Posted 7th June 2013 | 13 Comments

New TUC report says rail privatisation 'is broken'

The formerly large slam-door electric fleets had been replaced by 2005-6

A NEW report from the TUC claims that rail privatisation has failed, and has brought in little private sector investment.

'The Great Train Robbery' – written for the TUC by the Centre for Research on Social-Cultural Change at the University of Manchester – says that private train companies are 'heavily dependent upon the public purse' to enable them to run services.

In addition, most profit made by train operators goes to shareholders. The report says that rhe top five recipients alone received almost £3 billion in taxpayer support between 2007 and 2011. This allowed them to make operating profits of £504 million – £466 million of which was paid to shareholders.

Rolling stock investment has fallen back at times, with £1.9 billion spent on rolling stock between 2008 and 2012, compared with £3.2 billion between 1989 and 1993. However, some industry sources suggest this could be misleading, because there was more investment in the earlier years of privatisation, when new fleets were procured for Virgin, TransPennine Express, ScotRail and the three third-rail operators south of London which play a key role in the commuter market. Indeed, the formerly large slam-door electric fleets had been replaced by 2005-6

The report is also luke-warm about the innovations which are often credited to the private sector operators, saying that even where there has been private sector investment in new technology, such as Virgin’s tilting trains, it has been underwritten by the state through subsidies to train operating companies and guarantees to rolling stock leasing companies.

It points out that investment in infrastructure has largely been funded through borrowing by Network Rail, which now has debts of over £30 billion, and that the company is spending more on servicing and repaying this debt than on maintenance. It also says that average train fares in Britain increased by three times the rate of average wages between 2008 and 2012.

TUC General Secretary Frances O’Grady said: “This study explodes the myth that rail firms are bringing added value to our railways. In reality they rely upon taxpayers to turn a profit, virtually all of which ends up in shareholders’ pockets, rather than being used to improve services.

“Rail privatisation has not brought the improvements its cheerleaders promised – the average age of trains has increased and most new investment is funded by the state.

“The claim that private train operators are responsible for more people using the railways must also be taken with a huge pinch of salt. Passenger growth has mirrored changes in the wider economy and is not the result of creative marketing drives by companies.

“The government must accept that the current model is broken. Its determination to impose franchising across the network – even on the East Coast Main Line which is performing well as a nationalised service – shows ministers are ignoring the evidence of 20 years of failure.”

ATOC chief executive Michael Roberts did not agree. He said: "Britain’s railway has been transformed in the last 15 years, thanks to the public and private sectors working successfully together to deliver for passengers and taxpayers. By introducing competition between train companies to run services, government has ensured operators have played a crucial role in reversing the fortunes of the railway by motivating them to attract more passengers.

“Significant investment plus an industry focused on encouraging rail travel are generating record levels of revenue to pay for more trains, faster services and better stations.”

Jeremy Acklam from the Institution of Engineering and Technology added: "When British Rail existed, investment in the track, stations and trains was determined by the Government of the day if they had any money available.

"This report hints that the UK should return to publicly owned railways and  therefore it’s clear that the current rate of investment would be then used for other things. Privatisation has enabled large scale investment in engineering through rolling stock, stations and track because long term investors can be certain of their returns over many years. The next five year investment period will see more than £45bn for new track and trains, a figure which would have been unthinkable in the days of British Rail."

Reader Comments:

Views expressed in submitted comments are that of the author, and not necessarily shared by Railnews.

  • Ken Oldfield, Stone

    Just quickly scanned through all the comments, one gent is doubting tuc,s ability to run a bath! well whats all that about? as no one is asking them to run a railway! As for Tony Pearce saying employees wages boomed! I nearly fell off my chair laughing. Tony, maybe some did well out of it in key positions but the vast majority of dedicated railway staff, since privatiasation have lost their travel facilities, their pensions & work massively unsocial hours for a rate of pay per hour, that maybe Tony wouldnt think twice about paying for a cup of coffee and a biscuit. Also the "remember wells" who would have us believe that British Rail was a terminal disaster, may actually be suffering from memory loss, it did very well with very experienced railway managers, It never cancelled a train as flippantly as TOCs do nowadays with a cursory comment that you have to get the next service. As David C Smith says, it is indeed a Pretend privatisation, never in its history so directly run by the government as now, whilst laundering OUR money into private profit.

  • Tim Price, Bestwood Village

    "No there isn't, as most buses have a life span of 5-10 years with certain companies always buying new buses whilst others always "buy" old buses.

    Compare this with trains which have a life spand of 30-40 years and although old trains are not brought for new areas they are moved to new areas."

    I must confess i have a little trouble understanding the concept that a bus has a lifespan of 5-10 years, when a lot of local services are operated by trains that are little more than Leyland National buses (14X's, 153's etc) with a supposed design life of 30 years. How does that work?

    That apart, i get very tired indeed of all this Union v TOC venom.
    Instead of constant bickering, criticism and mistrust which gets no one anywhere and just causes bad feeling, perhaps the Unions could take an extended break from pursuing their Socialist ideals and instead, use their skill and knowledge to work together with the TOC's with ideas to mutually improve services in an atmosphere of mutual respect.
    A lot more would be achieved in a shorter space of time. After all, two groups pushing against one another will make little progress, but two groups pushing in the same direction on the other hand......

  • Chris Neville-Smith, Durham, England

    "that way the tuc would be involved"

    The TUC's job is to fight the corner of workers and get them a better deal. How good a job they do is open to debate.

    But as for actually running things, in their haste to blame everything on privatisation, the TUC's understanding of the railways' problems is very poor. If there's one worse motive to running a public service than profit, it's running a service for political point-scoring.

    Quite frankly, I would not trust the TUC to run a bath, let alone a vital piece of national infrastructure.

  • Nigel King, Leeds

    I have a suggestion,maybe we can have a workers co-operative within these so called private railways,that way the tuc would be involved and the goverment would have less input, less likley to give subsidy's and the profits would go back into the railway, the staff would be more responsable etc.

  • david c smith, milton keynes

    I agree with Youlden of London that many of the privatised utilities , including the rail TOC's are monopolistic , with little effective competition .This in turn, on the railways causes reliance on government control to give public accountability ; unfortunately this just largely prevents any enterprise or innovation and corresponding investment by the TOC's

    Personally I'd like to see accountability given by effective open - access competition instead of franchising on those routes where feasible( eg. most intercity ). On natural monopoly services ( eg. commuter), accountability could be acheived through direct democrcy, as consumer co - operatives perhaps, with diractly elected managenent boards , bypassing government bureaucracies.

  • Graham, Basingstoke

    "there is a case to answer as to why it is that private bus companies have a rolling program to buy new buses and yet ROSCOs don't !"

    No there isn't, as most buses have a life span of 5-10 years with certain companies always buying new buses whilst others always "buy" old buses.

    Compare this with trains which have a life spand of 30-40 years and although old trains are not brought for new areas they are moved to new areas.

    If trains had a 10 year life span then yes there would have to be a lot more of them brought year on year, as it is there are big orders every so often (i.e. IEP will be 598 coach over a few years). This is why the report could claim that the investment was rubbish after provitisation as they pcked the few years where there were only a few trains ordered.

  • Leslie burge, leicester

    One reason why people are choosing to use the train is that motoring costs have driven them off the roads and onto trains.I would sooner have any profits
    ploughed back into the railways rather than into shareholders pockets.

  • Youlden, London

    This report does not surprise me. You have the energy companies holding the government to ransom over energy prices. They now want inflated guaranteed prices for their energy 30 years into the future otherwise they will not renew capacity. We have the privatised water companies in England increasing prices twice as fast as in Scotland and Wales over the last 15 years, where in Scotland and Wales they are still in the public sector. We still have hose-pipe bans in the summer because the new owners of water companies, when they were first privatised, sold off all the spare capacity for profit to line their own pocket, leaving no spare capacity for a dry summer. We have private rail companies charging train fares twice the price that you get in Europe. Could someone tell me where the competition is in all these monopolies. And the stupid British public supports them all by lavishing vasts sums of tax payers money on them. A massive transfer of funds from the tax payer to shareholders. Like the banks, competition for the poor and sociallism for the rich. Keep an eye on the NHS, because that is the next gold mine for the private sector to raid. 100 billon pound of contacts, so the private sector can come and redistribute to the rich. When will the British people wake up. I don't know about Thacher 'turning in her grave', she is more likely to be 'laugthing'.

    Youlden

  • Tony Pearce, Reading

    I remember well the situation prior to privatisation. Hundreds of speed restrictions some around 10/20 mph because of deteriorating track. Dirty trains that often failed due to mechanical failure. Freight traffic disappearing by the train load. The railways were sold because they needed so much investent to put them right, - and the Government thought they didn't have the money. Privatisation was to them 'Managed decline'. And then suddenly it all changed round with traffic numbers booming after privatisation. And so did all employees wages. The Trade Unions and their Members did very well out of the new system. Most of the private firms profit goes to 'shareholders' - which in reality is Pension Funds to pay people's pensions. When you buy something such as Petrol or Food you expect the shop to make a profit. Why not on the railways ?

  • Melvyn Windebank, Canvey Island, Essex

    While there is a case for saying many slam door trains were replaced ahead of privatisation there is a case to answer as to why it is that private bus companies have a rolling program to buy new buses and yet ROSCOs don't !

    While major projects like Crossrail and Thameslink will need an element of government funding one has to ask why ROSCOs don't have a similar programme like.bus companies to order lets say 100 trains a year to replace old stock and provide extra capacity it's something that needs to be investigated as it is an example of where privatisation has failed !

    Perhaps if longer franchises are awarded the franchisees might buy trains directly and thus widen further the alliance concept ?

  • Chris Jones-Bridger, DEESIDE

    WE may have a 'privatised' railway but the funding for continued investment continues to be underwritten by the public purse. The most significant change since the demise of BR is the creation of a funding structure through the five year railway control periods and a commitment through transport policy, with reasonable cross party agreement, to keep providing investment to the industry. BR never had that luxury.

    It is so tedious to see the repeated soundbites from the likes of ATOC and I of E&T claiming investment is a result of privatisation. The majority of private operators have been reluctant to directly sink shareholder cash into direct investment. This has come through leasing the costs being underwritten by fares & subsidy and as seen where collapses have occurred like GNER & Nat Express EC ultimately underwritten by the DfT. Again NR's ability to borrow to invest is through it's regulated revenue stream primarily through direct govt grant.

    Continued development and improvement in the industry is the result of public policy not private innovation.

  • Chris Neville-Smith, Durham, England

    Oh, what a surprise, the TUC says privatisation is bad. Exactly what result were they expecting? Next week: report commissioned by Pope says world benefits from Catholicism.

    If the report's two main concerns are subsidy and private company profits, I'm not interested. Commuter lines are only viable with subsidies whether or not they are in public ownership - that's an inevitable consequence of lines where the majority of travelling is done in just a few hours of the day (and it's quite right to subsidise them too - the cost of gridlock if you shut these lines down would be far far greater). There is a moral question on whether companies should make a profit, but it's stayed roughly 2% of fare revenue for years, and Frances O’Grady is highly deluded if you think an extra 2% going into railway investment is going to make much difference.

    The real problem with the railways is decades of under-investment. It's been going on since in the 60s, 70s and 80s under British Rail, and whilst the fiasco of trying to fund a WCML upgrade through private funding didn't help, that was simply a continuation of the decades-long practice of going cheap on maintenance and improvements. It's only been in the last ten years that the government has realised how important a reliable rail system are and how much it *really* costs to have one. What we are paying for now isn't fat cat dividends, however exciting the TUC finds this idea. We are instead paying heavily to catch up on the investments we should have made 20-30 years ago, like the rest of Europe.

    Railtrack was staggeringly incompetent, but I wouldn't trust the TUC to run the railways either. The TUC loves to bash privatisation because it's an easy scapegoat that panders to the pre-existing ideology and allows them to ignores reality. And the reality is that there is no cheap way of creating a modern reliable railways. Either we invest heavily with the taxpayer picking up a lot of the tab, or we forget about dealing with overcrowding and delays. That is the choice facing the country whether or not you renationalise the railways, and the TUC doesn't seem to want us to face up to this. I'm not a fan of privatisation, but the TUC's stance is not helpful in the slightest,

  • david c smith, milton keynes

    The pioblem with our ptivatised passenger railway is that it is a" pretend privatisation" where most decisions are made by government, leaving little scope for innovation, enterprise or ( especially lomger term ) investment. by the TOC's. At the same time, the TOC's are raking off shareholder dividends in return for little more rhan day - to - day running., as local private monopolies.

    The only main route where there is effective competition seems to be London - Birmingham ( Virgin / Chilltern / London Midland ).

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