All aboard The Big Debate Express! This week we ask: “Should Britain’s railways be renationalised?”
Yes – Harry Adams
The way Britain currently operates its railway system is flawed. But for over two decades governments have arrogantly maintained this system of cushy and lengthy franchise deals meted out to Train Operating Companies (TOCs) which in turn reap the benefits of limited or no competition and massive government subsidy. Ticketing systems are often complicated and misleading, and above-inflation fare rises put our railways at risk of becoming, in the words of former Transport Secretary Phillip Hammond, “a rich man’s toy”.
Given the fractured nature of the current system – in which infrastructure, operating rights and rolling stock are owned by three separate parties – it is little wonder that we find ourselves in a situation like this.
And yet, passenger numbers continue to boom and the government continues to use this as justification for its unswerving sponsorship of the current system. This is misleading and increasingly contrary to the electorate’s wishes; as illustrated by a recent YouGov poll which found that 58% of those surveyed wanted to see the railways nationalised.
The way Britain currently operates its railway system is flawed.
The privatisation argument is founded on two key myths. The first is the gross exaggeration that privatisation is the sole cause of the current renaissance of railway travel. The dissolution in 1993 of the tired British Railways (BR) halted the long decline with fresh private investment and sorely needed rebranding.
However, to pin the cause of today’s record-high passenger numbers on this completely is to overlook factors beyond the railway industry itself; namely, increasing road congestion and fuel prices. Additionally, the “competition, innovation and flexibility”, detailed in the 1992 White Paper, and assumed to be unachievable by any publicly run system, has never materialised.
Only with the introduction of “open access agreements” – in which the government allows certain additional TOCs to operate specified routes in competition with the main franchise holder – has anything akin to consumer choice been achieved. But the scale and scope of such operations is limited; something unlikely to change in the current climate without increasing subsidy payments, as the major TOCs oppose any competition as a threat to their profit margins.
The second myth is that a publicly owned railway would automatically take the form of pre-1993 BR, without learning any of its lessons. This is something to be wary of, but the BR of most people’s memories must be put in its proper context; that is, in the late 1970s and 1980s, when railways were unfashionable and limited congestion made road travel far more attractive.
Indeed, we already have evidence that the old BR-mould of operation is not the only form a publicly run network could take. From 2009-15, Directly Operated Railways (a not-for-dividend subsidiary of the Department for Transport) stepped in for the disgraced National Express on the East Coast Main Line.
It not only made the route profitable, but cost the government less to operate in subsidy payments than the Virgin-operated West Coast Main Line. However, in March 2015, the franchise was hastily re-privatised, at a greater cost to taxpayers and with dire implications for competition; Virgin now operates both the West Coast and East Coast routes.
This is transport policy at its most ideological. Directly Operated Railways provided a clear and successful alternative to the current regime of eye-watering subsidies, and during its six years of operation returned the government more profit than any other franchise.
In recognition of this, both Jeremy Corbyn and Caroline Lucas have proposed staggered nationalisation programs, whereby a government body like Directly Operated Railways assumes control of the franchises as they come up for renewal.
The government’s current policy, however, aims to make this potential process as difficult as possible, ensuring it would take until the early 2030s to complete, thereby risking a fractured transitional period in which the remaining TOCs become increasingly de-incentivised by looming nationalisation.
This is transport policy at its most ideological.
This is proving a powerful deterrent, but the overall cost of mindless ideological adherence to franchising in the face of a proven and superior alternative will ultimately be borne by the passenger and taxpayer. Ensuring that railways operate the public service desired of them will always cost the taxpayer in some form. Either by direct funding, or perpetuating the illusion of private sector competition by clandestinely funnelling public money to TOCs in the form of subsidies.
Further privatisation is an even less attractive option. It would likely entail the selling off of government-owned assets, fracturing the system permanently with little scope for effective regulation, and a situation in which subsidy-less TOCs soothed their stretched profit margins with fare increases or cuts to services.
But we have an obvious solution. Nationalisation along the measured lines of Directly Operated Railways is profitable and effective, for taxpayers, passengers and government alike. Irrespective of ideological views, it is time we rid British transport policy of this franchising rot for good.
No – Alistair Woods
Poor service, late, dirty… Ask your parents what they thought of British Rail and you will probably get an answer along those lines. Since the railways were privatised in the mid ‘90s they have improved markedly in multiple ways. So I find the statistic that 60% of Britons support railway nationalisation worrying.
The easiest way to demonstrate these improvements is to simply look at the facts, so here goes.
From 1993 to 1997 the government set up a tendering process whereby they offered up different sections of track to be run by private franchises, on approximately 10 year leases. Previously the whole thing was controlled by the state owned British Rail.
The key change has been increased investment. For decades the government had underinvested. In 1994 investment was £1.2bn (adjusted for inflation), but by 2014 it was £6.8bn. So even though trains can be horribly overcrowded in rush hour and halted by a few leaves or a millimetre of snow, they are actually in a far better state than if they had been left in the government’s hands.
These improvements have been noticed by the public, whose satisfaction with the railways has risen 7% to 83% since 1999 (the first year this was surveyed). More significantly people have been talking with their feet. Since privatisation passenger numbers have increased by 117%. This growth far outstrips comparable networks, such as those of France and Germany.
You should note that subsidies for the railways have increased in real terms, from £2.2bn to £3.8bn today. However, after considering the extra passengers, this works out as about a 20% decrease in subsidy per passenger journey, meaning that each journey costs the government less.
But perhaps the greatest complaint people have today is fare increases, which have gone up by 24% according to the Economist. But why should we assume that renationalising the railways would reverse this?
Since the railways were privatised in the mid ‘90s they have improved markedly in multiple ways.
Where most supporters of renationalisation perk up is at the fact that it is estimated that Britain’s railways are around 40% less efficient than comparable publicly owned European ones. Many then infer that therefore renationalisation must be the golden ticket.
However, the main reason for these inefficiencies is not the economies of scale that would occur under a single public company. Instead it is expensive labour practices that need to be tackled, according an independent government commissioned report.
Take a look at TfL, where Tube drivers start on £50k and strikes are seemingly annual, now guess whether the government would the required action to deal with this, i.e. fire a lot of people. If you want to improve efficiency look into leasing out the track itself (currently it is just use of the track) or changing lease lengths.
Instead it is expensive labour practices that need to be tackled
A major barrier to renationalisation is that the initial cost would be huge. The government would either be faced with spending billions on buying out the franchisees’ leases. Or lose tens of billions in private investment by taking over the lines as their leases ended, giving the firms no incentive to invest once they knew their lease was not going to be renewed.
Initially, from an outsider’s perspective, renationalisation may look great. But due to the chronic underinvestment under public ownership we are not in the same position as other countries, thus to try and emulate them would wrong. In our current situation, keeping our railways in private hands is the best policy.
And finally, yes, rail companies will make a profit. And yes, they are heavily subsidised. But we get a better service that’s better value for money for the government and the public. Get over it