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23 October 2015

What’s Labour’s plan for the railways?

Labour's plan is not about harking back to the past, but providing the best service for the future, says Jonathan Reynolds. 

By Jonathan Reynolds

Some people will feel Labour’s pledge to return the railways to public ownership is a long overdue return to traditional Labour policies. Others might be worried we are getting nostalgic for the past. Labour’s transport team has a simple message for everyone – this is about building a better railway by being able to provide better services across the country.   This includes in many marginal constituencies, where the problems faced by commuters are amongst the primary political issues raised.

Although this will inevitably be seen as a battle of public versus private, Britain’s privatised railways are already under considerable state control. Railways are, frankly, too important for any government to ever really walk away from, and cannot ever be run as a free market. The Department of Transport and its ministers have a major say in fares, rolling stock, stations, timetables and more. Any railway system requires subsidy, and at around £4bn a year (double the cost of what British Rail received once inflation is accounted for) the Government’s financial support for Britain’s railways is considerable. In addition, and unlike in the privatised utilities, nearly all investment in our rail network still comes from taxpayers and farepayers.

The one part of the railway network that was completely sold off, the infrastructure and stations, enjoyed a short life as “Railtrack” before it collapsed under the pressure of its own responsibilities. Its successor Network Rail is now in public hands.

So what does Labour want to change? We are proposing to end the costly and unnecessary franchise system, whereby private companies (ironically many of which are actually subsidiaries of foreign state-owned railways) bid for the right to run each major line and make profit from the public infrastructure behind it. No other country in the world runs its railway this way, and it is widely acknowledged that the franchising process has led to unnecessary instability and, crucially, much higher costs through increased fragmentation.  This has ultimately led to the significantly higher fares British rail users have to pay compared to their European counterparts.

But even more crucially, franchising has created an inflexible railway. Franchises have to correctly predict the level of demand many years into the future, and often get it wrong. The technical challenges of running franchise competitions was dramatically exposed in 2012 when the InterCity West Coast competition collapsed – costing taxpayers over £50 million and leading to job losses in the rail supply chain. The inflexibilities of the franchise system also led to the loss of modern trains from TransPennine Express, which led to some services being downgraded, and a further £20 million bill for the Exchequer. Franchising deprives us of the ability to respond quickly and efficiently to changing circumstances, which leads to overcrowding and an awful passenger experience.

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In other areas of privatisation, private operators have been rewarded for taking risks and putting new investment in. But neither is true of the railways. Investment ultimately comes from either taxpayers (via Network Rail) or farepayers. As far as risks go, operators can simply walk away in the event of underperformance, as National Express infamously did in 2009 when it handed the East Coast franchise back to the DfT.  It was subsequently run profitably under public ownership.

So this isn’t a policy driven by misty-eyed nostalgia for British Rail, but simply a recognition that what we have at the moment isn’t working for passengers or taxpayers, and that we should be willing to look around the world for examples of best practice we could apply here at home.

Labour’s Transport team now intend to establish a taskforce to look in detail at how our railways should be run, including on how we ensure there is a strong voice for devolved city and regional government over rail services, and on what the best relationship should be between the infrastructure side of the railway and the train operating services. We will also work to make sure that the voices of passengers, staff and local communities are all properly represented in the oversight of the rail network.

Most of all however, we are simply determined to give the country a much better railway.

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