Matt Drake

Corbyn’s railway plans “wouldn’t make much difference” to current system

23 May 2017

THE UK’s railways are already a defacto nationalised system, according to Richard Wellings from the Institute of Economic Affairs.

British Rail, which was the nationalised railway system established under Atlee’s government in 1948, was eventually sold off under the Railway Act 1993. The idea of franchising the system was to generate more revenue by providing competition.

However, Richard Wellings, Deputy Research Director of the IEA, believes that the rail system was never truly privatised. He said: “People don’t realise just how much money the government spends subsidising the railways.

“In 2002, the government set up Network Rail, which means they own the railway infrastructure. At the moment, Network Rail has a debt of £40bn and it is estimated to rise to £50bn by 2020. The problem is that the rail companies don’t own the tracks themselves. In the 19th century we had a form of free market train networks and the companies owned the tracks.”

When the railways were franchised the Train Operating Companies asked the government to purchase parts of the track but were turned down.

Also, three quarters of Britain’s franchises are owned by foreign states, mostly from Europe. Part of the reason is due to the European commission rail directive 91/ 440/ EEC which requires the UK to open access to the railway’s operations to other companies that do not own the rail infrastructure.

Deutsche Bahn is a German national railway company. It is a private joint-stock company, but the federal government is its majority shareholder and its headquarters are in Berlin.

The DB group (Deutsche Bahn AG) is divided into four main operation groups: Arriva, DB Bahn, DB Netze, and DB Schenker. Arriva operates Arriva Cross Country, LOROL, Chiltern Railways and London Overground.

Arriva Trains Wales’ total income from the Wales and Borders franchise, in 2014-15, was £258m. Of the £258m, £119m was passenger income, £93m was franchise receipts from Government and £46m was classed as ‘other’ income. Almost half of the company’s income is subsidised by the Welsh government.

There are sections of the UK’s rail that are almost entirely owned by foreign governments. Eurostar was partly owned by the London & Continental Railways company. This was state owned and had 40% of the share along with 5% to SNCB and 55% to SNCF. SNCB is the Belgian State railway and SNCF is the French State railway.

In March 2015 the government sold its share to Patina Rail LLP, an Anglo-Canadian Consortium, for £757.1m. The consortium is made up of two companies. Canadian Caisse de Depot et Placement du Quebec and UK’s Hermes Infrastructure.

Mr Wellings said: “Jeremy Corbyn’s plan is to wait until the rail franchises run out. So, in that sense the cost wouldn’t make much difference. But what we need is to reform the system and move into a truly free market system.

“The problem with a nationalised system is that it stops rail companies adopting a more entrepreneurial and innovative approach. As a result, it means that rail companies can operate railway lines which aren’t economical, in some areas of the country the trains are just transporting air.”


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