Britain’s Railways: Should They Be Renationalised?

August 20, 2015, 3:23 PM GMT+0

Jeremy Corbyn’s policy programme has predictably come under intense scrutiny since he unexpectedly became the frontrunner in the Labour leadership election. Much of what he supports in both domestic and foreign policy has been attacked by his rivals and by a hostile media as extreme, impractical or likely to ensure his party stays in opposition as long as he remains its leader. But one plank in his platform has attracted much less vitriol. One of his rivals, Andy Burnham, even supports it himself. This is the policy to renationalise the railways. Is it a good idea?

Britain’s railways were nationalised in 1948, the same year as the National Health Service was created. To those on the left, these two major events marked the great socialist achievements of the Attlee government. But whilst no one has sought explicitly to privatise the NHS (though plenty of people believe it is being privatised by stealth), the railways, along with other industries nationalised by the post-war Labour government, such as steel and coal, were eventually returned to the private sector. Margaret Thatcher baulked at it, but her successor, John Major, did privatise the old British Rail back in 1995.

Mr Major wanted to do so by recreating the old regional rail companies like the Great Western Railway. But he was persuaded by his civil servants to adopt a different model. Instead of creating a new set of regional private companies, each with responsibility for all aspects of the rail service in its region, the new privatised rail network would be carved up in terms of function. A new private company, Railtrack, would be responsible for the track over the whole nation and would lease its use out to private companies competing with each other to run different services on it in different parts of the country.

This new model was much criticised at the outset, not least for the fat fees it gave to lawyers negotiating immensely complicated contracts between Railtrack and the many train-operating companies. Nor did the original model survive. Railtrack ran into trouble and Tony Blair’s Labour government had to get rid of it, replacing it with Network Rail, a state-owned company doing much the same job.

It was never imagined that privatisation would put an end to the need for the taxpayer to subsidise rail travel. No major rail network in the world operates without subsidy and critics of privatisation point out that government subsidies to rail have tripled in the twenty years since privatisation. But supporters claimed that a privatised railway would be run better than the old British Rail, which was a byword for inefficiency. They also claimed that it would lead to greater investment in the network.

These supporters argue that their faith has been vindicated by results. Whereas between 1960 and 1995 passenger numbers fell by a third (from around one billion a year to just over 600,000), since privatisation, passenger numbers have more than doubled to 1.6bn. They claim too that there has been record investment in the railways, improving both services and safety. The current rail minister, Claire Perry, argues that the railways are enjoying the largest programme of investment since the Victorian era.

Of course there may be other reasons than privatisation to explain the upsurge in the use of trains: congested roads may be one of them. But one of the reasons why rail renationalisation is back on the agenda is that, at least since 2010, the government has been trying to reduce the amount of taxpayers’ money going into the railways and making passengers pay more of the cost through fares.

Back in 2010 51% of the costs of running the railways were borne by passengers; now it is 62%, reckoned by some to be the highest rate in Europe. The change has been brought about by the government insisting that regulated fares be increased by more than the rate of inflation. Rail unions, campaigning for renationalisation, point out that such fares have risen by 25% in the last five years while average pay has gone up by only 9%. This has understandably antagonised commuters, especially those who still can’t get a seat on rush-hour trains despite having to fork out so much more of their income in season tickets.

The government has responded to this disaffection by restricting regulated fare increases to the rate of inflation for the next five years. It means that such fares will go up only by 1% next January, and this at a time when pay increases are exceeding inflation. So commuters should feel less stretched. Yet campaigners for renationalisation have struck a chord with their claim that all that privatisation has led to is increased fares for the poor, long-suffering commuter and increased profits for the rail companies.

Labour went into the recent election with a policy that fell far short of renationalisation. Instead, they proposed legislation to allow public-sector operators to ‘take on lines and challenge the private train-operating companies on a level playing field’. This followed what was seen as a successful takeover of the east coast franchise by a public sector company under the previous coalition government.

Now two of the candidates for Labour leader want to go much further. Andy Burnham wants a gradual renationalisation as circumstances allow; Jeremy Corbyn wants to make sure it happens sooner.

Opponents say such a policy is anything but a panacea. They accuse supporters of forgetting just how unpopular and inefficient British Rail was regarded as being. And they point out that the state-owned part of the current railway system, Network Rail, is hardly an advertisement for the supposed virtues of nationalisation. Only recently it was fined £2m by the rail regulator for ‘inept timetabling and poor planning for upgrades’. And cost overruns by Network Rail caused the government to blow the whistle on various major investment projects within its £38.5bn five-year plan (an announcement made, the government’s critics point out, after the election rather than before it). Network Rail’s debts have risen by £5bn in a year and currently stand at £37.8bn. Opponents of renationalisation say that if the railways were fully back in state hands much more of the investment programme would be in jeopardy.

Finally, there is the question of the cost of renationalisation. The other two contenders for the Labour leadership, Yvette Cooper and Liz Kendall, say that with stringency in the public finances likely to continue for many years, a future Labour government simply could not afford to renationalise the railways.

So who’s right? What do you think?

Let us know.