The recent announcement of government plans to create a public sector body called ‘Great British Railways’ to co-ordinate all rail services has been hailed by many as a victory for a parliamentary left that has long called for nationalisation of rail. However, as transport researcher and activist Tom Haines-Doran writes, these plans in fact set the stage for further increases in fares and job cuts for rail workers.
The British government has announced its plans to improve the shambolic privatised railway system, following years of policy deliberation and inquiries. It promises to end the chaos of passenger services franchising, with services to be specified and coordinated by a public sector body called ‘Great British Railways’.
Some commentators have hailed the move as a success for anti-privatisation campaigners, and particularly for the left of the Labour Party. This has been epitomised by #CorbynWasRight trending on Twitter. However, as this article will argue, the announcement is intended to achieve the opposite of a public owned and democratically managed railway which was an important part of Labour’s Green Industrial Revolution plans before the last general election.
The railway system has been in a state of perpetually worsening crisis since the privatisation and break-up of state-owned British Railways (BR) in the mid-1990s. Successive governments had deliberately under-funded BR for many years, which left a legacy of depleted infrastructure and old trains. Privatisation was an experiment in creating competition and attracting finance to an industry heavily reliant on government subsidy. However, the resulting fragmentation of an industry whose functioning relies on tight cooperation between the different elements that go into providing services led to crippling inefficiency, greater costs and poor services.
While private ‘investment’ in an inherently loss-making industry reduces the amount of public subsidy required to provide a given level of service, it increases costs in the long term because private finance is more expensive than government borrowing. The history of rail privatisation is a history of governments of all stripes continually reforming the industry to be attractive to private finance, leading to much higher costs in the long term.
This dynamic was illustrated most starkly in the creation of ‘Network Rail’ in the early 2000s. Network Rail was created to replace Railtrack, the private monopoly owner of the railway infrastructure, following Railtrack’s financial collapse. Railtrack had prioritised shareholder dividend payments over maintaining a safe railway, leading to huge problems and, most dramatically and tragically, the Hatfield rail crash in 2000.
If the railways were to keep functioning on some basic level, they would need to find the huge amount of money required to rebuild the network. Network Rail was an arm’s length company which designed to attract private finance into the industry, and so reduce up-front costs to the Treasury. Network Rail proceeded to run up an enormous debt. Through an accounting trick, it was classified it as private sector debt, so allowing the Treasury to claim total government debt was lower than it really was.
This scam ended in 2014, when the European Union forced the government to admit that the debt, by then totalling £34 billion, was indeed government debt. This had the effect of legally renationalising Network Rail. Renationalisation laid bare the true costs of the railways to taxpayers. By 2015, total government subsidy to the railways reached over £13 billion a year – in real terms more than six times that required by BR before privatisation, despite a doubling of ridership and a real-terms increase in fares of over 20 per cent.
Since Network Rail’s renationalisation, successive governments have been searching for a private finance short-term fix to replace the ones that have come before, but with little success.
Covid masks deeper problems
The Covid-19 crisis has seen income from passengers drop as much as 93 per cent, as a result of working from home and government messaging to avoid public transport. Like in many other industries, the government has stepped in to rescue private companies and to avoid industrial collapse. However, this has only accelerated a trend of increased government intervention in franchising thanks to the system’s failings.
Privatisation separated the running of passenger services from the management of infrastructure, in order to foster forms competition in an attempt to reduce public subsidy costs. This created bidding competitions between private companies to for the right to run passenger service franchises, the winner of which was usually the company that promised to reduce its reliance on public subsidy the most. In practice, in order to keep private companies interested in participating, the government had to take much financial risk away from operators through various mechanisms, most starkly in the form of frequent and expensive bailouts and temporary renationalisations.
Private companies were able to make tidy profits when circumstances were favourable to them, but were protected from losses when things got tricky. There were no beneficiaries of this system, except for the private companies themselves. Although their profit margins were low compared to companies operating in other industries, the guaranteed nature of their returns made them lucrative investment for international financial capital, and unnecessarily increased overall industry costs. Recent attempts by governments to make companies take on financial risk has simply resulted in fewer bidders and so less competitive bids. Having been in a perpetual state of worsening crisis for many years, the franchising system effectively collapsed in the months leading up to the Covid-19 outbreak.
Baked-in class war with patriotic icing
Which brings us to Great British Railways. The main thrust of this policy change is for passenger services to be run as ‘concessions’. This is similar to the forms of outsourcing and privatisation that readers may be more familiar with, such as Biffa-run council waste collection or Care UK–provided NHS services. Instead of private companies competing to provide services in which they attempt to maximise revenue to meet the subsidy reductions they have promised, the government through Great British Railway will specify almost every aspect of provision, such as timetables, fares, types of train used.
A key justification for privatisation was private companies’ supposed entrepreneurial flair and customer focus. None of this is relevant in a world where the sole income for train companies will be a flat fee for service from a government body which will collect all fares. They will enjoy guaranteed, steady income flows, which are particularly attractive to financial investors at a time of low interest rates and lack of profitable investment opportunities (‘yield’). Guaranteed profits mean money passing from taxpayers and fare payers to shareholders instead of being invested in improving provision, and the concession model will unnecessarily add the bureaucratic and legal costs of outsourcing.
So what is the point? The government argues that allowing private companies modest profit margins is worthwhile given the benefits: the kinds of private companies that will seek to be involved are experienced in improving efficiency and driving down costs. However, even if we take this highly questionable assertion at face value, it is important to think about how that could possibly be achieved. The concessions will not own any assets: tracks and stations will continue to be owned by the government, and trains will continue to be owned by private leasing companies. The only real ‘assets’ the operators of concessions will have are railway staff such as drivers, guards and ticket sellers.
Efficiency would therefore focus on attacking railway stuff through job and pay cuts. Indeed, the concession model makes it easier for the government to orchestrate its efforts on what has been a stop-start war between government and railway workers for the past decade. which, thanks to stubborn resistance and unprecedented strike action against de-staffing, is a war in which has failed to achieve much success in recent years.
The argument that the creation of Great British Railways signals a renewed attack on railway staff in order to reduce public subsidy is underlined by the launching document’s lack of discussion of how, and to what extent, the railways will be funded under new proposals. Its repeated but vague references to private finance opportunities indicate that the government continues to search for private finance ‘solutions’ to the railways’ financial crisis, caused by years of short-term private financial ‘fixes’, while also pursuing the altogether more straightforward strategy of simply de-staffing and cutting services.
An attack on rail workers is likely to be accompanied by even greater fare rises, as the Transport Secretary Grant Shapps has indicated. According to Shapps it is time to have a ‘grown up conversation’ about the balance between rail passengers and the ‘wider taxpaying public’.
Playing with trains while the planet burns
Perhaps the most disappointing (but not surprising) problem with the government’s announcement is its abject failure to address what the railways are for, including the role we need them to play in the massive and rapid reduction in fossil fuels required if there is to be any hope of earth continuing to support human life.
Railways are certainly not the answer to everything. In most parts of Britain they are a niche form of transport. The vast majority of journeys people make are of short distances more suited to walking, cycling, bus and tram travel. But railways are very energy efficient means of carrying large amounts of people over medium and long distances, and it is much easier to electrify railways than other forms of transport. Creating a shift from car and air travel to rail use is necessary (if insufficient) part of decarbonising transport, and that means we need to increase the capacity and accessibility of railways. Clearly, the new coronavirus reality presents additional challenges to that task, but it remains one that is impossible to avoid.
The Great British Railways proposal is a result of a government groping around for solutions to the longstanding financial and operational problems on our railways. As with much of contemporary politics, flag waving is employed to paper over the structural failures of railways provision, and lack of solutions to them within elite political common sense. What’s particularly brazen about Great British Railways is that it evokes nostalgia of a (largely mythical) pre-neoliberal age of post-war social compromise, where governments made limited concessions to stave off the organised working class through providing high quality public services. It evokes this while in reality carrying on with the business-as-usual neoliberal practices of privatising and cutting social services.
If this shallow and contradictory political strategy succeeds, it will only succeed thanks to the overall political weakness of the left. But rail workers have recent experience of successful and widespread militant strike action, perhaps more so than any other section of the British trade union movement. It seems highly likely that such action will be required again. Rail workers are more likely to succeed if they can unite their struggles over pay and conditions with that of passenger groups and environmental campaigners for good, affordable, services.
Such a movement would need to focus on the deeper issue behind the government’s attacks, not just demand renationalisation. The railways are so inadequately prepared for the tasks that we require of them because successive governments have failed to recognise that railways – like many other important areas of provision – need high levels of state support if they are to function well. While it was more economically efficient than today’s system, nationalised British Railways was a cut price, poor service unable to compete with the increasing convenience of driving and flying. A truly public railway system would take social and environmental impacts as its primary measure of success, not Treasury-dictated financial targets.
The formation of Great British Railways puts the government on a collision course with rail workers and passengers.