It is widely agreed that railway privatisation, which came in in 1996, has been a colossal failure. It was the last in a whole series of privatisations carried out on ideological grounds by the Thatcher and Major governments, and there are reports that even Margaret Thatcher baulked at it and felt it was a privatisation too far. Railways are natural monopolies.
The way the railways were privatised was an utter disaster. The Major government took this one big national entity and fragmented it into all these different franchises until there were more than 100 companies involved in the running of the railways. Even the infrastructure was broken up into different companies, which led to a few tragic rail crashes around the millennium. Arguably, they would have been better privatising rail and handing it all to one company to run it efficiently – but that would have gone against the whole spirit of competition they were trying to introduce.
The thinking was that British Rail, being a public body, was running the rail sector inefficiently and it needed private management to improve the performance. But there is very little, if any, evidence that that actually happened. Defenders of privatisation say there has been a massive increase in the numbers of people using the railways, but that reflects the fact that it is becoming more unpleasant to use the car, and more people are living in urban areas, where rail is often the best option.
There are so many companies running the rail network now and the irony is that a lot of the franchisees are state-owned companies from other countries. The government brought in legislation banning British state-owned companies from bidding for franchises. So now German, French and Dutch state-owned companies are all involved in our railways – the joke is that we do have a nationalised railway, it’s just not owned by the British.
“German, French and Dutch state-owned companies are all involved in our railways – the joke is that we do have a nationalised railway, it’s just not owned by the British.”
Before privatisation British Rail had a bad reputation but the truth is that – like most nationalised industries – it wasn’t nearly as bad as its detractors made out. BR’s efficiency in the 1980s was among the best in Europe. People forget that, unlike France or Germany or even Spain, post-1945 British governments didn’t invest in the railways, so of course they got worse in terms of the infrastructure and rolling stock. People used to laugh at BR sandwiches but the irony is that today railway stations have wide choices of food outlets and consumer products on the concourses, but it hasn’t improved the core business when you get on the actual trains.
It would actually not be hard to renationalise the railways at all. All you would need would be an Act of Parliament. One of the few positive effects of Brexit is that we would no longer be subject to European single market rules under which all public services have to be open to competition and bidding. That would no longer be an issue for the railways.
“One of the few positive effects of Brexit is that we would no longer be subject to European single market rules under which all public services have to be open to competition.”
There are no real logistical hurdles to renationalisation. The infrastructure is already back in public hands: Network Rail. The only factor would be the length of the existing franchise arrangements left to run, and the government could simply let them run out. If the government signalled it was going to engage in wholesale nationalisation some private companies might just hand back their franchises early anyway.
We wouldn’t have to just go back to BR. The railways don’t have to be either lots of different companies making money for shareholders or a state-owned centralised bureaucratic system. We could easily design a system that had elements of national ownership covering infrastructure, inter-city services and modernisation of the track, then local regional and metropolitan companies operating around them in a more decentralised system. There could be a governance structure that allows worker, passenger and local authority representation on the boards. It could create a diverse representation of interests.
We would need to change the franchise system. If we based it around returning money to the public purse and providing real investment in rolling stock, it would very likely force the private operators out of the market. Today they operate very profitably without making any commitments to investment: Richard Branson is quite a subsidy junkie. Yet the reality is that the railways need long-term structure and investment that the private companies don’t want to commit to.
Interestingly, whenever there are polls, even a majority of Conservative voters are in favour of renationalisation. It’s one of those things that goes across the party divide. People aren’t stupid: anybody who has travelled on the railways in France or Germany, and compares them to what we have here, can see that our system isn’t working.
“We will either get public ownership or we will get more and more state intervention within the existing system – because the current system clearly doesn’t work.”
In the south east of England, which is the Conservative government’s heartland, the rail system seems to be broken. The government can threaten new anti-trade unions laws but it won’t solve the basic problem, which is that they have a growing number of people using the trains and they just haven’t got the infrastructure or capacity. It needs a serious level of modernisation and investment to make the whole thing work and the private companies won’t do that because they are short-termist by nature.
Will renationalisation happen? It’s hard to predict, but what is certain is that a huge set of failures are piling up down the line. We will either get public ownership or we will get more and more state intervention within the existing system – because the current system clearly doesn’t work and it just isn’t delivering.