Eighteen months later than scheduled, the government’s White Paper on the future of the rail industry has arrived. Following a review by Keith Williams, a former boss of British Airways, and transport secretary Grant Shapps, the government has announced a significant revamp. The extent of the change should not be overstated: Britain’s rail industry will remain a semi-privatised hybrid system of state-owned infrastructure and privately run trains. But in a recognition that the current model has generated years of “fragmentation, confusion and overcomplication”, the government is scrapping the franchise system and creating a single public body, Great British Railways (GBR) – a “guiding mind” that will manage all parts of the industry for the first time since the abolition of British Rail in the mid-1990s.
What will GBR do?
Like Network Rail, the public body that Great British Railways will replace and absorb, GBR will own the network and manage the 20,000 miles of track. Unlike Network Rail, it will also set fares and timetables and act as a central point for ticketing. And instead of a franchise system – in which train-operating companies bid to run services and then have considerable commercial freedom to set fares – GBR will award licences on a concession system, meaning train operators will be given contracts to run individual lines for a fixed fee. They will be contracted solely to operate a defined service to certain standards of safety, security and cleanliness – with some greater commercial flexibility on marketing and ticket prices on inter-city routes, where trains have to compete with airlines.
Is this a step towards re-nationalisation?
No, but it is a recognition that John Major’s overly complex privatisation model has failed, and that what Shapps calls “a quarter century of fragmentation on the railways” needs to end. Passenger numbers have more than doubled since privatisation (albeit most of the increase is accounted
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for by journeys in and around London).
But the main issue with the 1990s model was that the system of multi-year franchises became “increasingly complex and sclerotic, stifling innovation”, saysThe Times – and leading to the collapse of franchises such as Virgin East Coast. The heavy fragmentation inherent in the model also produced timetabling debacles such as the one in May 2018 when services in the north and southeast of England went into meltdown – a collapse that triggered the Williams review.
Will the government be spending more?
It hopes to spend less and has notably failed to rule out fare rises. Government money accounted for a third of the rail industry’s income last year, and in the five years to 2019-2020, annual state spending doubled to £5.1bn (including £300m of pandemic support) on operating and maintaining England’s rail network. That’s equivalent to £3.67 of taxpayers’ money per passenger journey, according to National Audit Office figures. Williams envisages a better outlook for both camps. Under the streamlining outlined in the report, the government envisages savings, after five years, of £1.5bn a year on top of existing cuts (or 15% of revenue from pre-pandemic fares).
Does the new system make sense?
Some are sceptical. What’s proposed is a refined form of “rentier capitalism”, says The Observer – the state “creating another area of economic activity that offers the private sector guaranteed returns for little risk”. With a fixed fee, private firms won’t have to worry about revenue, only about controlling costs – inevitably putting downward pressure on service standards, staffing levels and wages. The new GBR faces two “titanic headaches”, says Simon Jenkins in The Guardian – managing a post-Covid-19 and possibly long-term slump in passengers, and watching government rail investment get “eaten alive” by the pointless HS2. Moreover, the original sin of the botched 1990s privatisation – splitting control of the network from operations, leaving private franchisees with no managerial control of their stations, track and signalling – is not corrected by this latest rejig. Hence we can’t expect much to change as a result of it.
What’s the more positive view?
The model the government wants to create already exists in London and is successful. There, the Overground network is run by Arriva, a company owned by Deutsche Bahn, the German state rail company. But the Overground is fully integrated into the Transport for London (TfL) network, with the public body setting fares and timetables; the trains are even branded with the TfL symbol rather than the Arriva logo. The same model also works well at Merseyrail, says Jonn Elledge in the New Statesman – and makes a lot of sense, since “the same people who manage the infrastructure will plan the network and take the financial risk”. It’s a “sensible compromise”, says John Rentoul in The Independent, which will ease the “boring practicalities of a complex system” and satisfy the instinctive public yearning for a “national” railway.
Will it work?
It looks like a sensible balance, says the FT, although one caveat is that the concession model is best suited to commuter routes where the customer base is assured. What’s vital, says Ross Clark in the Daily Mail, is that the system retains the “open access” arrangements that let private companies bid to run entirely new services where they spot a hole in the market. This was the model that enabled Hull Trains to reinstate direct services from East Yorkshire to London, and Grand Central to do the same for London to Sunderland. If the government can simplify the existing rail network with a single ticketing system and without rip-off fares – but still leave room for private operators to develop new routes and services – it “would go a long way to resolving the many problems... created by John Major in his rush to emulate Margaret Thatcher’s successful privatisations
Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published Customers.com, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.
Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.
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