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Britain’s railways have never been properly privatized – so they can return to greater public control

Traveling by rail is a strange thing. There are some journeys undertaken for pleasure – especially on steam trains – but the vast majority are done because people have to go somewhere. The railroad is just a means to an end. Efficient rail transport facilitates economic production and economic growth.

The argument that public ownership of vital transportation infrastructure is better for the country is not new, nor is it limited to the left. I imagine that few if any would consider Winston Churchill a socialist, yet he argued in 1918 that if the railways were in the hands of the state, “it may be wise or expedient to run them (to) development, to place the trader in the hands of the state.” close contact with its market, and stimulate development” rather than maximizing profits.

Ironically, by the time the railways were nationalized, Churchill had changed his mind based on the data provided by Eric Geddes, Minister of Transport from 1919 to 1921. However, he was correct in his initial analysis. From 1948 to the mid-1990s, the then British Railways (BR) developed under public ownership from a war-battered service in need of investment and modernization and considered by some to be one of the best mainstream integrated rail services in the world.

For example, in 1989 BR was found to be 40% more efficient than eight comparable European rail systems, while its research and engineering expertise was also in the spotlight. The high-speed train (the iconic InterCity 125) broke new ground in 1987 with a speed of 230 km/h (still a world record for a diesel train) and at the same time proved to be a reliable workhorse in the country’s railway fleet.

BR also invested in new rolling stock. British rolling stock was on average two years younger in 1996 than in 2013.

All smooth sailing: 1987 heralded a new era of trains for British Rail.

Privatization: the end of the line?

In the 1980s, the Thatcher government reversed many of the nationalizations of the post-war era, overseeing the beginning of the transfer of much of the British public’s productive assets to (often international) business.

Insofar as she saw privatization as a means of “spreading the wealth of the country to as many people as possible,” Thatcher’s policy failed. Based on share ownership, British citizens’ share of national wealth continued to decline throughout the 1980s. There is also no evidence that privatization has improved the efficiency of previously public assets on average.

Despite the failures of privatization, not to mention its unpopularity with the British people, Thatcher’s successor, John Major, oversaw the “privatization” of Britain’s (non-Northern Ireland) railways between 1994 and 1997.

The network was not privatized in the usual sense of the word. Railroads have always relied on implicit and explicit government subsidies, and continue to do so. Rather, the railroads were franchised.

The franchise system is complex. Train operating companies (TOCs), subsidized by the taxpayer, operate franchises granted by the Ministry of Transport. TOCs rent their rolling stock from the (taxpayer subsidized) rolling stock companies (Roscos) and operate their services on lines owned by the public Network Rail (not having to pay the full cost of lines is yet another effective subsidy). of the industry).

Some of these subsidies go to the rail network, but much of this taxpayer money simply becomes dividends for the franchisees. With the onset of the COVID lockdowns, passenger numbers fell and in the context of (effective) renationalisation, the government stepped in to bear most of the risk of the railway companies. Previously, subsidies under the franchise schemes were in real terms approximately twice the pre-privatisation level.

Although rail “privatisation” was promoted by EU Directive 91/440, no other EU country followed the British example. Few, if any, comparator countries have such a high level of ‘private’ rail provision as Britain.

And few if any governments would now adopt the British model. On the contrary, the British case is seen as a cautionary tale, with high prices, fragmented services and aging rolling stock all contributing to the network’s problems.

Ironically, before COVID, many UK train services were operated in whole or in part by the nationalized rail companies of other EU countries. Even the market seems to prefer public facilities.

Return trip

The easiest route to renationalization, if we can really call it that, given that the railways have never been properly privatized, would be for the government to admit its mistakes and simply not renew the TOCs’ franchise. This is the policy of the PvdA. This route would not solve all railway problems; there would still be the matter of the Roscos to be resolved. But it would be a start.

There is a precedent for this. In 2009, East Coast Mainline operator National Express East Coast walked away from the TOC contract, meaning the public sector had to step in and operate the line.

Passenger satisfaction and profits subsequently improved. The magnitude of the improvement was so great that many assumed the “privatization” experiment was over. However, in 2015, the line received a new franchise. After another three years, when it became clear that the new franchise was underperforming, the line returned to public ownership.

The policy of renationalization is not really that: the railways have never been properly privatized. In reality, it looks more like holding up at least part of the franchise scheme with taxpayers’ hard-earned money.