around train stations, but this is the big one. The alternative is that we all continue being taken for a ride.

 

First Group has beaten off Virgin’s bid for the West Coast Main Line franchise. Photograph: Getty Images

Alan White's work has appeared in the Observer, Times, Private Eye, The National and the TLS. As John Heale, he is the author of One Blood: Inside Britain's Gang Culture.

Photo: Getty
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Who will win the Copeland by-election?

Labour face a tricky task in holding onto the seat. 

What’s the Copeland by-election about? That’s the question that will decide who wins it.

The Conservatives want it to be about the nuclear industry, which is the seat’s biggest employer, and Jeremy Corbyn’s long history of opposition to nuclear power.

Labour want it to be about the difficulties of the NHS in Cumbria in general and the future of West Cumberland Hospital in particular.

Who’s winning? Neither party is confident of victory but both sides think it will be close. That Theresa May has visited is a sign of the confidence in Conservative headquarters that, win or lose, Labour will not increase its majority from the six-point lead it held over the Conservatives in May 2015. (It’s always more instructive to talk about vote share rather than raw numbers, in by-elections in particular.)

But her visit may have been counterproductive. Yes, she is the most popular politician in Britain according to all the polls, but in visiting she has added fuel to the fire of Labour’s message that the Conservatives are keeping an anxious eye on the outcome.

Labour strategists feared that “the oxygen” would come out of the campaign if May used her visit to offer a guarantee about West Cumberland Hospital. Instead, she refused to answer, merely hyping up the issue further.

The party is nervous that opposition to Corbyn is going to supress turnout among their voters, but on the Conservative side, there is considerable irritation that May’s visit has made their task harder, too.

Voters know the difference between a by-election and a general election and my hunch is that people will get they can have a free hit on the health question without risking the future of the nuclear factory. That Corbyn has U-Turned on nuclear power only helps.

I said last week that if I knew what the local paper would look like between now and then I would be able to call the outcome. Today the West Cumbria News & Star leads with Downing Street’s refusal to answer questions about West Cumberland Hospital. All the signs favour Labour. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.