Exorbitant ticket prices, lack of investment, overstretched commuter trains, fragmented ownership and management structures and sky-high profits, together with unjustified dividends to shareholders. This is the state of Britain’s railways, and the Tories’ legacy to the country. It’s time we began to think the previously unthinkable and progressively bring the rail operating companies back under public control.
Less than a month ago, Network Rail announced profits of £1.48bn. Many readers may not be aware, or have forgotten, that our Labour government made Network Rail into a “not for dividend” company, which is not answerable to shareholders. As a consequence, all this profit is being reinvested back into infrastructure.
Why, when rail services are increasingly un reliable and ticket prices have soared, can’t this model be extended to the train operators?
It is a horrifically complicated picture: in 1996 the Tories, under John Major, were responsible for not only the wholesale privatisation of our rail services but also their fragmentation. The Tories introduced destructive – and dangerous – competitive tensions into the heart of the railways. We are still living with the consequences.
British Rail was split into more than a hundred different parts, including Railtrack, 25 train operators, 14 maintenance companies, three rolling stock operators and two freight operators. Far from providing efficiency or improvement, rail performance, measured by punctuality and safety, declined. Service targets have not regained the levels they were at in the final years of the much-maligned British Rail. The Conservatives’ disastrous new rail structure resulted in soaring public subsidies at the same time as ticket prices rose sharply; but now the taxpayer was subsidising private profiteers instead of a national public asset.
Privatisation was meant to improve services and help lever in private investment. Instead, services declined, and today any private investment in the railways is paid for by passengers and taxpayers. An estimated £800m a year is taken out of the industry in the form of profitable returns to private lenders and investors.
This adds up to £6bn of public money put into private pockets since 1996. And what have travellers received in return? Deteriorating services and rocketing prices. By the government’s own reckoning, public subsidy of the railways has now reached an almighty £4.5bn a year, of which £1.4bn is paid annually to the train operators. Yet, since 1997, the cost of rail travel to consumers has increased by almost 53 per cent.
It is time for Labour to act decisively in relation to the railways. Economically, socially and environmentally, bringing the railways back under public control makes sense and the imminent renewal of operating franchises, alongside the change in the leadership and deputy leadership of the party, provides unique opportunities.
Ten of the 19 rail operating franchises are due to expire between now and 2013, and four are due to start being negotiated this year. The cost to the public purse of this tendering process is £3m-£4m a time. Why not bypass this wasteful exercise and let Network Rail operate franchises in the same “not for profit” image? This would mean that the majority of passenger services could be taken back into public ownership by 2013, at no cost to the taxpayer.
It is not as if the private sector has proved itself vastly more efficient than the public sector. Network Rail is not the only good example of the public sector running services more effectively. The experience of South Eastern Trains, which was awarded Connex’s contract in 2003 and outperformed its private sector counterparts with less public subsidy, demonstrates that the public sector can run passenger services more effectively and efficiently and provide better value for money than its private sector comparators.
The government’s franchising policy has also been exposed by the recent failure of GNER to deliver its franchise commitments. The whole process was brought into stark focus with the warning from the former head of GNER Chris topher Garnett, who said: “Other train companies were also making bids with very low margins that could prove unsustainable.”
The House of Commons transport select committee delivered a scathing verdict on the current rail model in a recent report, with specific criticism of the franchising process: “We agree wholeheartedly with the general objectives of improving passenger services and maximising the value for money achieved from government subsidies. But we do not believe that the current system of passenger rail franchising can achieve those aims in the long term.”
In order to move the industry forward and provide the best value to both the taxpayer and passenger, the government must move away from its rigid adherence to the failed privatised model. Across the majority of the network there is little or no competition, and the private sector is taking only a marginal amount of the risk involved in running and investing in infrastructure. The private sector is entirely confident that the government will not allow any part of the passenger rail network to fail and therefore makes a limited commitment in terms of long-term investment in the industry.
As well as making financial, social and environmental sense, delivering cheaper, more punctual and efficient services is a vote winner, particularly in the south-east commuter-belt “marginals” on which new Labour has focused so much attention in the past ten years.
Since 2004, constituency Labour parties and trade unions have voted overwhelmingly to put rail services back into public ownership. I believe the time is right to start that process. It is not a matter of left-wing ideology, but pragmatic good sense. Skyrocketing prices, unreliable services and a lack of integration between routes and services are pushing people away from the railways and alienating them from the Labour Party.
The alternative is congested roads, higher accident rates and increased pollution.
Jon Cruddas is MP for Dagenham and a candidate for Labour’s deputy leadership