Time to End the Myths About Nationalisation and East Coast

Maria Eagle's call to effectively renationalise the rail network is so dangerous and backward-looking. Her view is based on phoney economics and is a brazen attempt to rewrite history. She has ignored the facts about the failing, worn out nationalised railway of yesterday and the modern, growing and successful railway of today.

If you asked passengers and taxpayers what they thought of the service under British Rail three decades ago, you would have had to shut your ears. It had the lowest number of passenger journeys of the second half of the 20th Century. Trains were old, passenger revenue was the lowest in real terms since the late 1960s and costs were out of control. Strikes were rife, service was poor and there was no proper system of measuring punctuality. Taxpayers felt the pain of "not for profit" under BR - the network had a growing deficit of nearly a billion pounds.

Today, the UK's passenger rail network is bigger now than in any of the last 20 years of British Rail. It is carrying record passenger numbers and growing faster than any other major network in Europe.In little over a decade, train companies have reversed the picture where they were net recipients of direct government support and are now net contributors to the government. They have contained costs and by attracting more passengers generated around £1.7billion for the government in 2011-12 to invest in new trains and the network's infrastructure, four times more than in the first full year of franchising in 1997-98.

That's what makes Maria Eagle's call to effectively renationalise the rail network so dangerous and backward-looking. Her view is based on phoney economics and is a brazen attempt to rewrite history. She has ignored the facts about the failing, worn out nationalised railway of yesterday and the modern, growing and successful railway of today.

There are many myths about the railway, but the biggest one that has gone unchecked for too long is that about the performance of the publicly-operated East Coast franchise and the desperate and misleading attempts in some quarters to use it to justify re-nationalisation.

We don't have any axe to grind with the Directly Operated Railways team at East Coast. They do a decent job. But if it is the view of passengers that count then customers on Virgin West Coast feel the private sector is doing a better job. For several years Virgin Trains has had significantly higher passenger satisfaction than East Coast.

The fact is that DOR's commercial return to the taxpayer has not been competitively tested. On a level playing field, we have nothing to fear from franchise bids from any train operator.

The level of return to the taxpayer from the East Coast network would be higher under a private sector operator following a full competitive tender. The biggest contribution to taxpayers on the UK rail network today actually comes from Stagecoach's South West Trains franchise. The taxpayer receives almost twice the level of net payments from South West Trains per passenger mile than that it receives from East Coast.

Private train company operating margins for the past 15 years have also remained modest and account for just 3p in every £1 on the cost of a train ticket. The rest is the cost of running the rail network. That profit reflects the key role the private sector plays in the financing of today's railway.

The reality is that Britain needs private sector finance and expertise to deliver the massive investment needed to tackle the combined challenges of increased capacity, fleet modernisation and infrastructure enhancement to meet passenger expectations. Although even with those challenges, the railway today is light years away from the old nationalised system. For example, peak overcrowding on trains in London and the South East was worse under BR in 1990 when annual passenger journeys in the UK were around 810million than it was in 2011 when there were 1.3billion passenger journeys on the network.

The country cannot afford to return to the structure of British Rail days where the burden of investment in the UK rail network lies solely with taxpayers. A report by the Office of Rail Regulation (ORR) in July 2013 warned that Britain's railways face a massive funding challenge as Network Rail will amass debts approaching £50billion by the end of the decade. Network Rail's interest payments will consume a third of its budget by 2029, even without accounting for any investment in HS2.

Meeting the challenge of growth and the need to add significant capacity will only be possible with private sector investment, cost-control and innovation. Train companies are already working closely with Network Rail and other partners to achieve that. At South West Trains, for example, we have an alliance with Network Rail that has brought the management of trains and track under one team in the interests of passengers. More than 100 extra carriages are coming on stream over the next 12 months and we have further plans to add capacity for thousands more passengers by opening up mothballed platforms at the former Waterloo International Station.

Instead of stepping back to a state monopoly, the rail network and our economy needs a model which maximises the skills of the private sector. Passengers are better served by Government stepping back from the current level of tight prescription and detailed control of the railway and instead adopt a more focussed approach to regulation based on the service delivered to passengers.

A flexible franchise system which also has strong incentives for train companies and Network Rail to work together would leave Government free to decide its overarching strategy for the railway. It would allow the industry - train and freight operators, Network Rail and suppliers - to more effectively run the network and drive up passenger satisfaction. Given that space, we are best placed to deliver technology solutions, improved ticket retailing, work with Government to produce a stable, long-term plan for fares, create greater capacity and respond to growing demand, and improve workforce skills.

All of this can be achieved by franchising and there is no need for nationalisation to deliver an integrated railway. Our ground-breaking alliance at South West Trains shows this can be done and delivered more effectively as part of a collaborative franchised system focused on delivering value for money for rail users and taxpayers. It is time the myths about East Coast and the ideology of publicly-operated railways were put back in the same history box labelled "The Earth is Flat".


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