1 May 2024

The dead hand of the state would kill our railways


Labour’s announcement that they will renationalise nearly all passenger rail services within their first five years of government has been received positively by the usual suspects.

The Guardian has come out praising it as a ‘sensible plan that passengers need’ citing the failure of railway privatisation as ‘a glaring failure of the Tory ideological fixation on the private sector’.

Mick Lynch, General Secretary of the Rail, Maritime and Transport union, also applauded the move, saying that bringing train companies into public ownership was ‘in the best interests of railway workers, passengers and the taxpayer’.

No surprise there. And for those with any knowledge, first-hand or second-hand, of the failing Avanti West Coast train line, the extent of public support for the policy won’t be a surprise either. According to a recent YouGov poll, around 70% of the British public supported train companies being brought back into public ownership. This support is crossparty, with 63% of Conservative voters wanting renationalisation of the railways. Labour is tapping into a genuine public desire for state intervention to solve persistent problems with this key pillar of our transport infrastructure.

The solution is popular precisely because the perceived problems with Britain’s railways are almost always laid at the feet of privatisation. It’s argued that rail privatisation is too complex, compromises on safety, and generates an industry more interested in profits and dividends than investment and getting people from A to B without delay or difficulty. Lynch made his view clear, calling the rail system ‘a cash cow for the cloud of parasitic private interests that swarm around it’.

However, research from the TaxPayers’ Alliance shows that none of these assumptions are correct.

To start, it’s the already nationalised bits that are causing many of the problems. Of the delays to UK journeys, almost 60% are caused by Network Rail which is, you guessed correctly, already nationalised. As for the vast subsidies provided to the train companies, three of the four largest given out between 2022-23 were given to nationalised rail services (ScotRail, Northern, and South Eastern), totalling over £1.7bn.

In respect to Lynch’s argument regarding ‘parasitic private interests’, in 2022-23, most franchised train operators did not pay any dividends to their shareholders. Total dividends paid were 43% less than in 2021-22 and 75% lower compared to before the pandemic. So if the railways are a cash cow as Lynch suggests, then there is very little being milked. And what of the vast alleged profits? Average margins for train operator companies are just 1.2%.

Contrary to what public opinion may suggest, privatisation has improved many areas of the railway system. Investment in the railways has gone up ninefold from £698m in 1994–95 to £6.84bn by the end of 2014. In regards to safety, according to a 2022 report by the Office of Rail and Road, Britain ‘continues to have one of the safest railways in Europe’ with the lowest number of fatalities and weighted serious injuries.

As for the promise of greater investment? Under renationalisation, the railways would be pitted against a dozen other priorities, many of which are bigger vote winners, impacting more marginal constituencies – think pensions, the NHS and crime. As Andy Bagnall, Chief Executive of Rail Partners pointed out, railways will be ‘competing for funding with other public services like the NHS. Historically, British Rail often lost this battle’.

There is no doubt that there are problems with the current system. But rather than reaching for the tired and predictable lever of state intervention, why not try to inject some genuine competition into the railways as, for example, the Adam Smith Institute and Centre for Policy Studies have argued for with their suggestion to allow more Open Access operators into the network? This would mean enabling competition between operators on the same route, rather than a system where providers have monopolies over whole sections of track. Evidence of existing routes with Open Access operators has led to lower fares and higher satisfaction.

Getting privatisation right is crucial. Because in a renationalised future, the progress that has been made in the industry since the 90s will be derailed. No one wants to see the railways and its passengers be put into second class for the foreseeable future.

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William Yarwood is Media Campaign Manager at the Taxpayers' Alliance.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.