Labour’s nonexistent rail policy

For too long Labour has championed rail renationalisation without explaining how it will solve the problems that the railways face, writes James Wood

Rail renationalisation has for a long time been an ideological comfort blanket for the Labour party. The public do not like socialism? They support rail renationalisation. Think privatisation works? Private rail companies making millions in publicly-subsidised profits. Private enterprise delivering a better service for the customer? Cancellations, delays, strikes and ‘planned engineering works’. The commuter hell. The rail replacement bus service.

And like all comfort blankets, you continue to hold onto it long after it has become threadbare, dirty and full of holes. The sentimental value is what makes you keep it, in just the same way Labour continues to argue for renationalisation without any understanding of how the policy would work or what the alternatives to the current system are.

I say ‘policy’ in the loosest sense of the word. The ‘people’s railway’ is policymaking by slogan. What happens to Network Rail, which is already publicly owned? Are we going to buy out franchises or wait 20 years for them to expire? What about the rolling stock, which is owned by a third party entirely – are we buying that too? And what about the supply chain, the servicing, the back office functions? Who provides strategic leadership? Who is in a charge on a day-to-day basis? Who is accountable when everything goes wrong? Of course none of these questions have been answered because the truth about Labour’s rail policy is that it does not exist. The shadow transport secretary regurgitates RMT press releases about ‘Britain’s rip-off railways’ and Jeremy Corbyn stands on picket lines with Southern guards opposing a technology that railway safety experts all say is safe. Where there should be innovative thinking about how Labour maintains and improves the United Kingdom’s most vital infrastructure, there is merely a gaping void, filled with nostalgia for the Blue-Grey BR and the ‘public good, private bad’ reflex that bastardises so much of Labour’s current policy debate.

The truth is that Britain’s railways are in ruder health than they have ever been. Passenger numbers in 2014-15 were 1.64 billion, the highest in history, up from 800 million in 1994. On 23 February this year (touch wood) we will celebrate 10 years since a passenger was killed on the rail network, a thankfully long way from the appalling regularity of high-fatality crashes of the eighties and nineties. And in 2015-16, also for the first time in history, not one worker was killed on the railways in Britain.

This is not to say there are not huge issues with the railway today. Network Rail’s cost overruns have seen electrification of the railways from London to Bristol, Cardiff, Nottingham and Sheffield pushed back into the 2020s. There is an industry-wide skills shortage of key resources such as signalling and electrical engineers. The fares system is confusing and inefficient, with 1.6bn separate tickets that can be purchased. The doubling of passenger numbers has but unprecedented strain on the Victorian infrastructure. Running costs are significantly higher than in comparable European countries. Various parts of the industry are not good at working together, and far too many parts of the country have a service that is not good enough to help them prosper economically. All of this is fertile ground for Labour. But nationalisation is not the answer, and it is unclear that Labour even understands the question.

First, the myth of the ‘rip-off private train company’ is just that. In 2012-13, train operating company profits were £250m. This is set against TOC costs of £6.2bn, ticket revenue of £7.7bn and industry-wide costs of £13bn. Clearly, the TOCs are not diverting huge amounts of money out of the railways as a whole. Each TOC holds a franchise, negotiated with the government, to run a specified service for a specified period of time. In order to run the service they must agree to pay the department for transport for the right to do so, and they must continue to do so even if the service makes a loss. Under the ‘cap and collar’ agreement written into each franchise, the government will pick up part of the bill for significant losses made by the TOC in the event of revenue being lower than anticipated, while the government receives a share of the profits should revenue be higher than anticipated. This is on top of the franchise premium which the TOC has to pay. So while it is true that publicly-run East Coast returned £1bn to the department of transport over 5 years of operation, their successor Virgin has agreed to pay the department of transport £3bn over 8 years. That is not a ‘rip-off private train company’, but a good deal for the taxpayer.

Second, the UK does not have extremely high fares. While season tickets into London and walk-up tickets for long-distance journeys are expensive, the range of cheap fares that can be bought in advance is huge. Moreover, a quirk of the UK ticketing system is that a return ticket usually costs only a few pence more than a single. This inflates the cost of a single ticket, making UK fares appear more expensive than those elsewhere. Because the UK’s rail network is the most intensively used in Europe we have developed a far more aggressive pricing structure for peak-time demand, with peak-time commuters into London subsidising the travel of others throughout the day. This is both commercially sensible and reduces the need for public subsidy. A nationalised operator would do exactly the same as the private TOCs have been doing.

Finally, the recent increase in fares has not been down to privatisation but government policy. When the Tories came to power in 2010 they decided that rather than rail costs being funded 50/50 between the farebox and the government, government would only pay 25 per cent of the industry’s costs with farebox revenue increasing to 75 per cent of total rail income. This has obviously resulted in a series of above-inflation price rises. Once again, regardless of whether the railway was nationalised or privatised, the response to cuts in government funding would be either ticket price increases or cuts to services and an argument that a nationalised railway would not engage in the former necessarily means it would engage in the latter. Furthermore, even if the £250m made by the TOCs was directly deducted from UK farebox income, that would fund a one-off two per cent cut in ticket prices. Simply removing the private sector from the railways will not create a railway with high investment and low fares.

The railways are a success story of 21st century Britain. So it behoves us to formulate policy that protects that success and builds upon it in the future, looking at the real issues facing the railways and asking how we can improve them. The party’s current stance is policy made for all the wrong reasons – because the unions like it, because the left of the party like it, because certain opinion polls say the public like it. Nowhere in the recent discussion has anyone, at any level of the party, explained how nationalisation will solve the actual problems the railway faces, rather than the fictional ones that exist in the mind of the left. When it comes to transport policy, it is time for Labour to close its mouth and start engaging its brain.

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James Wood is a Labour party member.

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Comments: 5...

  1. On February 13, 2017 at 4:22 pm SARAH BROOKES responded with... #

    What a lot of nonsense. The subsidy to the railways is still double in real terms what is was in the days of British Rail. This is because the few at the top are sucking on the teat of government sovereign currency issue, as well as the highest by far fares in the whole of Europe.
    European nationalised railways have shares in our private ones – and we are therefore subsidising their railways. Their railways are cheap 1) because they are nationalised, therefore no greedy rentseeking is sucking out the wealth for nothing (corporate welfare). 2) Because we are subsidising them.
    Just do not tell the poor that the rich suck at more welfare than they do, or that government can never go broke because it issues the currency!
    The only reason for government “borrowing” is an accounting artifact – all government spending increases the money supply, and don’t the rich just realise that this, as Keynes said, increases their savings.

    • On February 14, 2017 at 5:16 pm Luke the Drifter responded with... #

      Sarah Brookes’ reply suggest that she either didn’t read the article properly or, if she did, didn’t understand it, as he disposes of her main substantive points in it. Instead of a reasoned response offering alternative policies all we get is the same old incoherent rhetoric and sloganising (along with some rather baffling references to the money supply and Keynes).

  2. On February 13, 2017 at 5:44 pm David Lindsay responded with... #

    Who is James Wood’s employer? What shares does he (or, based on his prose style, do his parents) own?

    • On February 14, 2017 at 12:33 am Richard Honey responded with... #

      Is that the best you can do? How about addressing the substantive points and providing coherent alternative arguments instead of irrelevant personal slurs . Kind of adds substance to James’s contention that some on the left have no real ideas and substitute slogans for policy.

  3. On February 14, 2017 at 5:02 pm Luke the Drifter responded with... #

    I wondered how long it would be before the idiots turned up to slag off this article. Mr Woods is exactly right and this is exactly the kind of discussion we should be having except that comment spaces like this are all too often filled with nonsensical rhetoric from the Corbynista keyboard warriors.

    One of the current tragedies of the party is that it has become virtually a policy free zone (don’t confuse demands with policies) not just for transport but the NHS, housing, Brexit, immigration, the economy, social security, defence, indeed all the main issues that actually matter to voters. Instead we have grandstanding, virtue signalling and gesture politics (which are all the Corbynistas seem capable of) without any clear and systematic thinking about either the issues themselves, the causes of current problems, how demands would be implemented and the possible consequences of doing so.

    The people with genuine expertise who wanted to work with Labour to help create such policies have long ago left in frustration and Labour is fast becoming a hollowed out party and irrelevant to the political process. It is not only transport where ‘it is time for Labour to close its mouth and start engaging its brain’ this applies across the whole list of policy issues. If we don’t change soon we’ll be looking at fewer than 150 MPs after the 2020 election.

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