Taxpayers are giving Branson and co a free ride to the bank.
Right-wing papers were in full-blown attack mode this morning as talk of renationalising the railways geared up a notch.
The 3.4% rise in rail fares this week which came into effect this week has been described as ‘the last straw for passengers’ by campaign groups.
Organisations like We Own It and transport unions are calling for the government to ‘take back control’ of the broken rail network – particularly in light of 76% of the public believing railways should be run in public ownership.
Today The Sun’s editorial leads with faux sympathy for hard-hit commuters – before arguing:
“Renationalisation would mean hard-up taxpayers who may never use trains subsidising richer ones who would like a cheaper commute into London from their leafy suburb.”
Of course, it’s total cobblers.
Firstly, train subsidies have gone up since privatisation.
What The Sun describes is already happening under a supposedly ‘privatised’ system. As so often happens, the government is privatising the profits and nationalising the losses. As described here:
“The government spends over £5bn on public transport subsidies….but for decades, it’s been the most affluent who benefit the most. The richest 10% of households each receive on average nearly double the subsidy of the poorest 10% of households.
“The root cause of this imbalance is the huge subsidy provided for rail travel in London and the south-east.”
Secondly, rail is already nationalised in the UK – just not by us.
New analysis by the Telegraph has shown that “72% of rail franchises are already backed by the state – just not ours.”
They note that 18 out of 25 rail franchises are currently run by foreign state-backed operators, with the number set to rise.
Finally, the most recent example of publicly-owned rail in the UK – the East Coast mainline (before re-priviatisation a few years ago) was incredibly profitable for the taxpayer.
In the year to March 2014 – the last financial year before it was re-privatised – East Coast paid back £225m to the government.
We Own It, the campaign group calling for public ownership, has put forward five steps to take the railway into public hands. We publish it in full here:
1. Scrap Clause 25 of the 1993 Railways Act
Legislation currently bans any UK government bodies from running rail franchises, except as ‘operator of last resort’. This needs to be changed so that public bodies are allowed to take over rail franchises when they expire.
2. Reinstate Directly Operated Railways (DOR)
Directly Operated Railways (DOR) was the public body which ran the East Coast line as ‘operator of last resort’ between 2009 and 2015 when the private company failed. Under public ownership, East Coast was the most efficient franchise in the UK.
Despite this, in 2015 the government disbanded DOR and outsourced its functions to a partnership of private companies including EY. It needs to be reinstated as a public operator.
3. Bring rail franchises in house as they expire
Once the legal and practical sides have been dealt with, the public sector will be able to take over contracts as franchises come to their natural end. This approach will take longer than buying back rail franchises immediately but it won’t cost the government a penny.
4. Buy trains directly from manufacturers
At the moment rail companies spend 11% of their income from passengers on leasing trains from a small group of rolling stock companies (ROSCOs). If trains were bought straight from the manufacturers, cutting out the profit-hungry middle men, we’d save about £200 million a year.
5. Create an integrated, publicly owned national rail network
Once all the franchises and trains have been integrated into one railway network, we will save around £1.2 billion a year. This money could be reinvested into better services or cutting fares by 18%.
We Own It has recently launched a campaign for the East Coast line to be brought into public ownership because Virgin and Stagecoach have failed to stick to their franchise agreement.
Despite the best arguments of The Sun and others, we know all this can be done. And not only that – it will actually be better for the taxpayer.
Josiah Mortimer is Editor of Left Foot Forward. Follow him on Twitter.
See also: Why we need to nationalise the railways
3 Responses to “The Sun is wrong: Taking back control of our rail network would save us a fortune”
patrick newman
The rail fare escalator is supposed to fund investment in improving the railways but on the East Coast 40-year-old, BR HS 125 locomotives are still pulling trains. A high proportion of these are still diesel driven in spite of the line being electrified up to Edinburgh. Even those who do not support renationalisation can surely see the franchising system engenderers inefficiency and can fail completely (East Coast three times!). How can it be efficient to have 20+ rail operators and the inherent conflicts of interest between Network Rail and the TOC’s?
Richard Gadsden
At least you’ve thought about the ROSCOs, which puts you a step ahead of everyone else writing on this.
What should be pointed out, though, is that all the existing trains are owned by the ROSCOs. Trains last about 40-50 years, so a nationalised TOC will either have to lease them from the ROSCOs (in which case, they’ll have to carry on paying excessive rates with large profit shares in, much as DOR did when they ran East Coast) or they will have to buy out the ROSCOs (which will cost a large amount of money, and the ROSCOs will likely get a price representing their current valuation, ie including their future profits, rather than a price for just the value of the trains).
So that £200 million a year won’t be saved for a long, long time; it’ll be saved a bit at a time as the expensive leased or ex-ROSCO trains are take out of service and replaced by directly purchased trains.
TfL have done a vastly better job running London Overground than most private operators (I’d make a case for Chilterns, Grand Central and Hull Trains all being relatively good). And the Scottish Government is starting to do a decent job of managing ScotRail into competence.
But we need to be careful not to oversell this. We’re going to either carry on having high fares for commuters and walk-up long-distance journeys, or we’re going to have to subsidise much more from taxes. Sure, the fares won’t be as high as they are, but they’ll still be more than in Germany or France.
Renationalisation will help with a bunch of things (especially if we don’t unpick the structure of the industry, but just have DOR replace the franchises, so there’s still a long-term planning cycle with a guaranteed subsidy for a period to stop the treasury raiding the BR budget like they used to), but it won’t change the fundamental fact that over 70% of UK rail is paid for through fares, and most European systems are more like 50%.
I’d prefer raising the subsidy to do more with our railway – to build more trains, lengthen more platforms, electrify more track, reopen more of the Beeching cuts, buy more and longer trains, upgrade signalling to allow for more frequent services, four-track some existing two-track lines to allow for a proper mix of stopping and express trains, maybe even build some entirely new lines.
But, if you’re going to cut fares (not just stop them going up), though, please don’t just cut across the board. Take the opportunity of a one-off big cut to restructure the fare system to make sense. There are so many fares that are inconsistent because they were originally set by different companies in the nineteenth century and they’ve just been uprated with inflation every year since. That’s why we have split-ticketing to save money, that’s why the East Coast mainline is cheaper than the West Coast mainline (Manchester to London is £145, Leeds to London is £127; Leeds is further), that’s why there are so many bizarre things about rail prices.
But fixing without a big fare cut it will mean that some people will pay much more than they currently do, while others who overpay will pay much less. And the people whose fares go up by 20% or 30% will make that unacceptable. But if you can apply a system-wide 18% cut in one go, then you could restructure fares into a new system that makes sense and fix the anomalies and no-one will get a fare increase. If you currently get a bargain, you’ll carry on paying the same; if you currently get ripped-off, you’ll pay much less.
As a matter of political tactics, you could freeze fares or restrict them to inflation-only increases for a few years while you design the new fares system, make your shadow fares public and give people a year or so to spot all the anomalies you’ve missed so you can fix those, and then bring the new system in just in time for the next General Election. It would take a couple of years at least to design a new fares system – and you’re going to need a few years to wait out the TOC franchise agreements anyway – but a one-off big cut is going to have much more political impact than a series of smaller ones or annual freezes.
Jimmy Glesga
The train is a means of transport just like a taxi or bus. Buses and trains get massive subsidy so why not the taxi! Personally I would nationalise the buses first without any compensation. The bus drivers would be angry as they have shares! Then go for the trains next in a slow fashion until the franchises end. It is possible that the franchises will just give up early and the government can take over.
The train rolling stock owners really did make a killing and they should be targeted first and no compensation.