Labour has put nationalisation at the heart of their election campaign with rail, mail, utilities and broadband all on the list for expropriation. Nationalisation of the railways has long been a popular policy: according to some polls, three quarters of voters support it. British rail passengers pay some of the highest fares in Europe, and the left has successfully tied that to the fact that most European passenger rail services are publicly owned and state operated. But the predictable debate, pitting profiteering corporations against a benevolent public option, is disingenuous and misleading. Here are a few reasons why.
First of all, most fares are regulated and increases are tied by legislation to the RPI. Often, unregulated fares rise by less than regulated ones.
Second, funding and delivery of a service are separate issues. By some measures, British rail fares are the highest in Europe (but it depends on what ticket you buy). The reason for the relatively high costs of rail travel is mainly that British subsidies are the lowest by some distance. UK passengers simply bear a higher part of the cost of their own journey than in mainland Europe. Labour’s latest give-away, the promise of a 33% reduction in ticket prices, is of course not a saving, but a redistribution from those who do not use the trains to those who do.
Third, the legacy from the nationalized British Rail is a creaking rail infrastructure, still suffering from decades of under-investment.
Fourth, the rail companies are not making excessive profits, as it is routinely portraited. 97% of ticket prices are spent on the operation and maintenance of the system and 3% goes to profits. And that is not even the full picture. A revenue share is in place between the franchises and government, who shares in the downside as well as the upside.
According to Fullfact.org, accounting for all costs and revenue shares, the average return on equity amongst rail franchises is a modest 3.4%. Indignant calls of profiteering are, as usual ,misplaced (the left has a proud history of ignoring the need for a return on invested capital).
Fifth, Network Rail, who owns and operates the rail infrastructure, is a public company and shoulders a large part of the responsibility for fares increases. It is also directly responsible for the many delays owed to engineering works on the network, a constant source of frustration for passengers and ammunition for the proponents of nationalization .
Sixth, powerful unions have secured railway staff inflation busting pay rises. On the much maligned franchise run by Southern Rail, Aslef secured drivers a pay rise worth 28.5% over 5 years. Southern drivers already make in excess of £50k/ year. This is a fight Labour, who’s funding is dominated by donations from the unions, is unlikely to take up as part of their pitch to run the railways.
Privatization was never a true description of the reforms that took place in the mid ‘90s. The Tories were far from committed to true privatization, with many opposing viewpoints resulting in a convoluted, bureaucratic, state controlled system with no true competition but rather a number of state granted monopolistic franchises. Never the less, what is known as rail privatization has been a success compared to what came before it: journey times are down, the quality and cleanliness of coaches is up, as is train frequency – and passenger numbers are booming. In addition, the British rail passenger network enjoys the best safety record in Europe.
The very public anger so often directed at the trains services hides the fact that the UK railways enjoy an above average satisfaction rating compared to other European systems . An EU Commission survey from 2018 placed the UK 6th out of 27. This is never communicated to the British public, most of whom seem to think they are getting a much worse service than anywhere else.
It is a sad testament to emotive headline politics that rail nationalisation enjoys such large-scale support in Britain. Whatever competition and incentivization to customer service has been introduced via privatization has served the public well, but inevitably whoever runs the system will be get the blame when ticket prices goes up. True competition on the railways might see prices fall, but under the current system only bigger state subsidies can lower prices. But whether tax payers or passengers pays for the ticket, the truth is that British public has been well served by privatization.