It’s more than 15 years since the privatisation of the railways and it’s clear that there are two basic planks of that process that haven’t worked out as expected. Privatisation was supposed to free the railways from government control. And it was supposed to free the railways from the financial grasp of the Treasury. Neither of those two crucial tenets of privatisation has been achieved.
Indeed, what has actually happened is something entirely different. The subsidy that the railways receive from the government is now five times as much as it was in British Rail’s day. Roughly speaking it has gone up from £1 billion a year to £5 billion. Now, even allowing for inflation, that is a huge leap. In fact I’d say it’s an astronomical leap. And simultaneously passenger fares have rocketed over that period.
The success story in the equation is that usage has also gone up. The operators would claim that more people are using the railways because of the splendidness of the service. But anyone with an iota of common sense would realise that’s not the case – in fact, it’s a ludicrous suggestion. Usage has gone up because of dissatisfaction with other modes of transport.
So since privatisation we’ve managed to increase government subsidies, increase fares, and increase passenger usage. A triple whammy. And you have to ask where is all this money going? What’s happened is that privatisation created a system that has a lot of interfaces between many companies, all bound by complex legal agreements. There’s a lot of friction at all those interfaces which absorbs a lot of money.
Primarily there are three groups of people who have prospered out of all this. One group is the lawyers who cement all these relationships – they have done extremely well. The second group are the fat-cats who are running the companies, many of whom are receiving astronomical salaries. And the third group is the Roscos – the vehicle owners – who largely speaking are the banks. They have a captive market and are charging huge amounts of money to hire out, for example, two-axle diesel rail cars.
I often wonder how it is that companies are allowed to take huge amounts of money out of a system that is being subsidised by the taxpayer to the tune of £5 billion a year? That is a complete scandal. It’s the laundering of public money into banks’ coffers.
So where do we go from here? Well, it’s clear that the railways have to rise up the political agenda. We need to come up with a more logical and economic system and there needs to be a thorough review of the current arrangements. The big mistake with privatisation was to fragment the railway. If it had been privatised in one piece it would have had a better chance of success. That at a stroke would have reduced a lot of the internal cost.
And then there are wider almost philosophical considerations. How do we value the benefit that railway infrastructure brings to society and to calculations such as national GDP? No railway in the world, except for one or two commuter lines in Japan, makes a profit when it has to pay for its own infrastructure. It’s an artificial system. We need to think carefully about why the infrastructure is there and what its benefits are – and therefore how we go about paying for it.
Privatisation created a railway with many failings. And we need to start addressing these failings. The railway can only deliver if it is freed from the constraints of the systems and structures that have been imposed upon it.