Under the government’s plans the state still holds the risk while the private sector makes the profits.
Money will still leak out through dividend payments and profit seeking. This inefficiency means passengers are still likely to face fares that outstrip wages and opportunities to invest in the system will be lost.
What does it say?
The white paper promises an end to the old, shambolic franchise system. This was expected. Williams’ comments over the years had made it clear that he thought franchises were not fit for purpose. The indications were that franchises would be replaced by concessions similar to the model in place for Transport for London (TfL)
A version of this has been in operation since March 2020, when the government replaced franchises with the Emergency Measures Agreements (EMAs) and then the Emergency Recovery Measures Agreements (ERMAs). EMAs / ERMAs provided the Train Operating Companies (TOCs) with guaranteed returns regardless how many passengers they carried. The white paper makes this model permanent.
Great British Rail
Under the new system, the railways are under the control of a new body: Great British Rail (GBR). GBR puts services out to tender, and operators compete to run them. In return they will be paid a flat fee and any profit or loss will go to GBR.
The first thing to note is that this is not public ownership.
There is a single guiding mind overseeing the railways and that role is being played by a public body. This is an improvement on the fragmentation and chaos of the old system. But, the operators are still private bodies run for profit. That means that money still leaks out of the system as profit and dividends for shareholders. Money which could go to improving services or investing in infrastructure.
With operators guaranteed to make money whatever happens to passenger numbers, the Government have once again privatized profit and nationalized risk.
There is also a risk that GBR becomes block on more radical reforms within the devolved authorities by tying them to the TFL model, when they might want to go further.
The new system leaves the Rolling Stock Operating Companies (ROSCOs) which lease the actual trains, in place. These companies have made truly huge profits particularly over the course of the pandemic, when profits have been guaranteed by the tax payer. One recently posted £47m in dividend payments and boasted about the beneficial impact of the pandemic on their bottom line.
Action on Fares
The paper promises some reforms to ticketing include some measures on smart ticketing and flexible season tickets. Passengers will be offered Carnet options for multiple journeys but reports are that the Treasury blocked options for bigger discounts.
We are clear, this is a missed opportunity. Once introduce guaranteed public funding for concessions there is even less justification for involving the private sector. Why should private shareholders be guaranteed returns while the taxpayer holds all the risk?
The best way to provide a good service for passengers, to ensure investment in the industry, to safeguard the workforce and capture their expertise is to bring the railways into public ownership. The government has admitted the old way wasn’t working. It is a shame they missed the chance to make a real change that would.
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