The railways can evoke passionate views about the merits of public ownership in the same way as the NHS. As nationally owned entities, the two are kindred spirits. The National Health Service Act of 1946 was followed a year later by the
Transport Act that merged the “big four” rail routes and created British Railways. But they have taken different paths since, with the disastrous privatisation of the rail network in the mid-1990s resulting in today’s patched-up structure: the infrastructure – tracks and stations – is nationally owned, while the services – run on privately owned trains – are operated by the private sector on a route-by-route basis under the franchise system.
Jeremy Corbyn addressed this mess earlier this month with a call for nationalisation of those private operators, and
created a mess of his own when the operator he used to make his point, Sir Richard Branson’s Virgin Trains, took umbrage. But don’t let a dissection of seat availability in carriage H, or your view of Corbyn or Branson, detract from a valid question raised by the Labour leader’s clumsy foray: what benefits have been delivered by private ownership of rail services?
Safety and punctuality, the two key factors for passengers, have improved vastly since the nadir of 2000 when the network ground to a near-halt in the wake of the fatal Hatfield crash. That improvement was only possible because the then operator of the rail system, privately owned Railtrack, was replaced by a state-controlled entity, Network Rail. Billions of pounds of state funding has been pumped into Network Rail, through grants and debt, with a noticeable improvement in services as a result. Any train operator pointing to increased passenger numbers, improved punctuality and a sea-change in safety since 2000 should be thanking, therefore, the taxpayer, not the private sector. Private operators run branded carriages while a nationally owned business does the hard work.
Corbyn’s central argument is that nationalisation of rail franchises – such as Virgin Trains East Coast and Greater Anglia – will make services less crowded and fares cheaper. If we accept that nationalisation has made trains safer and more punctual, should it follow that the same policy for franchises will provide more seats at lower expense to the passenger? No, because the issue is ultimately one of funding, not of ownership. Consider the
figures: farepayers put £8.8bn into the railways in 2014-2015, compared with £3.5bn from the state. Next to this combined “input” of £12.3bn, private operators took out £222m in dividend payments. These figures suggest that nationalisation will not make a meaningful difference in terms of adding more seats – new carriage orders cost between £1bn and £4.5bn a go – or lowering fare levels through greater subsidy.
That leaves two options: increased public subsidy or reducing costs. Both are problematic for Labour or any party. Analogous to the NHS as a symbol of collective endeavour, the railways merit considerable public investment but the health service is probably as far as the electorate will allow bottomless taxpayer commitment to go.
Labour, punished by voters last time round for failing to restore trust lost over deficit spending, will struggle to make an argument for pumping more cash into the railways.
The deficit problem also applies to reducing costs. Network Rail’s undoubted achievements have left a towering mountain of debt: more than £40bn. It has to be reduced, and it would be dangerous to add to it at the rate seen over the past decade. If fares fall, it would not be wise to balance out the funding reduction with a rise in Network Rail’s debt. Elsewhere on the network, the consequences of trying to take costs out of the system are stark. The industrial action causing disruption on the Southern rail franchise – a key London commuter route – is centred on attempts to introduce new train carriages without guards: in other words, to reduce costs. A Labour party under Corbyn would not be expected to take sides against the rail unions, which locks off a further option for getting fares down and funding new carriages.
The case for nationalising rail operators is persuasive because the benefit operators such as Virgin bring to passengers is minimal compared with the far greater achievement of state-backed Network Rail. Indeed, a saving of £222m per year is better than nothing when some public benefits are being axed for similar gains. Nonetheless, Corbyn is in the classic post-credit crunch bind: common ownership of rail, as with health, housing and energy, is a common good. But he will struggle to pay for it.
