The Daily Telegraph - Saturday
Labour’s train plans recall national joke British Rail
The state taking over the railways is one pre-election idea of the opposition, but would it really work, asks Michael Bow
When looking for a punchline, Eric Morecambe liked to target the state-owned operator of Britain’s railways. “My father used to be an engineer at British Rail,” the comic would say. “He used to weld the crusts on to the meat pies.”
Morecambe and Wise could always guarantee a laugh: during the 1970s and 1980s, British Rail was seen as the epitome of all that was wrong with Britain. The dreadful food on the trains was the least of it.
British Rail finally reached the end of the line in 1994 when John Major kicked off its privatisation.
Now, Labour wants to resurrect the state-owned system.
Sir Keir Starmer’s party has made a promise to take back control of the railways one of the party’s flagship policies running into election year.
Despite shadow chancellor Rachel Reeves saying nationalisation wouldn’t “stack up against our fiscal rules”, other Labour figures are gung-ho.
Shadow transport secretary Louise Haigh said: “We’ve got a plan to fix the railways as a whole, which involves bringing operators into public ownership, but that will actually bring significant savings.” More detailed plans later, she said.
A resurrection of a British Rail-style system is likely to trigger fresh scrutiny of what was previously thought to be a relic of history.
Most people born after 1980 are unlikely to remember the brand. That includes Haigh, who was born in 1987.
Rose-tinted spectacles for stateownership mask a period of decline for the railways when they were under the yoke of British Rail. “British Rail was a
‘There are no magic levers but simplification is important. Railways need to benefit the customer’
disaster for passengers,” says Sir John Redwood, who helped usher in rail privatisation in the 1990s. “Passenger numbers fell away throughout the nationalised years. There were too many delays, too many cancellations, poor service, poor catering, so it wasn’t attractive to passengers.”
Journeys halved, plunging from 1.2bn per year to just 630m after the state took control, figures show.
British Rail’s Intercity service later became associated with football hooliganism and widespread decay.
“Nationalisation was disastrous for rail,” said Peel Hunt’s long-time transport analyst Alexander Paterson.
“It made railways even more focused on the employee, and even less focused on the customer and volumes collapsed. It took privatisation the best part of 20-odd years to get it back close to its peak.”
Passenger journeys reached a fresh peak of 1.7bn in the year before Covid, matching figures last seen during the interwar boom in the 1920s when railways were also in private hands.
Sir John says: “Privatisation turned it around. It produced better services, boosted passenger numbers and cut the bills for taxpayers.” The railways were born in the swashbuckling Victorian era of the railway baron, when entrepreneurs laid tracks to create their own private train systems.
Around 120 smaller operators were then Hoovered up by the government in 1921 to create the “big four”: Great Western Railways (GWR), London North Eastern, London, Midland and Scottish, and Southern Railways.
Passenger numbers soared during the interwar period, but the Second World War destroyed much of the system and forced Clement Attlee to nationalise the big four in 1948.
Labour is yet to spell out exactly how it will replicate Attlee but the cheapest and easiest way is to simply take over train contracts when they run out. The state still owns the tracks themselves through the arm’s length body Network Rail. The Government currently issues fixed-term contracts to run trains on Britain’s railways to operating companies, which trade under well-known brands such as Avanti West Coast and Southeastern.
When these contracts lapse, the Government could simply begin running its own services instead.
Creeping nationalisation of the railways is already under way. Plans for a Great British Railways (GBR) body, combining Network Rail with the Government’s rail functions, have been put forward. The plans have been delayed and are not yet law, but GBR could in theory be the model for a national state operator.
The Government already operates four franchises – LNER, Transpennine, Northern Trains and South Eastern – as the operator of last resort when the private companies lost their contracts. Wrapping further franchises into the model would add to this haul.
Assuming Labour takes power this year, its first challenge will be to decide what to do with a string of contracts coming up for renewal.
Avanti, Chiltern Railways, Thameslink, Essex Thameside, East Anglia, East Midlands, Southwestern and Great Western are all up for renewal between 2025 and 2026.
“Taking over all these franchises irrespective of performance metrics would be quite an ambitious undertaking for a centrist potential Labour government and the Department for Transport,” says RBC Capital analyst Ruairi Cullinane.
“Such an approach would also come with elevated political risks since the Government would increasingly be blamed for any disruption and delays.”
Despite the praise for the private model, as anyone stuck hanging around a train station or crammed in a vestibule for hours will attest, the train can be a frustrating way to travel.
While privatisation has boosted usage, the customer experience has often gone the other way.
The massive increase in the use of the railways triggered by privatisation has not been matched by investment.
“Taking politics out of it, the biggest problem the railways face is it’s a victim of their own success,” says Gerald Khoo, an analyst at Liberum.
“More people are using railways than has been the case in several generations. If you have more people using the service, you need to put more money in. Most fares have been regulated and we’ve got ageing infrastructure in very crowded parts of the country.” According to the Office of Rail and Road, the most frequent complaints from passengers are about punctuality and overcrowding. Ironically, the Government rather than the train companies are largely responsible for these problems.
Most sources of cancellations are because of issues with infrastructure such as signalling or the tracks, one of the few parts of the system which the Government actively owns.
The Government also regulates the fares train companies can charge, driving up the price for passengers who need to travel at peak times.
One way to fix the railways may be, counterintuitively, to make them more liberalised and for the Government to become less involved in the system.
A system of open access, where private train companies run competing services on the same line, is one solution that has won praise.
Under the system, multiple train operators apply to run trains on a single piece of track, giving customers the choice of which train company to use. For operators, this would replace the current political risk of losing their monopoly franchises with the commercial risk of failing to lure enough passengers. In effect, they would be incentivised to do the best job they could for passengers.
“Train operators are currently paid a fixed fee and a variable fee based on how they perform under the National Rail contract but they’re not directly exposed to passenger revenues risk, because that sits with the Government,” says Cullinane.
“With open access, you are exposed to that. Operators are exposed to more commercial risks.”
Lumo, Hull Trains and Grand Central are three of the first privately owned operators currently running on open access tracks in the north and into Scotland. They compete with the incumbent operator, LNER, and the model is notable for winning support from some members of the Labour
Party. A recent Parliamentary reception celebrating the success of Lumo and Hull Trains attracted more than a dozen Labour MPs.
The Government could also liberalise the railways by giving up its control over fares. There are currently 55m fares available on Britain’s railways – an astounding figure that underscores the mind-boggling structure of the rail system.
Train operators have freedom to set off-peak prices but peak fares are set by the Government and linked to inflation. Post-Covid working practices mean fewer people are using the trains at peak times than they were a few years ago. It means there could be scope to give train companies complete power over setting fares to better respond to supply and demand.
Sir John believes more privatisation is needed, not less. He suggests: “I would now want a fully integrated privatised modelling. Split up the tracks into regional or line-by-line blocks, and people can bid for it and you wouldn’t stop one of the leading train providers from owning it.”
Paterson added: “There are no magic levers you can pull but simplification is important. Railways need to operate for the benefit of the customer, not for the staff who work there. It has to be customer-facing and it needs to be responsive to changing customer demands. It must be more affordable.”
To paraphrase Morecambe and Wise, bring us sunshine.