In 2022 Britain’s rail infrastructure owner Network Rail, whose £56.1 billion debt mountain is underwritten by UK taxpayers, spent more on interest on loans than maintaining and improving Britain’s railways. Network Rail is a legacy of New Labour. Following the bankruptcy of Railtrack plc in 2002, then chancellor Gordon Brown wanted historic debt off public expenditure balance sheets. His solution, a privately-financed ‘company limited by guarantee’, reintegrated some engineering systems fragmented by Tory rail privatisation.
Unfortunately, the rail industry retained the privatised character bequeathed by the Tories. Major capital expenditure projects are outsourced to private contractors, and a plethora of contractual interfaces ensure each company maintains a bureaucracy dedicated to delay attribution and managing staff across multiple agencies and employers.
Cash cow
New Labour’s addiction to private finance models also created a cash cow for commercial lenders. In September 2014, the Office for National Statistics reclassified Network Rail as a central government body in UK national accounts and public sector finances. Private debt to commercial banks was no longer ‘off the books’.
The Tory/Lib Dem coalition then decided Network Rail should borrow directly from government, signing a £30.3 billion loan facility to cover its financing to March 2019. By 2017, Tory ministers, already panicking at the prospect of Network Rail’s future financing needs, anticipated £47.9 billion rail expenditure for 2019-24, comprising 72 per cent of government funding (£34.7 billion) with the rest from increased fees on train operators and income from Network Rail’s property portfolio.
As costs rose and heroic assumptions of increasing passenger revenue failed to materialise, train operators Stagecoach and Virgin handed contracts back to government, while in 2020 Northern Trains collapsed and was taken into public ownership. Even before the strain of Covid-19, private operators lobbied to replace rail franchises with a management-fee system to safeguard their profits. Emergency recovery management agreements introduced in 2020 have now been replaced by permanent management contracts, which RMT calculates will pay private train operators £955 million in dividends by 2027.
Unhappy passengers
After a decade of above inflation fare increases, with falling real wages, by January 2018 real terms rail fares were 20 per cent higher than in 1995. In January 2019, Transport Focus reported overall passenger satisfaction at a ten-year low.
Privatised rail’s structural fragmentation led to a timetable crisis in 2018 with mass cancellations of train services. The transport select committee ascribed the chaos to ‘the astonishing complexity of a disaggregated railway in which interrelated train companies operating on publicly owned and managed infrastructure have competing commercial interests’. An evidence paper presented to the Williams review, published in May 2021, setting out Tory intentions to reform rail, noted: ‘Distrust of the rail industry has worsened among passengers… only second-hand car dealers are more distrusted by consumers’.
Distrust of the rail industry has worsened among passengers… only second-hand car dealers are more distrusted by consumers
The position of the rolling stock companies is even more egregious. From 2016 to 2020 train leasing costs rose by more than 90 per cent. Three rolling stock leasing companies between them own 88 per cent of Britain’s trains and paid out £949 million in dividends in 2020 alone.
Shadow transport secretary Louise Haigh’s commitment at Labour’s 2022 conference – that a Labour government will take rail services into public ownership as existing contracts expire – is therefore a rather tepid recognition of the failure of 27 years of rail privatisation. Any proposal that allows rampant profiteering by cartels and foreign governments to continue to contract expiry, at passengers’ and taxpayers’ expense, is not serious about the need to reform ownership and control of our railways.
Renationalisation
Keir Starmer’s casual attitude to pledges recalls Labour’s 1995 conference, where the party committed itself to ‘A publicly owned, publicly accountable railway.’ No sooner did Labour enter government than it turned the meaning of public ownership on its head to promote a public-private partnership to privatise London Underground in Europe’s largest-ever private finance initiative (PFI) deal. Labour’s current commitment is unclear and lacks a worked-out plan to renationalise Britain’s rail industry within a realistic timeframe. But such a plan exists and was published as an opposition white paper in 2020. Then-shadow transport secretary Andy McDonald proposed a publicly owned railway company, GB Rail, to operate railway infrastructure and train services as part of a single unified company. This vertically integrated company would be the guiding mind for the whole railway and a sole employer for all rail workers.
There is a consistent long-term consensus among rail users and the general public alike for an integrated, publicly owned railway. Opinion polls and surveys show a substantial majority in favour of renationalisation for good reason.
Publicly owned rail enables transparent costing and sustainable funding. It would mean public investment in rail services and properly staffed trains and stations, rather than serving privately owned train operating companies extracting profit.
In 2015 the Rail Delivery Group reported 44 per cent of railway stations were entirely unstaffed and a further 45 per cent were unstaffed at some times of the day. In 2022 the same group was exposed for plans to close all railway ticket offices across the network. It is clear this is not the future that the public or passengers want.
Compared to privatised railways, a publicly owned railway, not driven to maximise profits by staff cuts, could reflect accessibility needs of a diversity of rail users, including disabled people. This is particularly pertinent following the resignation of an advisor from the government’s disabled persons transport advisory council (DPTAC) last year, in protest at plans to close ticket offices and bring in more driver-only trains, saying it would make an already unacceptable situation worse.
Critically, privatised rail’s primary need to generate profits is incompatible, with Britain’s climate change targets to remove diesel-only trains from the network by 2040 and achieve net zero by 2050. Privatisation has lumbered Britain’s rail industry with ageing rolling stock technology brought in with the intention of cutting staff and with competing interests that hold back innovation.
A single, integrated, publicly owned railway that sees rail workers as an asset, can rebuild our knowledge and skills base and engage in proper workforce planning and development with unions to ensure new green jobs, instead of leaving employment in the hands of companies hell-bent on destroying good jobs in shareholders’ interests.
This article has been amended from its print version to reflect the fact that The Labour Party committed itself to public ownership of the railways as part of its 1995 party conference. The original article claimed the quote came from its 1997 election manifesto.
