Renationalise the railways? We’d be better off privatising them properly

It may be that in times to come Jeremy Corbyn’s sit-in on the floor of a supposedly packed Virgin Trains service to Newcastle will be remembered as the trigger for the Great Renationalisation, and immortalised by folk singers. History suggests otherwise – not least the history of Network Rail.

Since Britain’s railway tracks were returned to state ownership in 2002, waste, delays and mismanagement have become endemic. Flagship projects are late and over budget; the company’s debt is now £41 billion despite £4 billion a year in subsidies. The lesson is that instead of returning to the Seventies we should be revisiting privatisation – but this time, doing it properly. How?

1. Re-integrate tracks and trains. It is far more cost-effective for the same firm to own both, and Brexit provides a golden opportunity to reform our dysfunctional and fragmented franchising system – partly the result of EU directives.

2. De-politicise the industry. Train operating companies could buy the infrastructure or a privatised Network Rail could take over train services. In the longer term the industry should determine its own structure through mergers or splits. Putting politicians in charge of a privately owned railway again would be a huge mistake, benefiting vested interests.

3. Phase out subsidies; political meddling will only end when they stop. Growth in traffic means much of the network can be commercially viable, allowing handouts to be gradually reduced. Firms should be free to introduce super-peak fares and third class carriages to tackle overcrowding and optimise returns.

4. Let private investors fund new infrastructure, and make the government withdraw. Private investors wouldn’t waste money on poor-value schemes such as HS2. Land development could fund new commuter routes, especially if planning rules were liberalised.

5. Cut red tape to encourage competition. Competition between train operators, as seen on the East Coast route, brings benefits, as well as inefficient duplication. But there is scope to encourage it between rail and other options, for example by deregulating coaches and taxis. Removing barriers to new housing in London would also reduce the demand for long-distance commuting.

Rising passenger numbers, ballooning debt and the financial burden of HS2 mean our railways are approaching crisis point. Increasing subsidies for the existing network is no longer a realistic option. Improving efficiency is therefore key, and the idea that a moribund monopoly hamstrung by political interference would bring the innovation needed is ludicrous. By contrast, entrepreneurial businesses, freed from red tape, have strong incentives to deliver more for less.