The Future of Rail in Europe – briefing in the European Parliament


Meeting to discuss the Fourth Railway Package in Brussels, European Parliament
Meeting to discuss the Fourth Railway Package in Brussels, European Parliament

On 28 May representatives from rail unions, the rail industry, policy makers and legal experts met in Brussels to discuss the impacts of rail liberalisation and privatisation on passengers, taxpayers and the workforce – based on the experiences of Britain and Sweden in particular. The meeting, co-hosted by Lucy Anderson MEP and Jens Nilsson MEP took place just ahead of European Union debates on the latest draft measures in the Fourth Railway Package.

The Fourth Railway Package aims to make competitive tendering of rail passenger services mandatory across Europe – pushing Member States to privatise their railways. The package will also enforce the separation of train operations from infrastructure management – which has led to fragmentation, inefficiency and extra costs in the UK. The European Parliament voted overwhelmingly against the mandatory opening up of rail passenger services in 2014. Most MEPs want Member States to be able to choose the most appropriate model(s) for running their railways, but disagreement over different aspects of the package has meant Member States have so far been unable to adopt a common position. If the package is passed into law, this risks repeating and embedding the mistakes of privatisation across Europe, and it will close the door on public ownership of rail in the UK in future.

The meeting included presentations from Jens Nilsson MEP, Per-Ola Fällman (Trade Union Officer, SEKO); Kevin Rowan (TUC), Dr Ian Taylor (Transport for Quality of Life), and Gordon Nardell QC.

Jens Nilsson MEP spoke positively about the experience of local authorities coming together to run the railways in Northern Sweden. He said that the decision to split infrastructure from train operations had been a good decision, but also felt that the state company responsible for infrastructure should have sole control i.e. infrastructure should not be fragmented into multiple parts covered by multiple contracts since this leads to problems. A contractor working on one part of the line does not really care about what is happening with the whole network, and will tend to do things as cheaply as possible, said Mr Nilsson.

Per-Ola Fällman: SEKO represents about 15,000 workers in  the Swedish railways, including drivers, maintenance workers, and cleaners. In his presentation, Mr Fällman highlighted that trust in the Swedish railways has declined considerably, particularly in relation to punctuality, and passengers feel increasingly unsafe, partly due to the reduction of on-board staff. Between 2000 and 2011 investment in Swedish railways (as a share of GDP) was below the average of 15 other European countries, and had increased little during this period.  In addition, the railway market had become vastly more complex since liberalisation in 1988. In terms of services – Mr Fällman noted that in 2010 there were 28,000 cancelled trains, and 45,000 hours of delayed trains. However, since in 2013 cancelled trains have not been recorded in statistics, and delays have gone from being recorded at more than 5 minutes – to over 15 minutes. Further information is available in Mr Fällman’s presentation

Kevin Rowan highlighted that the Fourth Railway Package is partly predicated on the belief that UK rail privatisation has been a success. But in reality, we have a highly fragmented railway and the highest commuter fares in Europe. Since privatisation all tickets have increased by an average of 117% or 24% in real terms – while private train companies continue to pay dividends to their shareholders (£388m in 2012-2014). The cost to the public purse of running the railways doubled from £2.4bn per year in the 5 years before privatisation – to £5.4bn per year between 2005-2010, and most investment in rail infrastructure has been funded by taxpayer funded Network Rail, as private sector investment has not materialised. Public ownership is backed by public opinion in the UK. Privatisation, said Mr Rowan, delivers the worst deal for passengers, taxpayers and the workforce.

Dr Ian Taylor illustrated that fragmentation and profit taking are an unavoidable outcome of liberalising rail. In the UK, there is now a cost-efficiency gap – with UK railways spending 40% more to deliver equivalent levels of output when compared to France, Germany, Italy and Spain which have largely publicly owned railways. Fragmentation and profit taking means that and extra £1bn is needed every year to run our railways. In 2013/14 only two train companies out of 19 managed to operate with no net government subsidy, one of which was publicly owned East Coast. Dr Taylor explored the effects of rail liberalisation on passengers e.g. complex ticketing and trains that do not connect. He noted that UK rail passengers are paying 109% more for an unrestricted return ticket compared with comparators in Europe. Industrial disputes have also gone up since privatisation, with network wide collective bargaining and dispute resolution being destroyed. Dr Taylor presented evidence to dispel the myth that privatisation has resulted in increasing passenger numbers. He concluded that the draft Governance Directive and removal of the right to directly award a contract to a not-for-profit publicly owned operator would conflict with e.g. minimising operational costs, achieving a seamless rail network and developing the network to a strategic vision. Further information is available in Dr Taylor’s presentation

Gordon Nardell QC asked where the evidence is to show that private sector operators are more effective and efficient. He highlighted that Directly Operated Railways in the UK had set a high benchmark with regards to financial performance and passenger satisfaction. Mr Nardell referred to analysis which showed that the majority of lines in the UK are run by state-owned or backed companies, and that there is increased market concentration rather than competition, which is contrary to EU policy. But “The very fact that so many undertakings controlled by public sector incumbents bid successfully to run UK services – in the most deregulated rail environment in the EU, with a political culture of hostility to public sector enterprises  – suggests that those bodies  are well able to hold their own and even out-perform the private sector in terms of meeting PSC [Public Service Contract] specification.” See presentation notes for further information.

Presentations were followed by a question and answer session with contributions from a variety of perspectives.