Sky-high ticket prices. Overcrowded trains. Bumper profits for private firms. Massive bonuses for bosses. The reality of Britain’s privatised railways was brought to everyone’s attention last week as another year of above inflation fare increases sparked protests at 40 stations.
But just how do the rail firms keep getting away with it? When the Tories privatised British Rail in 1994 they said the free market would bring us cheaper, more reliable and comfortable rail travel—and it wouldn’t cost taxpayers a thing.
However, privatisation has done none of this. In fact it has cost the public purse much more. In 1994, £1.14 billion of public money was spent on British Rail.
But in 2011 the public subsidy for the private railways hit £11 billion. Transport commentator Christian Wolmar expects this to increase further to over £18 billion by 2018.
A recent study also found that Britain’s railways were less efficient, more expensive and less comfortable than those in France, Spain, Germany and Italy, all of which are majority public-owned.
Rail fares in Britain are an average of ten times higher than they are on the continent. This is because no matter how they perform, train firms are given a free hand to jack up the fares (see below).
And if that doesn’t make them enough money to be happy with, the government steps in. Last November, East Midlands Trains made a loss of £25 million.
Because of the firm’s expensive fares, more people were driving than using trains for local journeys. But under East Midlands’ contract with the government, it received £46 million from taxpayers—a “revenue support grant”.
A large number of rail franchise contracts contain a similar clause. And firms don’t just receive money for failing. Some are very good at playing the system.
Last year, First Group decided not to take the offer of an extension on their Greater Western route contract. This meant the firm avoided paying £800 million it owed the taxpayer.
But when the route went up for bids from new firms, First Group put a new bid in. They won the contract—and were allowed to pocket millions more in state subsidies.
It’s not surprising that First Group knows how to play the system. Their chief executive is former London Underground boss Tim O’Toole. He was responsible for the bail out of private Underground firm Metronet, costing taxpayers £1.7 billion.
The government’s answer to all this is the McNulty report. It recommends cutting the number of guards on trains, forcing maintenance staff to work longer for less pay, and contracting out safety checks. This is despite that being the very cause of the Hatfield rail crash in which four people died and 120 people were injured.
Privatisation has created a system where rail firms are in a win-win situation and passengers are in a lose-lose one. What we need is a publicly owned and run railway. This would be a green alternative to cars, affordable by all.
Rail fares will shoot up by 6.2 percent in January, it was announced last week. This means that tens of thousands will join the “£5,000 club”—that’s the amount their fares will cost them annually.
Rail fares are regulated by the Department of Transport, which sets a limit on how much they can increase. This amount is traditionally based on July’s RPI inflation index, which stood at 3.2 percent this year.
Train companies can then add a further 3 percentage points on top of that. This is how they got to 6.2 percent.
But the reality is even worse. Firms are able to increase fares further using a formula known as “Flex”. Flex means fares can go up by another 5 percent for some journeys as long as they are reduced elsewhere.
The firms reduce the fares on obscure routes and hard-to-find ticket types, but hike them for busy commuter trains.
The Campaign for Better Transport says some passengers will now pay up to 15 percent of their salary on fares. Yet the Tories want to increase the amount of railway funding that comes from fares, from 65 percent to 75 percent. So there’ll be more rip offs coming down the line.
Convicted fraudster and Virgin tycoon Richard Branson lost his lucrative train contract last week. He was so upset he sent passengers an email.
It said “we’ve loved zipping you around” and thanked them for being “fantastically loyal to us”. Boo hoo. But he’s surely mixing up “loyalty” with “monopoly”.
Calls for the renationalisation of the railways used to attract mockery. But after the fare increases and scandals, they are going mainstream again. If the railways were nationalised, it would cut out the shareholders who are creaming off billions of pounds.
As RMT leader Bob Crow regularly points out, this money could be used to make fares cheaper—and make the trains more reliable.
Rail bosses of the top five firms handed themselves an average of £1 million last year. National Express boss Ray O’Toole got a 110 percent rise, to £1.3 million. And Brian Souter, boss of Stagecoach, pocketed £1.2 million.
KPMG knowingly hid Carillion’s financial problems