Rail nationalisation moves a step closer
NATIONALISATION of the passenger railway is a step closer to being officially recognised.
The Office of National Statistics (ONS) has launched a review of whether the debts of train operators should be counted on the Government’s balance sheet, instead of being in the private sector. One senior industry source told RAIL the result was “a foregone conclusion”, and added: “It will happen within weeks.”
Industry veteran Sir Michael Holden commented: “We could be looking at the beginning of the end of private sector involvement in passenger train operations.”
The ONS is politically independent, and says the decision was prompted by the Government decision in March to keep the railway running with an “initial” six-month package to underwrite any losses by taking all revenue and cost risk, and paying operators “a small pre-determined management fee”.
Rail companies have already received £3.5 billion of taxpayer support, and ministers are now considering how to extend that beyond the current Emergency Measures Agreements, which run out in September.
With passenger numbers still below 20% of pre-pandemic levels, no train operator is likely to be able to continue without further Government input. FirstGroup, which operates several franchises, has warned of “material uncertainty” over its ability to continue because of a lack of commitment of state support.
In a statement, the ONS said: “Alongside transferring financial risk to Government, Emergency Measures Agreements also imposed some obligations on the private train operators, in what is already a highly regulated industry.
“The ONS is therefore assessing if these new procedures should affect the classification of the train operating companies within the UK national accounts.” A decision will be announced “as soon as possible”.
There is increasing speculation that new 18-month emergency agreements will be created, as passenger numbers and revenue remain impossible to predict. A senior source told RAIL: “The ONS decision will not just be about who is paying the bills; it is more to do with the Department for
Transport’s control and oversight of the companies concerned.
“The DfT is pulling all the strings. It is making every decision. It is telling companies what they can and cannot spend, right down to very small amounts of money. That’s the reason they will declare the train operators to be under public control.”
A train operator put it more bluntly: “We cannot pee in a pot without getting permission for which pot to use.”
The source added: “We will come onto the public sector balance sheet. So we are nationalised in one sense, but we are still private companies. The real question is what this means for whatever replaces the emergency measures in September. We have a centralising government with strong command and control.
“Like Veolia is paid to empty your household bin to a certain standard, train operators will be paid to run services to a certain standard. Would this remove any scope for innovation and risk-taking, and would that leave the private operators any room to make more money in return for good ideas? Does the Transport Secretary want us to be like the bin emptiers, just keeping the trains clean and tidy? Or does he want something more?
“The ONS decision plays into all of that and shows what could happen if such tight control continues.”
Rail Delivery Group Chief Executive Paul Plummer said this “underscores the need for a fundamental reset of the relationship between the public and private sectors in rail, something
we have long been calling for.
“To ensure passenger numbers recover as quickly as possible, which is good for taxpayers, the economy and the environment, new contracts must lock in incentives for the private sector to grow revenue.”
RMT Senior Assistant General Secretary Mick Lynch countered: “The Government knows that rail privatisation has failed. It must bring the rail network back into public ownership, rather than continuing to bail out the private operators at a significant cost to the public purse.”
Another senior industry source with experience of both public and private sectors said: “The ONS is removing any misconception that the private sector is making any of the decisions.
“The Treasury seems to want the owning groups to run at a margin lower than the 2% they’ve had since March. It thinks this is too soft a deal. I think the owning groups will walk away if it becomes tighter.
“If everything is on the public books, and the only incentives are around reducing cost, we are back to the worst form of government control. It looks like we are heading into a downward spiral.
“Who is in the driving seat to push fares and ticketing reform? Has that gone? Where is the incentive for new products to drive demand? I sense the dead hand of government all over the place.
“If they are keeping all decisions inside the DfT - and that is the clear implication from the Office of National Statistics - this will be far worse than British Rail ever was. At least BR had a separate Board with expertise.”