Does rail privatisation deliver the best deal for passengers and taxpayers?

(L-R) Paul Nowak, Lilian Greenwood, Edward Welsh, John Stittle, Martin Abrams, Paul Clifton
(L-R) Paul Nowak, Lilian Greenwood, Edward Welsh, John Stittle, Martin Abrams, Paul Clifton

Does rail privatisation deliver the best deal for passengers and taxpayers? was the subject of lively discussion, along with other questions from the audience, at the Action for Rail fringe meeting at TUC Congress, 2015.

The panel included: Lilian Greenwood MP, Shadow Secretary of State for Transport; Edward Welsh, Director of Communications, Rail Delivery Group; Martin Abrams, Campaign for Better Transport; Professor John Stittle, Senior Lecturer in Accounting & Financial Analysis, University of Essex; and Paul Nowak, Assistant General Secretary, TUC. The meeting was chaired by Paul Clifton, Transport Correspondent for BBC South.

Does rail privatisation deliver the best deal for passengers and taxpayers?

Welsh kicked off by stating that he didn’t really recognise the rail industry as privatised because the government still had a number of levers such as invitations to tender, contracts and funding decisions. He highlighted that there were growing numbers of people travelling by rail and these increases were helping to pay for the running of the railways. He said, “absolutely we could do better”, for example by running more trains on time. He said he wasn’t saying that privatisation has caused increases in passenger numbers, but managing directors of train operating companies have to encourage more people to use the railways.

Nowak stated a categorical ‘no’ in answer to the question, because privatisation hasn’t delivered on the promises of cheaper fares, better services and increased private sector investment. He pointed out that we have the highest commuter fares in Europe e.g. a Brighton to London monthly season ticket costs £391, while a journey of a similar distance using Frances’ publicly owned railways costs £275 per month. Nowak also highlighted that services were often overcrowded and late, and most investment came from the public sector. There are good managers in both public and private sectors, and he questioned whether it was the management at e.g. Deutsch Bahn (which owns Arriva) that was playing a key role in increasing passenger numbers.

Greenwood stated that we want to see a more publicly owned railway and highlighted the success of the East Coast Main Line under public ownership which had returned around £1bn to the Treasury and had high passenger satisfaction ratings. Passengers care about the price of fares and quality of service. She said changes such as smart ticketing had improved the travelling experience for passengers, but that we hadn’t seen the full benefits due to fragmentation. Growth in passenger numbers isn’t caused by privatisation, other factors such as GDP play a role. And she pointed out that opinion polls show strong support for public ownership.

Abrams said that the jury is still out on whether rail privatisation delivers the best deal for passengers, but gave an unequivocal ‘no’ to the idea that it’s been a success for taxpayers. He highlighted the importance of long-term investment plans and the need for more flexibility in train fares, including better deals for part-time workers. Abrams stated that some people were having to make life-changing decisions because they could no longer afford to travel by rail.

Stittle stated that privatisation had led to fragmentation creating a very dysfunctional organisation. He said, “you can see it’s not working…. there is no ethos of public service”. Stittle said that rail privatisation is “not offering travellers a good deal, and we were led to believe subsidies would be cut, it would deliver more benefits and value for money, but this hasn’t been the case – subsidies in real terms have doubled.” If British Rail still existed today, it would be moving on and improving – he added. The additional cost of privatisation could be around £3bn per year.

What impact will the rail leadership election result have on future rail policy?

Jeremy was elected on a big mandate, said Greenwood, and his pitch included public ownership of the railways. She said she recognises the value of rail devolution, but more discussion was needed. We’ve had a period of knowing what investment is going into the railways, but the government now seems to be pulling money out – it’s important that we maintain investment.

Nowak said that Corbyn’s election has put public ownership on the agenda, and Action for Rail has been working for several years to make the economic case. Two thirds of people surveyed believe that the railways should be run as a public service in public hands.

Stittle highlighted the role of government in recent procurement of rolling stock for Thameslink, Crossrail and IEP. The government has taken the lead – and where have the rolling stock leasing companies (ROSCOs) been? The state needs to be involved and invest, and be directly purchasing trains. ROSCOs are an expensive system and this is reflected in passengers’ fares.

Abrams highlighted the need for better rolling stock and electrification in the North of the country and that Corbyn had a role to play in applying pressure on the government to deliver improvements.

The government say want to devolve powers over rail passenger services and also possible rail infrastructure. Does the panel think this is a good thing or a bad thing in the context of a privatised railway?

Welsh stated that the railways were already pretty devolved e.g. NWR, and LOROL and Merseyrail concessions. Devolution is happening and the railway is a local and regional business.

Nowak stressed that Action for Rail is in favour of steps that make services more democratic and accountable and lead to greater integration with other types of transport, but that we had serious concerns about the impacts of devolution on infrastructure and this leading to increased fragmentation.

A member of the audience highlighted that communications between different organisations was already difficult and that concerns already take too long to be raised and dealt with as a result of current fragmentation – which is affecting safety.

We’re already seeing that the government may be laying the way to break up and possibly privatise Network Rai, said Greenwood. There are questions to ask about the organisations efficiency and effectiveness, but fragmentation into regional structures isn’t a good idea. We need better integration with buses, cycling and walking.

Now Network Rail is on the public books, it means ministers can intervene, but it can also borrow at better rates, said Stittle. He said he wanted regions to have more involvement, but there could be operational conflicts for intercity services, which could be resolved, but there needed to be an umbrella-type organisation. Stittle said he suspected that the government had already decided what it wanted to do with Network Rail,  even though there was a review taking place.

Rail workers jobs are under threat and the privatised industry is facing a skills crisis. Is the privatised railway putting profit before people?

It’s important that we have the right skills and the right people and there is an issue about lack of diversity in the industry which we need to tackle. We need to do more to attract and retain the rail industry workforce – said Welsh.

Abrams said that happy staff means happy passengers. For many train operating companies passenger satisfaction is low, and passengers are also expected to do their own research on fares. So what’s happening is that frontline staff are getting hit hardest – when decisions are being made higher up.

There has been de-skilling in the industry and little long term planning for the workforce including apprenticeships, Stittle stated. British Rail used to have excellent apprenticeship schemes, training schools and better workforce planning. Network Rail have started to have more apprenticeship schemes but these seem more ad hoc and are not on the scale they used to be at British Rail.

Nowak said that growth in zero hours contracts and use of agency workers is inimical to a safe railway. It’s hard to maintain the highest level of safety when people are employed on zero hours contracts. And it will be difficult to attract people with zero hours contracts. Industry has to work with unions. We would very much like to see the Rail Delivery Group engage with unions. We’ve all got a long-term stake in the rail industry and we need to think about where the 10,000 engineers that are needed will come from.

How successful has the privatised railway been in supporting British manufacturing?

Greenwood reiterated that getting long-term investment in the railways and workforce planning requires making long-term decisions. We need a guiding mind so we can make these long term decisions about rolling stock, investment, electrification. A guiding mind would be a new organisation that would also include e.g. passengers. It’s concerning this government is putting things on hold.

Welsh highlighted that around 150,000 people work within the wider industry – and Hitachi has just invested nearly £100m, creating over 700 jobs to build a new fleet of trains.

Audience members contributed that we used to build trains, but now we are putting them together. The job isn’t as skilled as it used to be and we’re not supporting the wider supply chain as much because of this. We should be rebuilding manufacturing in Derby and York. Some trains are also been made for driver only operations – which will remove the safety guard – it’s an attack on jobs.

Nowak stated that we need a joined up industrial policy. The approaches taken by France and Germany have managed to sustain train manufacturing in those countries. When we make investments we need to be thinking about – what are we doing to support the next generation of engineers and manufacturing in the future.