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.

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I believe only Yvette Cooper has the breadth of support to beat Jeremy Corbyn

All the recent polling suggests Andy Burnham is losing more votes than anyone else to Jeremy Corbyn, says Diana Johnson MP.

Tom Blenkinsop MP on the New Statesman website today says he is giving his second preference to Andy Burnham as he thinks that Andy has the best chance of beating Jeremy.

This is on the basis that if Yvette goes out first all her second preferences will swing behind Andy, whereas if Andy goes out first then his second preferences, due to the broad alliance he has created behind his campaign, will all or largely switch to the other male candidate, Jeremy.

Let's take a deep breath and try and think through what will be the effect of preferential voting in the Labour leadership.

First of all, it is very difficult to know how second preferences will switch. From my telephone canvassing there is some rather interesting voting going on, but I don't accept that Tom’s analysis is correct. I have certainly picked up growing support for Yvette in recent weeks.

In fact you can argue the reverse of Tom’s analysis is true – Andy has moved further away from the centre and, as a result, his pitch to those like Tom who are supporting Liz first is now narrower. As a result, Yvette is more likely to pick up those second preferences.

Stats from the Yvette For Labour team show Yvette picking up the majority of second preferences from all candidates – from the Progress wing supporting Liz to the softer left fans of Jeremy – and Andy's supporters too. Their figures show many undecideds opting for Yvette as their first preference, as well as others choosing to switch their first preference to Yvette from one of the other candidates. It's for this reason I still believe only Yvette has the breadth of support to beat Jeremy and then to go on to win in 2020.

It's interesting that Andy has not been willing to make it clear that second preferences should go to Yvette or Liz. Yvette has been very clear that she would encourage second preferences to be for Andy or Liz.

Having watched Andy on Sky's Murnaghan show this morning, he categorically states that Labour will not get beyond first base with the electorate at a general election if we are not economically credible and that fundamentally Jeremy's economic plans do not add up. So, I am unsure why Andy is so unwilling to be clear on second preferences.

All the recent polling suggests Andy is losing more votes than anyone else to Jeremy. He trails fourth in London – where a huge proportion of our electorate is based.

So I would urge Tom to reflect more widely on who is best placed to provide the strongest opposition to the Tories, appeal to the widest group of voters and reach out to the communities we need to win back. I believe that this has to be Yvette.

The Newsnight focus group a few days ago showed that Yvette is best placed to win back those former Labour voters we will need in 2020.

Labour will pay a massive price if we ignore this.

Diana Johnson is the Labour MP for Hull North.