Labour's low-cost new public railway?
But no nationalisation for freight & ROSCOs
SHADOW Transport Secretary Andy McDonald says nationalisation will save money and not lead to additional expenditure if Labour is elected to power. Passengers will receive “lower fares, improved services and more effective investment in infrastructure and stations”, he said.
Responding exclusively to RAIL, he said nationalisation will save money “mainly by significantly reducing the operating costs, through an end to the fragmentation and complexity that follows from the creation of 16 different rail franchises with private companies”.
McDonald added that the cost of running franchise competitions would also end, claiming that in 2014-15 taxpayers subsidised the railway with £4.8 billion and that passenger contributions of around £9bn in fares have increased by 17% since 2010-11.
He also claimed that since privatisation the railway has received almost £72.5bn from taxpayers, adding: “It is clear to us, and I think the public, that the removal of private profit and dividends from the industry would be a considerable source of savings because private rail companies would no longer be siphoning off dividends - in 2014-15 alone £222 million was paid out by private TOCs to shareholders.”
McDonald highlighted the payment of around £1bn by East Coast, under Directly Operated Railways stewardship, as an example of how Labour believes public sector ownership and operation is cheaper. Nationalisation would be achieved by returning franchises to the public sector as they expire.
In terms of funding, McDonald said that the “considerable savings” made by nationalisation will “more than cover any modest expenditure in setting up and expanding public operation”.
Labour has no plans to nationalise the rolling stock leasing companies (ROSCOs), but says rail operations in public ownership will be “free to commission and procure rolling stock directly, and avoid the unnecessary costs incurred by private ROSCOs that profit from the leasing out of rolling stock to different operators in the UK”.
Nor are there any plans to nationalise open access passenger and freight operators, although McDonald added: “The open access model exists only to preserve the concept of competition as the driver of efficiency in rail services.”
Challenged about claims of excessive train operator profits when margins are typically in the order of 3% or less, he said: “Although that may seem like a low level, there is very little private investment made by train operating companies. So as a return on capital, it actually translates into significant profits.
“In addition, savings are not simply based on avoiding the loss of hundreds of millions of pounds which are extracted from the system, but by avoiding the massively expensive franchising process itself, and by avoiding the replication of activity and expenditure within the dozens of companies which currently operate the system.
“Britain’s fragmented system makes it far too difficult to make basic changes to fares and ticketing, like extending smart ticketing, and also drives up the cost of maintenance and enhancement works.”
On fares, McDonald believes that even avoiding ‘inflationbusting’ fare rises would make
a notable difference, and that a 10% cut in regulated fares (as promised by Labour leader Jeremy Corbyn) would make a “noticeable difference” to commuters.
Although integration of infrastructure management and train operations is not currently Labour policy, McDonald says the current system “allows for inefficiencies that create costs for taxpayers and commuters which fuel private profit. Although not party policy, we are considering a number of options, including reform of the relationship between train and track. A vertically integrated system is one such consideration.”
However, Labour’s plans to renationalise Britain’s railways have been attacked by Transport Select Committee member and Colchester MP Will Quince (Conservative).
“Labour would take the country back to the bad old days of British Rail sandwiches and the Beeching Axe,” he said.
“It would leave less money to spend on improving services, or lead to huge tax hikes and extra borrowing.”
Quince accused Labour of a “backwards-looking policy - brought by the trade unions [which] would cost billions in wasteful new spending, and would kill off vital investment”.