State-run trains are not the solution
PETER Gunn (‘Railways in Germany put ours to shame,’
Viewpoints, October 19) is right to be impressed by German railways. But he’s mistaken to think ours are less impressive because German railways are in public ownership and ours are privatized.
Only the freight side of our railways is fully privatized. The railway itself, tracks, stations and everything else, has been publicly owned through Network Rail since 2002. The passenger rail services are effectively owned and controlled by the government through the Secretary of State for Transport. The private sector only operates them, under periodic franchise contracts following competitive tendering. The tendering system exists in Germany too. Some private companies, including British ones, have won franchises and operate services there in the same way as here.
So there is not a great difference between the German and British rail structures. The reason for the quality difference is not ownership, but the way the German and British governments treat the services and their operators and the amounts they have been willing to invest in them.
In Britain, the terms of the franchise agreements give the government, through the Secretary of State, tight, detailed control over what services are provided and how, including investment in new trains. The Secretary of State also controls most of the fares charged. There is nothing wrong with any of that. The problem has been how the government has used those controls.
We have old, short length and overcrowded trains because successive governments of both major parties have for about 15 years deliberately not allowed more than a handful of new trains in the north of England, despite the number of passengers having more than doubled over the period. The government has also forced the fares to go up by more than inflation and the excess proceeds have gone to the government, not the companies.
However, the government has now seen the light. The current franchise companies in the north are being allowed to acquire several hundred new trains. But there is a long lead time. The first are in build and will arrive next year.
Through the competitive process for the new franchises, the government has done well in the north.
Overall, the TransPennine franchise will be subsidy free and the Northern franchise will have a much reduced subsidy compared with before. Both will have improved services. The commercial and performance risks lie with the companies. Private capital will pay for the new trains.
The companies are not making a fortune for shareholders. Most tendered to pay a premium to the government for their franchise rather than receive a subsidy. Last year the net premiums received by the government, after deducting subsidies paid, was about £850m. The amount retained by the companies was thought to be about £250m. That means that the government received about 75 per cent of the total profits. They would also have received £850m even if the profits had been less or nonexistent.
Going back to a directly operating state passenger railway would throw all this away, putting the financial risk on to the taxpayer and the cost of new trains on to the national deficit. Non-political Rail Supporter