The failings of the 1993 Railways Act still haunt us today 5

December 15th, 2013 House

On the face of it, the Railways Act has been a great success. The railways are booming with record numbers of passengers, a massive investment programme and an excellent recent safety performance. However, it is over the question of whether there is any causal relationship between privatisation and the boom in passenger numbers that the argument still rages. In what way has private sector involvement contibuted to this success story.

There is a fantastic irony about the current situation of the railways. Although they were nominally privatised by the 1993 legislation, the most fundamental failure of the Act was over the issue of getting government out of the railways. That was one of the stated aims of the ministers who pushed through the privatisation at a breakneck pace during the 1992 – 1997 Major administration but it has never been realised.

The railways, in fact, are still very much under state control. That’s not just because they require a massive subsidy – currently running at around £4bn, around double the cost of what British Rail received annually if inflation is taken into account – but also because they are such a key part of the nation’s infrastructure that ministers do not dare letting go. In virtually every significant aspect of the railways, there is the Department for Transport and its ministers hovering over any major decisions whether it is on fares rises, station investment, rolling stock procurement, ticket office opening hours, the timetable and so on. Virtually all the investment in the railway is paid for or supported by taxpayers.

The railways therefore, have not really been privatised. Indeed, the one part that was sold off to the public Railtrack – which owned the infrastructure and all the stations – flourished briefly and then collapsed because of the internal contradictions. The private sector, and the sharheholders in particular, could not bear the risk of being responsible for the upkeep, maintenance and renewal of the basic infrastructure of the railways. Following the Hatfield train crash and the fiasco over the renewal of the West Coast Main Line, Railtrack became Network Rail which all but the most ideological of supporters of privatisation recognise is in fact publicly owned gien that its £30bn debt – soon to be £50bn – is guaranteed by the state. Moreover, Network Rail then took in house the maintenance teams that had been privatised, bringing a large chunk of the railway industry under effective state control.

The train operators, too, are protected from bearing much of the risk of running a railway company. Under the current franchising arrangements, most have a cap and collar arrangement which effectively means that the risk of major losses or indeed excess profits. While the trains are owned by the three rolling stock companies created at privatisation, any decisions over the purchase of new stock or even the redeployment of older stock is made by civil servants and ministers, not the private owners.

As one railway manager who used to work for British Rail and then spent 20 year with a private operator, never tires of telling me ‘ the Department has far more involvement in the day to day running of the railways than it ever did in the days of BR. We have far less freedom to make key decisions than we did then’. Therefore if the Railways Act was an attempt to privatise railways, if was undoubtedly a failure.

 

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  • pjh64

    So, is the state responsible for the upturn in passengers?

    Has the private sector had anything to do with it, or would it have happened anyway?

  • RapidAssistant

    That’s the $64,000 question.

  • RapidAssistant

    For me, the whole root of the problem, the inconvenient truth as I like to call it….is that railways are a loss making enterprise. The whole complex structure, the whole contradictory nature of the franchise system and all the crazy financial arrangements boil down to the need to sweep this inconvenient truth under the carpet and make the railways artificially profitable in order to keep up the pretence that they are a genuine private sector success. They aren’t and never will be.

  • Paul Holt

    In conjunction with this article, a discussion of Beeching and its consequences would be appropriate.

  • marksl

    Had the Sectorised British Rail continued, the major growth in passenger traffic on the railway system would have been greater, as the fares would have been lower and the quality of service better (not least by being a wholly integrated network).
    So ironically the level of use (and overcrowding) could have been greater still,and could have led to BR facing the problem of being unable to borrow enough to fund upgrades, electrification and new trains. This is because the External Finance Limit prevented BRB from increasing its debt burden – BR had a low level of debt on privatisation. To avoid a build-up of the sort of debt which first Railtrack and then Network Rail have accrued since 1994, investment could have been limited despite demand.

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