2 January 2018

The folly of renationalising the railways

By James Price

Rail fares have just gone up again, by an average of 3.4 per cent. Add to that the industrial action that has plagued Southern Rail and other operators and it’s hardly surprise that a recent poll found that 75 per cent of Britons support renationalising the railways. This, however, wouldn’t just fail to deal with the problems that have passengers so angry. It would make things even worse and be grossly unfair.

The train-riding commuter tends to be better-off than the average Brit, generally travelling from leafy suburbs or the countryside into well-paid jobs in cities. This means that the majority of Britons travelling to work by car or bus subsidise wealthier railway passengers, a fact that is often forgotten by the politicians and policymakers who live in London (or commute in on trains), where there are more plentiful public transport options.

On the continent, rail fares are cheaper because the taxpayer subsidy is much higher. This may suit those of us who have experienced “cheap” rail travel on holiday in Europe, but European taxpayers are footing the bill. The logic of the British system is that it is fairer for someone using a service to pay more for it than those who don’t (or can’t).

There is still a taxpayer subsidy in the system thanks to chronic under-investment during the bad old days of British Rail, which left the network in a parlous state, with many lines closed.

That investment is starting to pay off. Just look at the redevelopment of King’s Cross and London Bridge. There would be much more of this if it were not for the UK’s true rail scandal, HS2. Electrification of the lines and signals upgrades in the South-West and North-East have been stopped indefinitely to make the sums add up for a £104bn white elephant that refuses to die.

Nevertheless, signalling improvements and other upgrades means that Britain now has the safest trains in Europe, and punctuality and journey speed are much better than they were under British Rail.

One of the major criticisms from those who want to see renationalisation is that dividends to shareholders come at the expense of the money available for investment. But those payments equate to only 13p per journey and, as a new Taxpayers’ Alliance report shows, half of train operators did not pay any dividends to shareholders in 2015-16. Added to the fact that the number of passenger journeys has increased every year since privatisation (except during the recession in 2009-10) and the overall picture looks very different to the one painted by those nostalgic for the bad old days.

Another bogus argument for renationaliation doing the rounds today was the example of East Coast. The fact that the service was taken into temporary public ownership is often cited as proof that it would work with the entire network. But, as Sebastian Payne of the Financial Times pointed out, Directly Operated Railways paid less than half the track access charges than its predecessor.

No one wants to pay higher fares, especially when there are no seats available for the long slog into work. But the evidence shows that on the whole we are pretty pleased with the rail network. The latest National Rail Passenger Survey shows overall satisfaction at 83 per cent with only 6 per cent dissatisfaction. Of the 38 categories on which passengers are surveyed, only three had a higher proportion of dissatisfaction than satisfaction: availability of WiFi at stations and on trains being two, and the other being the availability of power sockets. The most unpopular operator? The strike-riddled Govia Thameslink Railway, whose franchise has an unusual structure as it uses a management contract under which fare income does not go to GTR, which instead receives a management fee. In other words, the “most nationalised” operator scored the lowest levels of satisfaction.

Another argument made is that Railtrack, Network Rail’s predecessor, was fully privatised and made a hash of things – so the pseudo-privatised system we have now should simply go back into public ownership. But the evidence clearly shows that the government doesn’t do particularly well when tasked with important jobs like buying rolling stock – take, for instance, the 2014 National Audit Office report criticising the procurement of Intercity Express and Thameslink rolling stock, the first time the Department for Transport had led such a programme since the days of British Rail.

Hand-in-hand with calls for renationalisation come support for trade unions. ASLEF and the RMT have made commuting into London on Southern Rail, as I do every day, very difficult. Continuing industrial action has nominally been about the “safety” of commuters if train guards are to be phased out, but these concerns have evaporated since Southern agreed to a 28 per cent pay increase (taking their basic pay to £63,000 for a four-day week). Small wonder 25p in ever £1 spent on the railways goes to staffing costs.

There is still much that can be done to improve the experience of rail commuters, beyond curbing the power of these trade unions. Extending platforms and stations to accommodate longer trains would help, as would more intelligent signalling. And the harsh peak/off-peak dichotomy should be replaced by a tiered costing system to smooth the demand on the first off-peak trains.

Richer people should pay for the privilege of living in leafy Surrey or Regency Cheltenham, but those of us who commute because we are priced out of living near where we work represent a failure of housing policy and should be helped. Our major commuter-receiving cities are much less dense than Paris, Tokyo or New York, and liberalising planning laws so that more of us could live nearer where we work would ease some of the worst routes.

But whatever the merits of these improvements, one thing is clear: renationalisation would be a massive, costly step backwards from the improvements that have been made in the last 25 years.

James Price is Campaign Manager at the Taxpayers' Alliance