Workers have begun a month of strike action to #KeepTheGuardOnTheTrain on South Western Railway. As RMT members strike to defend passenger safety, and Labour promises to renationalise the railways and slash ticket prices, Mike Haynes explains the absurdities of our privatised railway network: soggy, wet, dry leases and all.
You have to laugh at how privatisation has led to the UK rail system being renationalised… by the state railway companies of other countries. On the West Coast Line it is currently: ‘goodbye Virgin trains’ and ‘hello Trenitalia’: the Italian state railway system. Over 70% of rail contracts in the UK are now given out to companies partly or wholly owned by foreign state railways.
You need to be a rail detective to work out who owns what. When franchises change it takes time to repaint the trains and get new uniforms. Names are no guide. West Midlands Trains sounds local. It is 15% owned by East Japan Railways, 15% by Mitsui: another Japanese conglomerate. The biggest share, 70%, is owned by Abellio. Abellio is wholly owned by Nederlandse Spoorwegen: Dutch Railways.
It’s really confusing. Arriva trains are owned by Arriva UK which is headquartered in Sunderland. But in 2010 Arriva was taken over by Deutsche Bahn: the German national rail operator. There are nearly 30 operating companies to track so I won’t go on.
The trains companies bid and get the contracts for a specific period of time. Most of the stations are franchised too. This is why you see the platform staff uniforms change when the franchises change and as you travel from station to station. The refreshments are usually then sub-franchised to other companies. But a Starbucks on a station is a franchise of a franchise of a franchise. It is a bit like one of those Russian dolls.
Don’t think that the trains and carriages are owned by the railway companies. They are leased from the ROSCOs: the rolling stock operating companies. These have names like Eversholt, Porterbrook, Angel Trains.
Have you heard of soggy, wet and dry leases? Thought not. A dry lease is when the company from which you rent the train pays for all the maintenance. A soggy lease is when the maintenance is shared between the ROSCO and the leasing company. A wet lease is when the train operating company pays for all the maintenance. You can guess which one the rolling stock operating companies like best: the one that puts all the costs onto someone else. This is one reason why the ROSCOs are so profitable and why they are backed by global banks and private equity companies.
The track is controlled by Network Rail. It had to be effectively renationalised because it couldn’t work as a private company. But Network Rail outsources. The now defunct Wolverhampton-based Carillion once had a subsidiary called Carillion Rail. As such construction companies wobble and go under more goes to the biggest like Balfour Beatty. But they don’t do everything either: they sub-contract too.
Best not to ask about the administrative costs. But what happens to the profit? Well most of it is paid out to the shareholders and the parent companies. And if the parent companies are foreign rail operators then the profit goes back to them. It is a form of multinational state business. For these companies and rail travellers in Italy, Germany, Holland it seems a good idea. So good in fact that you would think that the UK state could have got in on the act. But it can’t because – well you have guessed it – the UK has a ‘private rail’ system.
But where do the profits come from? They come from income minus costs. The income is the fares and since privatisation these have shot up in the UK. But they also come from subsidies and these too have shot up. They also come from something else. Rail companies love it when the system fails because then they have to be compensated. One guard laughingly told me that they are not interested in tickets. Think about it: if you are travelling long distance several companies probably have to have a bit of your fare. But if the train is late because it’s someone else’s fault then they win: the company gets compensation. Fares are always secondary. Well, that might be a bit exaggerated but if you are stuck on a train it helps to know someone is making money of your problems.
Then there is the issue of investment. The companies agree to pay the government so much each year for their franchises. The government then agrees to put money back to keep the system going and help pay for improvements.
So, there is a gross subsidy: the money the government puts in. And there is a net subsidy: that’s the money put in minus the franchise payment. The net subsidy is now running at three times the pre-privatisation level. Yes, that is right: the UK’s privatised railways are more heavily subsidised than when they were nationalised.
I am a regular train traveller. I appreciate the value of the train if not the cost of the tickets on a long journey. You can get to know the staff and can chat about who they are working for this week and whether they like their new uniforms. You can ask them about their conditions. Some are on new ones. Others still think of themselves as British Rail staff having been ‘TUPEd’ (pronounced ‘tup-eed’) over several times – i.e. their old conditions have been transferred.
As someone who tries to think about this stuff professionally it is a good way of using the journey. I can find out things if the train has free Wi-Fi (I am not paying because it is usually free in other countries). Of course, the Wi-Fi has to be turned on and working. Now there is an interesting question I don’t know the answer to. Is the Wi-Fi equipment on the train dry, soggy or wet? Is it part of the leasing deal with the ROSCO or something paid for by the train company? If Marx were alive today he would have struggled even longer to finish Capital.