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Nationalising the railway is a political not a practical plan

Labour has said it will fully nationalise the railways in five years if elected (Alamy)

4 min read

Labour is right to say that the status quo cannot continue, but its plan to take the railway into public ownership is not the answer.

Train companies agree that the railway needs to change – the industry has been calling for radical reform since the Williams Rail Review was announced in 2018. But Labour’s nationalisation policy announced this week is an ideological rather than an evidence-based proposal which will ultimately see costs increase over time for taxpayers, or passengers, or both.  

The industry agrees with Labour that the status quo is unacceptable. In fact, we agree on more than we disagree. We support putting the focus on passengers, setting up Great British Railways, keeping rail freight and open access in the private sector, setting a rail freight growth target, and we have long been calling for reforms to fares and ticketing regulations. But we think that Labour’s focus on ownership is more political than practical – it won’t make a single train run more on time or make a single fare a penny cheaper. 

Instead of nationalisation, there is an alternative approach that gives the best of both public and private sectors. It is a plan that is already proven to work and has broad support. It gives more public control, but lets the private sector deliver services to control costs and grow revenues, in turn reducing taxpayer subsidy. It’s the model used on the Overground in London, on Merseyrail in Liverpool, and on the Bee Network of buses in Manchester.  

If Labour Mayors think this system works, what’s stopping a future Labour government applying this mixed-market model at a national level? Most customers don’t care much about how the trains are run, they just want reliable, affordable and comfortable travel, which is why Labour has room to be pragmatic.  

By going for nationalisation, Labour would also be bucking the trend we’re seeing across Europe. Governments across the political spectrum, including those on the centre-left, are seeking to copy the success of the previous British privatised model to reduce subsidies for the taxpayer and provide cheaper fares for customers by increasing competition for passengers. 

While there is evidence that public-private partnerships are already working in Britain and in Europe, there’s no clear evidence that nationalisation will work. The independent economists, Oxera, calculate that the taxpayer was funding an £800m deficit for British Rail at the point of privatisation. Private train companies subsequently turned this deficit into a surplus. In the ten years leading up to the pandemic, just under £4bn was paid in to the exchequer by the railway operators collectively meaning the biggest dividend under privatisation was paid to the taxpayers not to the train companies. 

To be clear, train companies aren’t advocating for resurrecting the old franchising model. But we do need to capture the strengths of that system which saw the doubling of passenger numbers and £14bn of private money invested, mainly in new trains, without increasing government debt.  

As well as holding onto things that worked well previously, we need to repair the aspects of the railway that aren’t working so well today. One of those is micromanagement. It is not widely understood that since the pandemic private-sector train companies have already been brought under public control and are now subject to a level of micromanagement by government not seen even under British Rail. Whitehall interference is holding the railway back – something Labour also recognises in its policy proposals. 

However, although Labour may have identified the issue correctly, its proposals won’t solve the problem – what additional freedoms and incentives would there be for a nationalised monopoly operator, underwritten by the taxpayer, to control costs and grow revenue in order to reduce subsidy? Between 2020 and 2023, the government spent £23bn to plug a black hole created by a drop in ticket sales. The longer the railway’s subsidy persists, the longer scarce public resources are being diverted away from public services like schools or the NHS. 

You don’t have to like the private sector but, harnessed pragmatically, train companies can help to close the gap in the railway’s finances, freeing up resources to achieve other government priorities instead. 

So, the railway is approaching a critical junction – while rail might not be a central focus of the coming general election, the election really matters to our industry. Train companies want to be constructive partners and work with whoever forms the next government to deliver rapid improvement for the customer and taxpayer.  

 

Andy Bagnall is CEO at Rail Partners.

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