Rail privatisation was promoted in the early 1990s in the UK with promises of a better, cheaper service for rail users and reduced taxpayer subsidy. Private rail companies, it was argued, would bring in capital and business expertise which would transform the sector’s performance while competition would drive efficiency and innovation.
Action for Rail has published new analysis which comprehensively debunks these ‘myths’ of rail privatisation. To see the new, short report – The Four Big Myths of UK Rail Privatisation, please click here.
On each of the above measures, UK rail privatisation has been a failure. Today’s railways require billions more in government funding, private investment has failed to materialise and passengers face the highest fares and travel on some of the oldest rolling stock in Europe. Private train operating companies are net recipients of public subsidy while distributing nearly all their operating profits as dividends to the shareholders of their parent companies.
Advocates of rail privatisation adhere to the myth of franchising as a success story for the passenger and the taxpayer. This document busts those myths.
Here are some key facts from the mythbusting report:
Myth 1 – UK rail privatisation has created passenger growth
- Growth in rail passenger journeys is driven by three key factors that have nothing to do with train operating companies: longterm growth in GDP, changing commuting patterns as employment has concentrated in major urban areas, particularly in London and the South East, and increase in motoring costs.
- The 59 per cent increase in passenger growth on the UK railways has also been stimulated by the 300 per cent increase in public subsidy since privatisation.
Myth 2 – UK rail privatisation has resulted in new investment and innovation
- Over 90 per cent of new investment in the railways in recent years has been financed by public sector body Network Rail, and comes mainly from taxpayer funding or government-underwritten borrowing.
- Genuine at-risk private investment in the railway in 2010–11 lay somewhere in the range of £100m–£380m, with the figure most probably lying at the lower end. In the same year, other sources of income for the railway – public money and the fare box – contributed £10.6bn.
Myth 3 – UK rail privatisation has resulted in cheaper and better services for passengers
- Since rail privatisation in 1995 up to 2015, all tickets (regulated and unregulated) have increased by an average of 117 per cent, or by 24 per cent in real terms.
- UK railways are slower and more overcrowded than predominantly publicly owned
rail services in Germany, France, Italy and Spain.
Myth 4 – UK rail privatisation is a better deal for the taxpayer
- The cost of running the railway has more than doubled in real terms since privatisation from £2.4bn per year (1990–91 to 1994–95) to approximately £5.4bn per year (2005–06 to 2009–10).
- Official figures show that all but one of the private train operators in the UK receive more in subsidies than they return in the form of franchise payments to the government. In 2013–14, the government contributed £3.8bn to the UK rail industry.
- The top five recipients of public subsidy alone received almost £3bn in taxpayer support between 2007 and 2011. This allowed them to make operating profits of £504m – over 90 per cent (£466m) of which was paid to shareholders.
Please read The Four Big Myths of UK Rail Privatisation