A nationalised railway doesn’t have to be rubbish – but this one probably would be

The good old days. Image: Getty

As the general election nears, the major parties are starting to set out their vision for Great Britain’s railways. The Conservative manifesto will appear later this week. Think-tanks associated with the sillier end of the party have lobbied for Network Rail to be privatised, which would be a disaster, so it’s worth keeping a look out.

But Labour’s manifesto was published on Tuesday. Stephen Bush has a good summary, and you can read the whole thing here. One of its more eye-catching pledges is “public ownership” for the railways.

As we’ve covered before, this covers a lot of ground. Network Rail, which owns the tracks, operates maintenance and signalling, manages new-build projects, and allocates and manages train paths, has been in the public sector since 2002, and under the direct control of the Department for Transport (DfT) since 2014.

The manifesto clarifies Labour’s line with the phrase “as franchises expire”. This implies it’s talking about train operating companies (TOCs), like Chiltern or Northern Rail. These are contracted by the DfT to run passenger train services: every few years there is a bidding auction to see who’ll pay the biggest premium for the right to operate trains on a given route.

The winning bidder must meet a service specification agreed with the DfT, pay track charges to Network Rail, lease the trains that are needed to operate the service, and pay staff. In exchange, it gets to set and collect fares on the route, subject to price caps laid down by the DfT, and to keep whatever’s left once it’s paid everyone else.

So if Labour wins a majority in next month’s election, then when franchises start expiring, they will be delivered in-house. There is a model for this, which has been successful on a small scale: the DfT has a subsidiary called Directly Operated Railways, which takes over from a franchisee if they go bust. When National Express East Coast went bust in 2009, DOR took the franchise and provided a good service. Although it fell short of the premiums NXEC had originally pledged to pay, it returned £235m in profit to the DfT in its final year of operation.

There are, however, two problems seeking to apply this small-scale success to Labour’s plans. One is simple scalability. When East Coast was benchmarked against private operators, it was very clear to everyone involved what a good job consisted of. But if the entire business is nationalised, there’s no obvious way to determine whether the public operator is providing good value for money, and not much incentive for it to do so.

There are structures that maintain benchmarking and competition under government control. The most obvious is in London, where TfL sets all aspects of the service and takes all the profit/loss risk, but ensures value for money by contracting out some operations. The same could be done by devolved regional governments (which would also enhance local accountability), and directly by the DfT for long distance and regional services.


This isn’t what’s happening, though. Labour’s pledge that the new operator “will be built on the platform of Network Rail” sounds more like an attempt to recreate the monolithic structure of British Rail. This is, at best, untested in the modern era.

The second problem with Labour’s manifesto version of nationalisation is the side promises being made. Explicit pledges include “ending the expansion of driver only operation” and “freezing fares”.

The first of these is a bad idea. Driver-only operation is a proven safe way of reducing costs without inconveniencing passengers, already used on 30 per cent of the network. The pledge has been modified from an earlier leaked draft which suggested DOO should be abolished altogether, but refusing to expand it takes away an opportunity to cut costs, with no benefit to passengers.

The second helps passengers more, but it’ll be expensive. Regulated train fares rise in line with inflation at about 2 per cent a year (1.8 per cent or 2.3 per cent, depending on whose methodology you use). With farebox revenue of £9.4bn, that’s an extra £200m a year to find in year 1, and £400m in year 2. After five years, there’ll be a £1bn/year gap compared to currently planned rises. And regulated fares are mainly used on already-full commuter trains, so there won’t be much volume growth to make up it.

Will abolishing TOCs pay for this? Annual TOC profits distributed to shareholders are £200m per year. So if the scale issues can be solved and the new model works as well as East Coast, then the savings in the first year will pay for the fares freeze. Hooray!

But this is a one-off gain: in the second year, we’ll need to find another £200m to pay for that year’s fare freeze. By year five, there’ll be a £800m/year revenue gap. AAnd we won’t be able to save money on guards to make up for it.

Overall, Labour’s rail plans are less terrifying and damaging than some of the options the Conservatives are contemplating – and there’s certainly nothing wrong with moving away from the TOC model in itself.

But the devil is in the detail, and the details here suggest that Labour’s plans are more focused on quid-pro-quos for the unions and cash bungs for commuters, than on the actual reason you might want to move away from the TOC model: the core job of shifting more people and freight onto the railways as efficiently and safely as possible.

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Brexit is an opportunity for cities to take back control

Leeds Town Hall. Image: Getty.

The Labour leader of Leeds City Council on the future of Britain’s cities.

As the negotiations about the shape of the UK’s exit from the EU continue, Britain’s most economically powerful cities outside London are arguing that the UK can be made stronger for Brexit – by allowing cities to “take back control” of service provision though new powers and freedoms

Core Cites UK, the representative voice of the cities at the centre of the ten largest economic areas outside London, has just launched an updated version of our green paper, ‘Invest Reform Trust’. The document calls for radical but deliverable proposals to allow cities to prepare for Brexit by boosting their productivity, and helping to rebalance the economy by supporting inclusive economic growth across the UK.

Despite representing areas responsible for a quarter of the UK’s economy and nearly a third of exports, city leaders have played little part in the development of the government’s approach to Brexit. Cities want a dialogue with the government on their Brexit plans and a new settlement which sees power passing from central government to local communities.

To help us deliver a Brexit that works for the UK’s cities, we are opening a dialogue with the EU Commission’s Chief Negotiator Michel Barnier to share our views of the Brexit process and what our cities want to achieve.

Most of the changes the Core Cities want to see can already be delivered by the UK. To address the fact that the productivity of UK cities lags behind competitors, we need to think differently and begin to address the structural problems in our economy before Brexit.

International evidence shows that cities which have the most control over taxes raised in their area tend to be the most productive.  The UK is significantly out of step with international competitors in the power given to cities and we are one of the most centralised countries in the world.  


Boosting the productivity of the UK’s Core Cities to the UK national average would increase the country’s national income by £70-£90bn a year. This would be a critical boost to the UK’s post-Brexit economic success.

Our green paper is clear that one-size fits all policy solutions simply can’t deal with the complexities of 21st century Britain. We need a place-based approach that looks at challenges and solutions in a different way, focused on the particular needs of local communities and local economies.

For example, our Core Cities face levels of unemployment higher than the national average, but also face shortages of skilled workers.  We need a more localised approach to skills, education and employment support with greater involvement from local democratic and business leaderships to deliver the skills to support growth in each area.

The UK will only make a success of Brexit if we are able to increase our international trade. Evidence shows city to city networks play an important role in boosting international trade.  The green paper calls for a new partnership with the Department of International trade to develop an Urban Trade programme across the UK’s cities and give cities more of a role in international trade missions.

To deliver economic growth that includes all areas of the UK, we also need to invest in our infrastructure. Not just our physical infrastructure of roads, rail telecommunications and so forth, but also our health, education and care infrastructure, ensuring that we are able to unlock the potential of our core assets, our people.

Whether you think that Brexit is a positive or a negative thing for the UK, it is clear that the process will be a challenging one.  Cities have a key role to play in delivering a good Brexit: one that sees local communities empowered and economic prosperity across all areas of the UK.

Cllr Judith Blake is leader of Leeds City Council.