Twenty years after British Rail was privatised, Ken Olende asks why we have to pay so much more for a worse service while rail firms count their profits
If a council worker has to commute by train to London from Chelmsford in Essex, they’ll pay £348.70 a month for the privilege. In a year the cost is £3,540.
It’s not much cheaper for a Liverpool factory operative who finds work in Manchester. They’ll have to fork out £2,800 a year.
Commuters now routinely spend 15 percent of their income travelling to work. Britain has the highest rail fares in the world and the most crowded trains in Europe.
This is largely down to a mix of chronic underinvestment, the bizarre way the railways are run and the amount creamed off in profits.
The current chaos began 20 years ago with privatisation that was supposed to make things more efficient.
On 19 January 1993 John Major’s Tory government passed an act that allowed it to sell off the assets of British Rail, the first part of moving the service into private hands.
These assets were recorded as worth £6.5 billion. The Tories sold them off for just £1.9 billion.
The Labour Party in opposition pointed out how inefficient privatisation was. It promised to renationalise.
But when Labour was elected in 1997 it failed to do so. It also decided to stick to Tory spending limits so no extra money went into rail investment.
But the public money paid into the railways has more than doubled in real terms since privatisation—up to £5.4 billion a year by 2009-10.
Fares have also increased much faster than inflation.
But much of this money is creamed off by private companies that expect to make a profit from their rail franchises.
This includes direct subsidies.
According to the Financial Times last year the government paid rail franchise firms “£490m in subsidies, in effect reimbursing them for revenues they expected, but failed, to earn”.
The report Rebuilding Rail said in June last year that, “Key reasons for the increase in cost include higher interest payments to keep Network Rail’s debts off the government balance sheet, costs from the fragmentation of the rail system, profit margins of contractors and sub-contractors and dividend payments to private investors.
“These represent a cumulative cost since privatisation of more than £11 billion of public funds, or around £1.2 billion per year.”
With no plan for the whole network, competing companies can’t rationally plan investment or improvements to rolling stock.
The government funded McNulty report spotted these issues. But it concluded that further division was the solution.
The obvious solution of renationalising the railways to save £1.2 billion a year was rejected on the grounds that other privatised industries have made “cost reductions”.
But Railtrack, the commercial company set up to oversee track maintenance, had to be effectively renationalised into Network Rail.
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