Socialist Worker

Rail privatisation is the express route for profits

Issue No. 2425

FirstGroup is squeezing billions from the state to run rail services

FirstGroup is squeezing billions from the state to run rail services (Pic: Andy F/

A rail firm snatched almost £1 billion of public money for doing nothing last week.

The Department for Transport has confirmed that it wants FirstGroup to continue running the Great Western rail route that runs between London and the west of Britain until 2019.

The firm had previously refused to take up an option to extend its franchise for three years beyond March 2013, saying it wanted a longer term deal.

And no wonder. By ducking the option, FirstGroup avoided paying £826.6 million to the government.

Instead, it received extra government subsidies totalling £133 million in 2010—just months before announcing it wouldn’t extend its franchise.

The extension means FirstGroup will have operated as a monopoly for the best part of a decade.

The Tories terminated competition for the Great Western franchise in January 2013. First’s contract was extended until October 2013.

Ministers then awarded a new franchise directly to First without competition. Now they plan to throw even more cash at the railways.

First is set to benefit from a £5 billion state investment to electrify the track between Bristol and Cardiff.


The scandal is just one in a long line of robberies carried out in the name of rail privatisation. And there are plenty more where that came from.

The battle for who would win the ScotRail franchise came to an end last week.

The Scottish government handed a £6 billion ten-year deal to Dutch state-owned bus and rail operator Abellio. Abellio will run most of Scotland’s rail network from April 2015.

It is the single biggest contract to be handed out by the Scottish government.  

It also showed how little the Scottish National Party (SNP) is willing to stray from the neoliberal agenda.

SNP transport minister Keith Brown hinted at support for rail ­renationalisation before the independence referendum last month (see below). In the end he continued to help line the pockets of the fat cats that run the rail companies.

The new contract extends Abellio’s share of the profits being sucked out of Britain’s railways.

The firm began operating the Greater Anglia franchise throughout the east of England, including the Stansted Express, in 2012.

It also has a 25-year contract to run Merseyrail services since 2003 along with partners Serco, who were recently handed an £800m contract to run Caledonian sleeper train services. 

Privatisation of the railways began 20 years ago, allegedly to make them more “efficient”.

But today Britain has the highest rail fares in the world and the most crowded trains in Europe.

Politicians have a rotten record and no excuses

Keith Brown

Keith Brown (Pic: Scottish Government)

The Scottish National Party’s Keith Brown has claimed that the Scottish government doesn’t have the power to change the franchising process for rail contracts.

James Kelly

James Kelly (Pic: Scottish Labour)

It isn’t true.

The Railways Act 1993 does force governments to put railway services out to tender. 

But the SNP could change the franchise to make it a not?for?profit contract.

An arms?length national rail transport authority could be set up to bid on that basis. 

And there is nothing to say the contract can’t be awarded to a not-for-profit bid.

The Scottish government could also run ScotRail using its power as operator of last resort. 

This is how the British government took over the East Coast rail franchise when privatisation failed for the second time.

East Coast has been run by the state’s Directly Operated Railways and returned more than £600 million to the state since 2009.

Labour and the Scottish National Party (SNP) are attacking each other over rail privatisation in the wake of the Abellio deal (see main).

Labour’s Scottish transport spokesperson James Kelly chastised the SNP for throwing away a chance to “facilitate a non-profit bid for the ScotRail franchise”.

Yet neither Labour nor the SNP will stand up for the renationalisation of the railways.

Former MSP Tommy Sheridan’s bill to take the railways back into public ownership in 2006 attracted support from just 18 MSPs in the Scottish parliament.

Only one was from Labour and none were from the SNP.

Labour leaders snubbed the unions’ call for renationalisation of the railways at the party’s national policy forum in July.

Instead Labour wants a “level playing field with the private sector”. 

This means that co-ops and mutuals would be encouraged to bid for rail franchises.

Meanwhile the Scottish National Party’s Keith Brown defended handing over ScotRail to Abellio. 

He claimed that suspending the tendering process could lead to job losses, fare hikes and hefty legal costs.

Failures don’t hold up profits

Dutch state?owned firm Abellio runs the Northern Rail franchise in Britain.

Bosses have attacked jobs, safety and service.

The RMT union recently exposed a senior manager praising his team for “covering up technical failures” during a strike. 

Northern Rail generated £586 million in income in 2012-13.

Subsidies are key to survival

The TUC issued The Great Train Robbery report last year. It argued that, “Train operating companies are entirely reliant upon public subsidies to run services”.

It said, “The 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—over 90 percent (£466 million) of which was paid to shareholders.”

Firms have a trick-et to ride

 The irrational nature of rail operators competing for profit was highlighted in a story last week.

One man and his travelling party had to stump up over £1,000.

They had tickets for the train route but they were with a different firm.

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