Rail privatisation hasn’t worked. It’s time to reverse it

The good old days. Image: Getty.

Just who exactly supports the UK’s privatised railway industry? It’s certainly not passengers, taxpayers, railway employees or increasingly many politicians.

The state-owned British Rail was privatised over several years starting in 1995. Prime Minister Margaret Thatcher was politically astute enough to avoid privatising this industry. But her successor, John Major, had no such doubts – he was convinced privatisation would ensure “greater responsiveness to the customer, and a higher quality of service and better value for money”.

He couldn’t have been more wrong. It’s now time to call a halt on this misconceived and misguided experiment – it just isn’t working. It’s time to renationalise the whole industry.

The benefits of privatisation forecast by politicians never materialised. Fares are now much higher, infrastructure failures and train delays increasing, the train franchising system is floundering and passenger dissatisfaction is high.

British Rail, the former nationalised industry, was a fully vertically integrated industry. This meant that BR owned and was responsible for virtually every aspect of the railway business. One researcher found it to be “perhaps the most financially successful railway in Europe”. Government subsidy was only 15 per cent of revenue in 1994, making British Rail the least subsidised railway system in Europe at the time.

Privatisation saw the industry broken up into over 100 separate companies. This fragmentation has led to a complex contractual web of operational transactions between different industry players – with a profit mark up being extracted at every stage. Renationalisating the railways would put an end to the operational and structural absurdity of the industry – and be substantially less costly.

Dysfunctional franchise model

Passenger train operating companies are awarded on a franchised basis. Normally, the operators bid to pay the highest premium to the government to win the right to operate train services on specified routes. This is based on the revenue each bidding company considers they can extract from passengers after paying their premium.

Renationalisation would lead to abolition of the costly and dysfunctional method of awarding these franchises. It would abolish the convoluted gaming by operating companies, who frequently overbid on the most optimistic assumptions in order to win a franchise.

Take the example of the failing East Coast franchise. GNER and National Express have both already walked away from their East Coast commitments and Virgin East Coast is currently renegotiating its franchise. They can do this because the penalties for failing to deliver are too low.

What’s more, the whole costly and time-consuming refranchising process is repeated every seven or eight years. Renationalisation would bring a swift halt to this disruptive and costly process – and permit better long-term planning.

Fares through the roof

Certainly, the passenger hasn’t benefited by lower fares since privatisation. Only about 36 per cent of fare revenue is regulated by the government and, even then, fare increases are related to the higher retail price index (RPI) measure of inflation (and not the lower consumer price index). For unregulated fares, the train operators have not been slow to increase fare revenue well in excess of RPI. For example, across all operators, standard class unregulated fares have increased by nearly 30 per cent in real terms since privatisation.

Whenever the train operators have the freedom to raise fares they rarely fail to increase them to whatever the market can bear. The Trades Union Congress recently highlighted that British commuters are now “spending up to five times as much of their salary on season tickets” than their continental counterparts. A commuter season ticket in the UK costing £381 a month will cost the equivalent of £66 in France or £118 in Germany.

Neglected and costly infrastructure

Another key aspect of the privatised industry is the infrastructure company that owns the railway tracks, stations and signalling. The first infrastructure company, Railtrack plc, was a publicly listed company that had a short life. Within less than five years of floatation the came the fatal Hatfield rail crash, when an express train came off the track. An inquiry found that the disaster was directly related to Railtrack’s neglect of the infrastructure.

Railtrack’s successor, Network Rail, ultimately became a public sector body of the Department for Transport. But Network Rail has been hampered by Railtrack’s former neglect of its assets and higher costs resulting from the fragmented nature of the industry. Indeed, these issues meant that the McNulty report in 2011, commissioned by the then transport secretary, found the privatised rail industry had a high cost base and the costs per passenger-km would have to be reduced by 40 per cent to match railways in France, Netherlands, Sweden and Switzerland.


Misguided support

Even the taxpayer would benefit from renationalisation. Under privatisation, state subsidies have nearly doubled in real terms. Direct government support has also previously been given to private sector train operators if their revenues fall below expectations. More recent franchisees can now receive these corporate state welfare “top-up” payments where, for example, there is fall in GDP or a slowdown in the London jobs market. Conventional private sector companies carry these business risks themselves – not so for the train companies. Renationalisation could reduce subsidies and have major financial gains for the tax payer.

Industry players frequently justify the success of privatisation by pointing to the growth in passenger traffic (passenger journeys have grown from 800m in 1996-97 to 1,729m in 2016-17). But this growth is despite privatisation; not because of it. Economic studies suggest this is down to other factors, such as employment levels, growth in GDP, property prices, leisure travel and road congestion – but not to privatisation.

The ConversationOverall, railway privatisation has failed to achieve its original objectives. Fares and state subsidies remain high, passengers are failing to obtain better value for money and industry unit costs remain stubbornly high. No other country has fully adopted the UK model of railway privatisation. And for good reason – it hasn’t worked.

John Stittle, Senior Lecturer in Accounting, University of Essex.

This article was originally published on The Conversation. Read the original article.

 
 
 
 

The media scumbag’s route of choice: A personal history of London’s C2 bus

A C2 bus at Parliament Hill. Image: David Howard/Wikimedia Commons.

London’s C2 bus route, which runs from Parliament Hill, by Hampstead Heath, down to Conduit Street, just off Regent Street, is one of the bus routes recently earmarked for the chop. It has oft been noted that, of all the routes recently pencilled in for cancellation after a consultation late last year, it was the one most likely to survive, for the simple reason that it links liberal suburban north London with BBC Broadcasting House and Soho; it’s thus the route most likely to be used by people who can convince someone to let them report on its imminent demise.

So it would come as no surprise that former Guardian editor Alan Rusbridger took to the Camden New Journal when the consultation began, arguing that it would be a disservice to the local community to discontinue a route where you can always get a seat – seemingly missing the point that the fact you can always get a seat is not a great sign of the route’s usefulness.

It wasn’t always that way. When I left university in 2000, and moved from accommodation near college to up to a rented shared house in N6, the C2 was my bus. I commuted to Soho for sixteen years: for more than a decade from flats around the Swain’s Lane roundabout, and for five years from Kentish Town. While my place of work bounced around from Golden Square to Lexington Street to Great Marlborough, it was always the most convenient way to get to, and from, work; especially given the difference between bus and tube prices.

So when it comes to the C2 I’ve seen it, I’ve done it, and bought the bus pass. And by bus pass, I mean those little paper ones that still existed at the beginning of this century. Not just before contactless, but before Oyster cards.

More importantly, it was before London buses operated a single zone. There was an outer zone, and an inner zone, with different prices. To travel from one zone to another cost £1.30, meaning an all cash commute was £2.60, whereas a paper bus pass was £2.00. That made it worth your while to divert to an early opening newsagents on your way to the bus stop (GK, in my case), even if you only got two buses a day.

It’s a measure of how greatly London’s buses have improved over the last twenty years, since first brought under control of the mayoralty, that pretty much everything about this anecdotage, including the prices, seems faintly mad. But there’s more: back when I started getting that bus down to Stop N, literally at the very end of the route, the C2 used single decker buses with a single door. It’s an appalling design for use in a crowded city, which meant most of any journey was, for most passengers, spent fighting your way up and down the middle of the bus to find a seat, and then back again to get off; or – and this was more likely – fighting your way up the bus to get into standing space the driver insisted was there, before fighting your way, etc.

Such buses – and in my former life in the English Midlands I went to school on one of these buses every day – are perfectly functional where bus stops are infrequent and buses rarely standing room only. But running through Camden Town at rush hour, they’re wholly unfit for purpose.

A Citypacer. Image: RXUYDC/Wikimedia Commons.

It could have been worse. I didn’t know this at the time, but a few years before the C2 route had been run using Optare City Pacers. Those are, let us be frank, not really buses at all, but minibuses. That’s something the reveals the C2’s origins, as a hopper route to the west end largely intended for the daytime use of Gospel Oak’s pensioners in the years immediately before bus privatisation. (The C11 has a similar origin, taking the same constituency from Archway to England’s Lane.)

Once responsibility for London Buses was moved to the newly established mayoralty, things improved dramatically. Under Ken Livingstone it went double decker in 2005, and 24 hour in 2007. Under Boris Johnson it was extended from its once, and future, terminus of Conduit Street to Victoria Station, swallowing up the cancelled sections of the 8 bus; this extension was quietly disposed of a few years later, once it was clear no one would notice. (I did.)


In those years I must have taken a C2 the best part of ten thousand times; but for all the years when I wouldn’t have been able to live without the C2, times have reduced its utility, and not just for me. I’m now a 214 sort of guy: these days the top chunk of the C2 route is duplicated exactly by that other bus, which starts up in Highgate Village and, once it gets to Swain’s Lane, follows the same path until the fork of Kentish Town Road and Royal College Street, opposite the long defunct South Kentish Town tube station.

From a few hundred metres below that point, at Camden Gardens, stop C, the 88 starts. That duplicates the rest of the C2’s route, with the exception of the run down Albany Street and onto Great Portland, for much of which the C2 is the only bus.

So the C2, old friend that it is, is pretty redundant in the age of the hopper fare, which allows you to change buses without paying a second fare. That’s even more true now the C2’s otherwise un-serviced stops are being giving over to a re-routed 88, which will pick up the C2’s most northern leg, by not finishing at Camden Gardens anymore and instead going all the way to Parliament Hill Fields. Which will be nice for it.

All this, however, ignores the best reason for getting rid of the C2 (or rather for merging it with the 88, which is what’s actually happening): that first character. The letter. Who wants a bus route with a letter in front of it when even half the night buses don’t have the N anymore? It’s relic of the route’s aforementioned origins as a ‘Camdenhopper’.

That C is twenty five years past its own utility. It’s just untidy. City Metric hates that sort of thing. Get rid.