Opinion: Renationalising the railways is not the solution – devolution is

David Thorpe recently wrote a Liberal Democrat Voice piece advocating the (piecemeal) renationalisation of the railways and the latest LDV survey found more than 40% of members want the railways fully nationalised. I wish to provide some historical context and offer an alternative solution.

Nationalisation in1948 was the culmination of a process started by the First World War. During the war, the railways were taken over by the government, run-down and eventually consolidated into the “Big Four” companies in 1923. WWII brought a greater strain and consequently the Transport Act 1947 created British Railways, followed by a 46 year period of great modernisation but also colossal waste and network decimation. The 24,000 mile network was halved by successive governments, each bringing their own wasteful investment projects and upheavals. Long-term, profit-driven investment by private companies had been exchanged for the short-term, vote-driven schemes of politicians.

Privatisation saved the railways. It was certainly imperfect and deliberately rushed by both the Conservative and Labour parties; the Major government was a minority one and privatisation was allowed to progress by Labour, to get it out of the way in time for the 1997 election. 15 years later and much has been improved with regards to franchises – despite the headlines. High fares are the result of Westminster’s dalliance with the railways and the need for high amounts of corrective investment.

I contend that Westminster, Whitehall and the railways (perhaps public transport in general) do not mix and propose a new approach which incorporates and improves the current arrangements whilst avoiding the problems of the past:

Abolish the Department for Transport (at least its role in the railways), with its railway responsibilities and powers devolved to Local Authorities, acting together through new Regional Rail Transport Executives (RRTEs).

RRTEs would be groupings of Local Authorities, loosely based upon the former British Rail operational regions (each covering a fairly distinct set of lines) with the exception of the Greater London Authority, Wales, Scotland and Northern Ireland, which could have RRTEs of their own.

Each RRTE would be responsible for funding (through a separate tax or Council Tax precept), spending and co-ordinating services and in effect be larger, more empowered versions of the Passenger Transport Executives and Integrated Transport Authorities that the metropolitan counties have today.

Significantly, RRTEs would be responsible for the specification and tendering of franchises for lines within their borders and work with neighbouring RRTEs for inter-regional franchises and traffic. This would put control of who wins which franchise in the hands of passengers through their councillors, instead of central government and civil servants and make operators more accountable to fare payers.

Devolution would make infrastructure spending more equitable between regions, less vulnerable to Westminster and Whitehall whims and help promote Local Authorities beyond being mere agents of central government. Tackling high costs and fares is another area where land and wealth taxation can help.

* Richard Shaw is a Liberal Democrat activist in Sheffield, a member of the Sheffield Local Party executive and is standing for election to Sheffield City Council in May 2014.

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20 Comments

  • Why restict these regional authorities to controlling only rail ? Transport needs to be integrated as it is in greater london by Transport For London. That TFL model could at least be extended to other major conurbations without complex legislation.

  • Geoffrey Payne 22nd Nov '12 - 12:51pm

    I really don’t know how it can be said that privatisation saved the railways. It certainly made the much more expensive given the need for the operators to make a profit. The so called meddling from Whitehall is largely about trying to keep prices under control. Most railway lines do not face any like for like competition so there is little incentive to reduce ticket prices. Transport prices in general are going up because of the price of fuel, but rail ticket prices in the UK are higher than the rest of Europe.
    Having said that I generally agree that a regional solution is a good idea and suitable for some railway lines, although for the inter city services I think that will still have to be operated nationally.
    There is nothing in the article about the need to tackle climate change – a matter that is obviously linked to transport policy and the need to provide a better alternative to travelling by car.

  • @Geoffrey Payne

    Have you forgotten how poor quality the rolling stock and many of the stations were under British Rail? Although there are things worse under privatisation, I think it is worth highlighting the improvements that have at least made travelling by rail a much more pleasurable experience now than it used to be. Ticket prices have gone up due to the need for train operators to make a profit, but the same motive has also massively increased the passenger numbers (I accept it isn’t the whole reason for increased passengers, but it is part of it).

    Whilst a privatised rail network in its current form may be run in the interests of the private owners, the old nationalised railway was partly run for the benefit of the people who worked there. Neither of these are right, but I do think there is a bit more focus on what is good for the customer now than in the past.

    (Declaration of interest – I did spend five years working for a private train operator that made a profit, had very high satisfaction ratings, doubled the number of services it ran, introduced lower fares and had higher than average growth).

  • I never cease to be amazed at how wrong headed some contributors to this debate can be. Do people really exist who have not travelled on railways in other European countries and who know nothing about economics or UK transport history?

    “Privatisation saved the railways.”

    This one is an absolute corker. It is utterly untrue. The absolute opposite of the truth. What evidence is there for this in any way whatsoever? If there has been any improvement, it has come about through massive increased amounts of publicly funded infrastructure investment, vastly increased subsidies to the network coupled with additional funding from rapid increases in fares.

    “The 24,000 mile network was halved by successive governments, each bringing their own wasteful investment projects and upheavals. Long-term, profit-driven investment by private companies had been exchanged for the short-term, vote-driven schemes of politicians.”

    This is a bizarre and tendentious interpretation of UK rail’s postwar history. In fact, the network was slashed to the bone under Dr Beeching, whose activities were commissioned by Tory transport minister Ernest Marples. His commercial interests lay, surprise, surprise in roadbuilding. Margaret Thatcher, who never travelled by train, delivered the coup de grace with a long period of underinvestment including the axeing of the APT project.

    “15 years later and much has been improved with regards to franchises – despite the headlines. ”

    So ignoring the chaos and meltdown in the franchising process which has been ongoing for years, this is simply to be dismissed as “headlines”. Again, where is the evidence for this improvement?

    As for Tom Papworth’s contribution, I will refrain from commenting other than to say that we will have to agree to disagree. His belief that the free market and anything private is somehow innately superior to any form of public ownership and that government intervention, in this case in transport, is inherently “bad” seems to sit very badly with (1) The widely observed reality across most well run European countries; (2) what I understand our party’s position on the matter is i.e. agnostic and certainly not ideologically wedded to either side.

    Would Tom not perhaps feel more comfortable among his ideological brethren in the Conservative Party?

  • Charles Beaumont 22nd Nov '12 - 3:16pm

    I strongly support regionalism. But with the railways there must be a question as to whether it’s the best option. I note that lots of countries that are larger than the UK and which have pretty good railway systems (France, Germany) do not operate a regionalised structure. In part isn’t that because a high-functioning railway network is a strategic enabler for the national economy? The argument that subsidies are bad because only high-income people use the trains is surely a circular one – at present the trains aren’t affordable to those on low incomes. Subsidy could change that. The lack of integrated transport planning is surely hitting our overall economic competitiveness. It means that there is more congestion, higher logistics costs and a workforce that is less mobile. It might be difficult for a regionalised railway system to make the right strategic decisions on this. However, it would be impossible to argue that the current system works well, so something needs to change!

  • Germany and France do operate a regional policy for their railways. A large part of the German network is tendered by the Lander to operators other than DB.

    @ Tom Papworth, The transport industry does not really work like that. For instance, railways shift far more passengers/ hr than the road industry and roads are a colossal waste of space, especially in a densely urbanised country. Besides, it would be nice to see the road hauliers pay their way; they don’t.

    And finally privatisation saved the railways. Not really, it did bring it to it’s knees though in the breakdown after Hatfield and the floods which followed….

    But I actually agree with the writer that a lot of the running of passenger trains should be returned to the regions, with funding left to the regions. Local democracy can then choose which services to run and how to run them, at the same time there will have to be some serious supply side changes to the biggest cost i.e. manpower. There will have to be a fundamental change to the roles of driver, guard and signaller and this will require the unions to be confronted.

  • Richard Shaw 22nd Nov '12 - 5:00pm

    Thank you for all the comments so far. If any readers feel a little short-changed by my brevity I apologise, but I had to keep to the word limit – my original draft was at least three times as long. ;)

    I’ll address the subjects of the comments , rather than responding to each individual comment.

    Transport Integration
    I don’t think it is necessary to have a single body controlling both bus and rail in order to achieve integration. Following the idea of subsidiarity, the responsibility for bus/rail integration should lie with the local authorities within whom the buses operate. As I hinted above, there is already the case for the metropolitan counties, which being densely populated with much interdependency between nearby towns and cities, cooperate through Passenger Transport Executives and Integrated Transport Authorities to coordinate bus, tram and train services. Bus services are much more localised than railways and their integration (or not) with rail services does not concern areas where they don’t operate. For instance, Sheffield City Council might need to liaise with Derbyshire County Council to ensure a bus from Chesterfield to Sheffield connects with a train service but they probably don’t need to bother Leicestershire County Council or any others with their hypothetical RRTE.

    London and TfL is a case in point, with its comprehensive tube, rail and bus network and high degree of dependency between boroughs. It makes sense therefore, like PTEs in the metropolitan counties, to have a single body to allow the local authorities to act together – hence why I suggested it could have a RRTE of its own or even subsume all powers and responsibilities into the GLA. In more sparsely populated areas like North Yorkshire the responsibility and powers for buses should lie directly with local authorities.

    Intercity traffic
    I don’t think there’s any need for national coordination of intercity services. The British Rail operating regions I spoke of correlated to the Big Four companies of the interwar years and contained a fairly distinct network of lines, notwithstanding the routes they operated jointly. For instance, the West Coast Mainline fell completely within the London Midland Region, as did the Manchester to Sheffield routes. As such most intercity traffic is self-contained within each RRTE. Longer distance and cross-country services can be organised by the RRTEs concerned, as was done in British Rail days.

    The impact of motor transport
    Motor transport from the 1920s to the 50s did have a measurable impact on the railways, predominantly when it came to goods traffic, the primary source of income for the railways. Cars were still a luxury and were not yet mass transport, however the influx of cheap, WWI army surplus motor lorries did erode much of the local traffic away from the end of the war. What really hurt though was the Government restrictions on how the railways could or should handle goods traffic, undermining their competitiveness. For instance, the railways were eventually not allowed to own their lorries and provide an integrated service. The Government maintained their “common carrier” status, meaning the railway companies had to take anything they were asked to transport by the public. The railways were forced to advertise all of their rates. This meant that the railways could not decline unprofitable traffic and motor lorry companies could easily cherry-pick the most profitable.

    A series of long strikes in the 50s also helped drive traffic onto the roads. As for canals, they continued well into the 1950s and 60s to compete and carry non-perishable goods, such as coal – which burns just as well after 1 days journey by rail as 14 days by boat and which has a steady demand. The cold winters of the 50s is what really helped finish them off.

    Network decline
    The first Beeching Report (Part 1) in 1962 did infamously cut the railways back and in dramatic effect, however the network was already being cut from the early 30s, more cuts from the 50s and with route closures and major downgrades in every decade up until privatisation. The second Beeching report asked for massive investment and new network building projects and yet was practically ignored by all. It’s really not a case of being the fault of any single party – both the Conservative and Labour parties are to blame for mismanagement and delivering cheap fares through being cheap in general.

    I look forward to further comments and will try to address as many points as possible.

  • I also dispute the notion that “privatisation saved the railways”. Also, there is no reason why a form of public ownership cannot be combined with a regional framework – though we should pay due attention to the issue of safety and that of practical journey planning. It seems to me that all sorts of options are possible and not just the black and white ones that the author appears to be suggesting. One might to be to introduce a more regionalised railway in which the state has, say, one-third ownership, employees of the rail companies one- third and private owners one-third.

  • Max Wilkinson 22nd Nov '12 - 7:42pm

    Here’s a short piece of realistic dialog to sum up the problem with our privatised railway firms:

    Me: I’ll have a return to London Paddington, please.
    First Great Western: That’ll be .
    Me: I’m so outraged I will use one of your competitors instead.
    First Great Western: We don’t have any.

    Therefore, First Great Western can charge as much as it wants to take me to London (toothless Government regulation limiting price rises to TWICE the rate of inflation, notwithstanding).

    We need a setup that’s run for the public good and charges reasonable prices. The road network is grinding to a halt, and a better, more affordable train service has to be part of the solution. Regional bodies might be the solution, but the starting point should be to move away from the current system, in which travellers are held to ransom. The free market can’t solve this one.

  • RC, you are correct, some of the contributors appear to have zero knowledge of Britain’s railway history. It is true of course that railways in Great Britain were privately financed – and as an investment such finance was an utter disaster. Nobody made money in any meaningful way from railway investments. Britains ‘railway mania’ was just that – manic, and an example of unbridled and un-regulated laissez-faire capitalism at its worst. Railway lines were built everywhere, many from nowhere in particular to somewhere else that was nowhere in particular. Virtually all railway companies lost money, they tended to be swallowed up by bigger companies who went on to……lose more money. The ‘railway mania’ reached its peak in the year 1846 and when like all manic financial bubbles, the bubble burst [the promotion of the railways was hugely encouraged by MPs who themselves invested heavily in railway companies ]. In 1846 “no fewer than 272 Acts of Parliament were passed, setting up new railway companies, and the proposed routes totalled 9,500 miles of new railway. Around a third of the railways authorised were never built – the company either collapsed due to poor financial planning, was bought out by a larger competitor before it could build its line, or turned out to be a fraudulent enterprise to channel investors’ money into another business”. So it is fair to say that after 1846 it dawned on investors great and small that the railway companies were not a golden goose – quite the reverse in fact. By the year 1923 the railway companies had had enought and begged the government to step in. In that year “Grouping” of the railway was introduced by Parliament. All railway companies were condensed into four big companies. Twenty-five years after that the ‘big four’ had themselves had enough and the whole industry was nationlised.

    Why is all the above relevant? Because successful railways throughout the world are virtually never run “for profit”. They don’t make money anywhere in the accepted free-enterprise (or capitalist) sense. The countries (and this DOES NOT include Britain) that have the best railways run them as a necessary national asset, and tend to put in huge amounts of state investment. Britain has never made up its mind; we want the railways (we invented them!) but we don’t want to pay for them. The result? we have ended with the very worst of all worlds – a railway that is (in my opinion) a national disgace, overpriced, under-invested and generall fourth-rate. I challenge anyone to travel on European railways, to return to British (privatised) rail travel and not feel thoroughly ashamed!

  • @RC
    ” If there has been any improvement, it has come about through massive increased amounts of publicly funded infrastructure investment, vastly increased subsidies to the network coupled with additional funding from rapid increases in fares.”
    So are you saying that without the kick in the bottom that privatisation gave the government, the (Conservative and New Labour) governments would of made these levels of investment? From what I saw privatisation forced the government to act and hence it is correct to say that “privatisation saved the railways”…

    @BigDave
    Yes Lewis Carrolls words “They threatened its life with a railway-share;” had some basis in truth.

    I’m not so sure about European railways being so good compared to our own, but then I have travelled off the beaten track in both Europe and Japan and without hesitation say that the Japanese railways leave the Europeans standing …

  • My thanks also to Richard for a constructive contribution to the debate.

    I doubt that RRTE’s on their own would be able to deliver the national strategy, so I see there being a need a central/national organisation; naturally outside of the DoT. I’m also skeptical about the RRTE’s raising funds via local taxes (just thinking about how the £1.4Bn rolling stock procurement that the DoT managed to mess up would be handled in your organisational model).

    I would want to make the RRTE’s more publicly accountable and hence have them setup as companies (CIC’s?) to enable members of the public to become members/shareholders and hence elect directors – ie. preventing these organisations from becoming invisible, unelected and hence largely unaccountable quango’s like the regional planning authorities …

    A potential advantage of the RRTE’s is that they have the potential to be more interested in ‘local’ transportation issues and hence should have the remit not just to run the existing network but also to enhance it, so that it is better able to support developments that have occurred since Beeching …

  • Geoffrey Payne 23rd Nov '12 - 1:39pm

    @TomPapworth because of the lib dem policy of raising tax thresholds, it cannot be said that low income people are paying for the subsidies of the railways, should they be introduced.

  • Tom P,
    you’ve made some good points, but for many of the reasons outlined above it is impossible to argue that transport operates in a free market, and because the constraints on competition are not merely regulatory increases in competition will not drive pricing in the way you suggest.

    A comparison between roads and rail is vital. But it strikes me as perverse to complain about public subsidies for rail driving up rail prices and then argue for more roadbuilding, which has a far more extensive network and is subsidised to a far greater extent.

    To put this in context there are about 10,000km of railways controlled by Network Rail compared to over 12,000km of trunk roads alone (among nearly 47,000km of main roads and 344,000km of paved roads) in the UK.

  • Richard Shaw 24th Nov '12 - 11:44pm

    re: ‘Privatisation saved the railways’
    Several commenters have taken issue with the above observation I made, based mostly on the cost of fares. However, I regard ‘Saving the railways’ as being the integrity of infrastructure, rolling stock, volume of traffic… the overall viability, as being different to whether passengers are paying more to travel and whether the prices of their fares are fair, are too high or were, in the past, too low. What is historically undeniable that the period of nationalisation was a period of, as Anders pointed out, managed decline. The original and principle source of income for the majority of railway companies was goods traffic and that this income was supplemented by passenger traffic, which was sometimes subsidised by goods traffic receipts. British Railways stopped being profitable in the early 50s, mostly through loss of profitable goods traffic and despite costly investments in marshalling yards, new rolling stock and so on, never made a penny again. The running down of the network was a result of wanting to deliver both cheap fares and minimise losses to the treasury.

    Privatisation did indeed bring bigger fares but it also brought investment in infrastructure and rolling stock. For example, freight traffic has boomed and companies like EWS/DB Schenker and Freightliner have spent millions on new wagons and locomotives (e.g. over 400+ 3200hp Class 66’s were delivered between 1998-2010) to replace ageing 1960s diesels – some of which were then refurbished and brought back into use because there still weren’t enough to cope with the increase in freight traffic brought about by better infrastructure and rolling stock. I maintain that the network is in better shape now than it would have been had privatisation not taken place.

    Whether nationalised or privatised you won’t get cheap fares for nothing – the choice seems to be either cuts to investment, inequitable taxpayer subsidies or a combination. But the point of my piece is not about fares, not directly anyway. It’s about how we govern and make the railways more responsive to passenger needs and make spending more equitable and encouraging long term investment, such as the Chiltern Trains’ franchise in which they get a longer franchise term based on performance and in return for them spending £100m+ to upgrade the Marylebone to Oxford line. Devolving decision making should make those decisions better, and if not, at least limit the scope of any fallout, both to the network and to the travelling public.

  • Richard Shaw. Your use of the word “subsidy”, I am afraid, reveals a very British attitude to railways. Nowhere else is the world (apart from the USA perhaps) is the gap between railway revenue and and the cost of running the said railway regarded as a “loss” requiring a “subsidy”. The word you should be using is “investment”. Any government that injects investment into their railway system is investing in the safe, efficient and environmentally-friendly transportation of freight and passengers – thus taking pressure of over-used and incredibly inefficient road transport. If ‘Beeching’ had not have happened this country would not have lost thouands of miles of precious transport infrastructure that was the legacy of several generations’ work and investment. That so many towns and villages lost their rail connection was a genuine tragedy, of couse there were railway routes that were underused beyond all hope, but the great majority of route-miles closed by Beeching would be a transport godsend in 2012, for both freight and passengers.

  • Richard Shaw 26th Nov '12 - 9:33pm

    BIGDAVE,

    Any externally sourced monies (or money shifted from another part of the business), to make up for the difference between income and outgoings in revenue, to maintain viability, is a subsidy. Whether or not something’s better for the environment or not doesn’t change that – it’s still subsidy. Investment is capital expenditure, e.g. building infrastructure, buying new trains, etc. in order to improve returns through, for example, fuel efficiency, improved capacity and hence increased revenue and hopefully increased profits. Holding down fares to make travel cheaper for the same quantity of people is subsidy. Increasing capacity so that more people can travel and possibly eliminating the need for subsidy is investment. Investment has a lasting effect, subsidies only have an effect while they’re maintained. I don’t think it’s a peculiarly British definition but I’m happy for you to provide sources saying otherwise.

    But all that’s a bit irrelevant really because I didn’t argue for or against subsidies – I was arguing about the structure of who should be in control of the railways and that groups of local authorities would be better than the Department of Transport. I don’t know why you’re arguing against Beeching; I wasn’t arguing in favour of it . In fact I referred to it as “colossal waste and network decimation”. However I believe we should not be too harsh against the Doctor himself, for 50-year foresight of the needs of the nation is a rare gift.

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