Great British Rail will be a Great British Flop
What Britain's railways need to get back on track
John Redwood is a former Secretary of States for Wales and MP for Wokingham. He writes regularly at his diary.
Ministers are telling us their rail nationalisation will produce much better services and lower fares. Great British Rail we are told will have a single controlling mind that will get decisions right. Ministers freely admit that their railway to date is poor on punctuality, low on passenger satisfaction and dreadful at value for money. They are right.
They also need to point out that the railway they took over was almost fully nationalised. Labour nationalised Network Rail, taking control of all the track, signals, powerlines and structures in 2002. A lot of the delays and cancellations on the current railway are down to Network Rail failures. The last government had started the nationalisation of the rest, bringing into public control train operating companies as and when franchises ran out or were surrendered for lack of profit. This government is continuing the same policy.
Privatisation in its early years worked well. When John Prescott took over as Transport Secretary he had to admit that there had been good growth in passenger numbers and better investment in new trains in a virtuous circle.
Privatisation freed the railways from the need to compete with more nurses, doctors, police and teachers in the public spending rounds. New companies brought in new services, better timetables, and modern trains. Large new capital investments were made by train companies and leasing companies. The industry moved into profit as journeys took off and more fares were paid.
After the nationalisation of Network Rail governments also took more and more control of fares and timetables. It became more difficult for train companies to provide better services, and they were restricted by the slots they could get from Network Rail. The Fat Controller had arrived in Whitehall. Ministers accepted they were to be pilloried for every train cancelation and bad timetable so government might as well direct and restrict companies.
Last year, less than 85 per cent of trains arrived within three minutes of timetable, and more than 4 per cent were cancelled altogether. Customer satisfaction was low, concerned over a lack of reliability and high standard fares . The industry needed £21.6 bn of government money and raised just £11.5bn in fares. If you had a bird’s-eye view of the routes into our leading towns and cities at peak times on a working week day you would see horribly congested roads and largely empty train lines. The lack of up to date digital signalling and in cab views of the line mean large gaps are enforced between trains, limiting train slots and pathways at busy times.
These failings are largely down to long nationalised Network Rail that has not put in the new signalling and satellite-based control systems and takes a risk averse approach to train spacing. They are right to want to take all actions to avoid collisions. They need to be backed up by drivers who do not pass signals at danger and better visibility of the positions of every train.
The railway gets money out of all proportion to the use it offers the public and business. Rail freight is down 28 per cent in the last decade, with the railway wanting trainload business and being bad at single waggon marshalling and smaller load handling. Passenger numbers have not recovered from the Covid hit, with working from home now undermining the five-day-a-week commuter business where the railway overcharged for season ticket travellers who had to deal with the monopoly. Rail accounts for just 2 per cent of trips undertaken, compared to cars at 59 per cent. Even on miles travelled we travel seven times a far by car as by train.
Rail gets its £21bn of support whilst motor vehicles face a barrage of charges and taxes, contributing far more to the Exchequer than the cost of the nationalised roads. Vehicle traffic is starved of new highway despite the success of that way of travel, and faces increasing restrictions on the roads we do have. Councils remove lanes, narrow lanes, put in more lights and speed controls, and close some roads altogether. Drivers pay VAT and car tax on the purchase of a vehicle, fuel duty and VAT on petrol, and VED to licence a car for road use.
The railways have a deal to die for on tax. There is no VAT on rail fares at all, though much travel is leisure and pleasure travel where VAT is charged on everything else. The diesel trains on the network can use red diesel, where instead of paying 52.95 per litre of fuel duty they pay just 6.5p. The electric trains do not have to pay the Climate Change Levy, though for much of the time they are running on electrical power generated by burning gas or wood in power stations.
So what is needed to right the three evils Ministers want to tackle? They will certainly require large sums of new capital. Network Rail needs to get on with comprehensive digital signalling and modern information systems for drivers and network controllers to avoid collisions and increase throughput. Train companies need new rolling stock and more trains to provide the additional services. Within the framework of a nationalised railway it will need franchise and contract opportunities for the private sector to run new services and supply new facilities, with a proper risk transfer to the private company. They can then raise the money needed.
It is going to require innovation and new services. That requires open access. Those who think up new ways of generating fare and related revenue from a better passenger offer should get access rights to the track and stations so they can run their service. With more capacity available as digital comes in so more entrepreneurs will be able to provide the better and different services and train routes people want.
It also requires a new management approach by the nationalised industry. Ministers say they want to be taken out of the loop on issues of fares, timetables and details of investment plans. That is a good idea but in practice as ministers own it they will be expected to explain the failures. The management they appoint to run the nationalised part needs to work out how to raise the productivity and service quality of the nationalised system, and needs to create relations with the unions that allow that to be implemented. This will not be easy.
The task will be easier if new services are admitted to the network by an independent regulator on fair access terms. These may pioneer better standards for employees. They can pioneer new ways of remuneration that link higher pay to better success in running to time and providing services people are willing to pay for. That can only happen if Network Rail gets on with allowing much greater use of our often empty railway lines.
What we’re reading
Cruising for a boozing. Over on his Substack, our own Kristian Niemietz has reviewed Henry Jeffreys’ new book: Empire of Booze. Jeffreys argues that Britain’s historic contribution to many notable alcoholic beverages lay not in inventing them but in commercialising, refining, and popularising them through trade, technology, and imperial networks - although Niemietz believes Jeffreys overeggs the Anglo contribution to lager and modern craft beer.
Midland misery. Sticking with today’s train theme, Neil O’Brien has written about how the Midland Mainline has deteriorated into an unreliable and uncomfortable service. The trains are overcrowded and poorly maintained, delays and cancellations are frequent, and passenger dissatisfaction is soaring despite high fares. He pins the blame on poor decision-making by the Department for Transport and a frustrating lack of transparency.
Talkin’ ‘bout regeneration. Simon Cooke has also been Substacking, about almost half a century of failed UK regeneration policy. He argues three dominant models – ‘Shiny Boosterism’, ‘Hugging Communities’ and ‘The Big Party’ – have all failed to deliver lasting economic revival in struggling towns and cities. Long-term prosperity instead depends on creating favourable conditions for businesses through local control over taxes and investment.
Future imperfect. For our old friends at CapX, the Prosperity Institute’s Joseph Dinnage has suggested that Andy Burnham is wary of the future. The swift development of artificial intelligence and automation threatens the economic model on which his previous vision of regional rebirth is grounded. Burnham may want to protect certain regions against change, but resisting technology would just make Britain poorer. Instead, policymakers must embrace innovation.
Getting off your socials. Finally, for CityAM, Emma Revell has argued that London’s housing crisis is one of a lack of housing full stop – not social housing, as many on the Left suggest. London has failed to build enough homes for decades, creating a chronic undersupply that has driven up prices and rents, with private development having been hampered by excessive planning requirements and affordable housing quotas. Fundamental planning reform is the answer.