Rethinking rail: Greening should look to Europe and away from privatisation

Matt Dykes, the TUC’s public transport policy officer, calls on transport secretary Justine Greening to look to Europe for examples of how to run the railways.

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Matt Dykes is the TUC’s public transport policy officer

Rail unions and transport campaigners will meet with MPs today at Westminster to discuss their response to the government’s new strategy for rail announced by the transport secretary Justine Greening earlier this month.

Kings-Cross-stationRail is facing a pivotal moment in its turbulent post-privatisation history.

The majority of operating franchises are up for renewal in the next five years, a new funding period for Network Rail is on the horizon; and the McNulty Review published last year casts its long shadow across the industry, calling for cuts of up to 30% in the next 10 years.

At the same time, passenger numbers continue to increase, Crossrail and HS2 progress their steady way, and the industry wrestles with how to accommodate growing demand.

So an ideal opportunity then for the government to address the inherent problems that beset our dysfunctional quasi-privatised rail system. But, unsurprisingly, we have another rail reform that wastes this opportunity.

Like McNulty, the government correctly identifies the inefficiencies created by a fragmented industry characterised by competing interests, complex and antagonistic contractual relationships, increasingly reliant on public subsidy and punishing fare rises.

And like McNulty, their prescriptions are for more of the same.

“Reforming our Railways, Putting the Customer First” (pdf) sets out the government’s vision for rail. The document is too light on detail to call it a strategy but, to be fair, its vision is certainly clear: privatisation works, let’s have more of it.

As an ex-Treasury acolyte of George Osborne, it is not surprising that Justine Greening brings her own take of ‘expansionary fiscal contraction’ to the railways. Slash costs and get government out of the way and the private sector will step in with the investment and growth.


See also:

Are sky-high train fares fair? Let the government know what you think 8 Mar 2012

All signals are go for HS2 10 Jan 2012

The railways: Yet another broken market in the UK 19 Aug 2011

How the Government could keep train fares down 16 Aug 2011

Train journeys from Hell: What is to be done? 23 Mar 2011


So the train operating companies get handed longer franchises with more commercial freedom and greater control over track through ‘deep alliances’ with (or even outright integration of) Network Rail. Encouraged to trim the fat through shedding thousands of ticket office, station and train staff, train operators will be incentivised to invest in and grow the railways.

The fact this has completely failed to work in the wider economy, as cash rich companies continue to pay off debts or hand out record dividends rather than invest, hasn’t dampened the Department for Transport’s ardour.

To an extent, rail may be different. Companies aren’t investing in the wider economy because of lack of demand, train operators predict future growth in passenger numbers – but passenger growth in the past has largely mirrored broader economic growth.

A continuing weak recovery might mean those passenger numbers fail to materialise, particularly if people become increasingly put off by the absence of staff on trains and in stations. It wouldn’t be the first time predicted passenger growth has failed to materialise, and then, as now, train operators know the fare payer and public purse will meet the shortfall.

The government tells us they will put an end to above inflation fare rises, once the savings in the industry have been found and economic circumstances have changed.

In the meantime, expect RPI plus 3% in 2013 and 2014, and for those of you who travel to work by train in peak hours, expect some stiffer fare hikes. This is to help ‘manage demand’ in peak hours, so be sure to let your boss know you’re changing your hours. Or just pay up.

As with so many rail reforms in the past, public ownership continues to be ignored as an option, despite evidence that shows state owned rail in Europe delivers cheaper and better services than us.

Research by Transport for Quality of Life (pdf) shows that additional costs of more than £1bn per year are incurred through a combination of debt write-offs, dividend payments to private investors, fragmentation and transaction costs, including profit margins of complex tiers of contractors and sub-contractors and higher interest payments incurred by Network Rail resulting from being kept off the government’s balance sheet.

The cumulative costs since privatisation could be well over £11bn. Those are some pretty hefty savings that could be passed onto the government and passenger alike.


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