There should be a sign upon disembarking at London St Pancras International train terminal: “Welcome to Britain, where everything’s a lot dearer and a little bit rubbish.” By John J Kelly
Audacious entrepreneurial plan to streamline the cost of UK rail travel
A report by Passenger Focus has told us something we already know: British rail passengers, especially commuters, pay 50% more for our generally uncomfortable and squalid rail journeys. It stopped short of telling us it’s because we’re a nation of prats, governed by numbskulls. But enough of the sociology, let’s stop fibbing about this and cut to the chase. Railways are a public utility and virtual monopoly. They cannot be run as though they exist in a free market competitive framework. Yet in the UK, we pretend otherwise. The 1993 Railways Act was one of the last ideological privatisations of the Conservative regime. It created a train wreck of 13 unco-ordinated train franchise operators, some, such as Virgin Trains with no previous experience of railway operations. In fact, Will Whitehorn, Branson’s PR general and now chairman of the absurd ‘Virgin Galactic‘ space travel company, was an early Managing Director. Many of the other franchises were run by the same timeservers who went through the motions in the public sector British Rail. The difference was that now they earned several multiples of their previous salaries and in some cases, became multi-millionaires by buying stock at bargain rates.
The aim of privatisation was to harness the energy of ‘entrepreneurs’ to attract investment and make the trains run faster, better and more cost-effectively for the passengers (whom were renamed customers). Actually, the entrepreneurs did what entrepreneurs do best. They made vast profits, while delaying investment in new rolling stock for myriad reasons, primarily that the tracks, stations and infrastructure, run by a separate private organisation, Railtrack, wasn’t fit for purpose. The government paid subsidies, supposedly to compensate for the operating losses incurred by the operators.
British Rail subsidies were a fraction of the amount which has been awarded under New Labour, who took over in government in 1997. Having vehemently objected to Rail privatisations, Labour did little to reverse the process, apart from renationalising Railtrack, rebranding it Network Rail when it collapsed after a series of ghastly incidents, primarily the Hatfield Rail Crash, which though it killed only 4 people, highlighted criminal failings in maintenance procedures. New Labour also created a watchdog, the Strategic Rail Authority, a toothless regulator whose last Chairman and CEO, Richard Bowker, was recruited from Virgin Trains (he is now CEO of National Express). Neither Strategic, nor Authoritative, the SRA was closed down in 2004 and its indefinable role was absorbed by the Department of Transport.
In order to protect investment in the railways (and allow the entrepreneurs to make oligarch profits) the government is committed to increasing passenger fares by 1.5% more than the rate of inflation. In fact the average rise is between 6-8%. The Transport Minister, (Lord) Andrew Adonis, a train afficionado though clearly not a regular traveller, said today that the government was committed to “sharing the cost of rail services fairly between taxpayers and passengers. “It is estimated it would cost taxpayers an extra £500m a year to bring UK commuter fares in line with these other European countries, which are more heavily subsidised. There is no free lunch here. We as a community pay for this one way or another.” (Source BBC News). Well spot this, your Lordship Mr trainspotter. Last year First Group, one of the operators, made £580 million profits, while National Express made £113 million. Between them, the operators have gouged billions and are bleeding the passengers white, with the apparent collusion of the government.
No free lunch indeed. No lunch at all on many of the trains, unless we count cellophane-wrapped sandwiches and throat-scalding powdered coffee at twice the price of a retail outlet. Lord Adonis went on to claim that since 1997, regulated fares had fallen sharply relative to earnings, and that with inflation now falling, train fares would drop further. Clearly he doesn’t get out much: while a limited number of advance fares can be bought cheaply, in many if not most cases, it is cheaper to fly, and much cheaper to drive, than to take the train in the UK. There IS a free lunch, dinner and tea. It has been gobbled up by the franchise operators in the form of profits. In fact, we are paying them to overcharge us. What was I saying about prats?
Compared to Spain, Germany, France or even Switzerland, British commuters, travelling a short distance, regularly, pay fares which are at least 50% higher. (Swiss commuters pay 33% of the price of a UK 10 km annual season ticket, and probably get a seat). This stealth tax on travel to work not only impacts the cost of living, it also mitigates against the much-vaunted competitiveness of UK Plc. Lord Adonis excuses this obscenity by stating that the continental systems are ‘heavily subsidised.’ So are the British – we subsidise the shareholders of train operating companies. What was I saying about prats?
So what is to be done? The Conservatives aim to cut £850 million from the subsidies, a move which will serve only to drive up fares and reduce investment in improvements even further. The only logical solution is forced re-nationalisation – it would cost a fraction of the bank bailouts, and redirect subsidies directly into the rail system without the gouging middleman. The way to achieve this is simply to say ‘No’ to Bowker, Branson, Brian Souter and the rest of the plug-ugly privateers who have plundered the system and under-delivered for so long. It is vital for the economy that rail fare increases, especially for commuters, are, at best, reduced or, at worst, keep pace with inflation. It is vital for the environment that people are encouraged to use rail as opposed to cars, and air travel for journeys less than 500 km.
New Labour will be remembered with contempt for driving though more aggressive, and ultimately more damaging privatisations than Old Tories, whose buccaneering it was partly elected to reverse. We used to attribute their uselessness to naivety: now we may need to re-appraise it as part of a greedy conspiracy, on the grounds that nobody could be that stupid. UK utility bills have consistently risen ahead of inflation and have failed to fall in line with huge drops in global energy prices. The biggest UK utility companies are French and German. Their investment in green energy, for example, has been minimal. Their profits, a large part of which leave the UK, remain substantial, if not vast. For the most part, they use existing power stations, gas and water conduits. What was I saying about prats?
We know the endgame. The huge profits which should have gone into infrastructure and rolling stock improvements will be timed out, and like the oil bonanza, we will be left with nothing to show but some nice trains on certain lines trundling along at usurious prices. Captive customers will continue to be fleeced and promised ‘Jam Tomorrow.’ The only jam will be the traffic version. We have ourselves to blame, but it doesn’t have to be that way. We need another government, though. This one is running down the wrong tracks and heading full speed for the buffers.
11 Comments
Right on – a “greedy conspiracy”. A consequence of giving a service industry freedom to set prices but without competition.
This has surely led to the gentrification of the railways? £108 return standard class from Leeds to London – companies will pay it for their executives but students etc are better off taking the car.
The Wright brothers and their strange flying machines must have perhaps appeared “absurd” to those lacking the vision to see that flight held extraordinary possibilities. Space travel, so long the domain of governmental agencies, is finally within the grasp of the more imaginative and financially frugal private-sector. If space tourism is the fastest way to generate the revenue to fund this new frontier, then so be it. However, it is perfectly obvious to anyone who has given it a moments thought, that this is but a stepping-stone to greater and more useful things. The technology Virgin Galactic is developing will soon evolve into sub-orbital point-to-point flight, allowing passengers to fly from London to Los Angeles in just a fraction of the time it now takes, and with a dramatically reduced carbon footprint. Absurd? I think not. This is the future.
Dear Richard
I am not calling space travel ‘absurd’ but the notion that Virgin is pumping out this hype for altruistic reasons definitely is. I cannot understand to whom the ‘benefits’will accrue? Branson’s fares of $200,000 per flight do not sound anywhere near ‘financially frugal.’ Sub-orbital point-to-point flight in the stratosphere holds the very real possibility of causing further damage to the ozone layer, and will only benefit those who feel themselves so important that shaving a couple of hours off their plane journey at vast environmental cost to the rest of us is worthwhile.
This may be the future, for an immeasurably tiny elite, but meanwhile, it would be heartening to see Virgin deliver passengers on time and at reasonable cost, from London to Wolverhampton or Manchester.
Thanks for your good comment, nothwithstanding, John
While your article does make a reasonable argument for re-nationalising the railways, it’s a shame that at times it degenerates into a generalised and largely unsubstantiated anti-government rant.
Re: profits, it should be pointed out that your figures for First Group and National Express are for the whole operation – including bus services, operations in other countries etc. – not their rail franchise operations specifically.
Overall profit is a very crude measure of profiteering (or indeed privateering). What might have been more useful would be a fuller breakdown: passenger fare revenues and government subsidy vs. investment in rolling stock, franchise costs and track access fees.
Dear Simon
Thanks for your comment. I really cannot accept that net profit is no indicator of profiteering. My point is that these ‘businesses belonged in the public domain, were transferred into the private sector, and generate ‘profits’ which appear remarkably similar to the taxpayer subsidies. I agree that a deep study could be done, and I could provide a full breakdown, but that’s not an easy exercise. You can find out yourself by looking at their accounts (which I have done). I’m not blaming the operators for doing what they have done – it’s the fault of government to have given them the easy means to drive a coach and horses through a poorly-regulated sector. New labour just aren’t natural businessmen. In pretending that they wre the party of business, they allowed the citizenry to be raped – by the bankers, the utility companies, the tax dodgers and the subsidised transport sector. I could be wrong, but this morning it was announced that UK national debt is £2 trillion. Who was responsible? Who claimed credit for the so-called boom? Who’s trying to shift the blame to ‘global conditions’ now that globalisation has proved a chimaera? I rest my case.
Yes, my piece is an anti-government, but it’s not really a rant. It may be irascible, but it’s not irrational. For the record, Thus is Her Majesty’s Permanent Opposition. I’m against tribes, distrust politicians and corporations as a default position. I hate civilian casualties, whether in war or through economics. I distrust economics, in fact. My stance is skepticism, because there’s not enough of it about. I suspect yours is too, and your opinion is as good as mine.
Best, John
Dear John,
I didn’t say net profit wasn’t any indicator, I said it was a crude one. I agree that the accounts of these companies make for torturous reading, but I think we’re in agreement that without context the net profit figures alone mean only so much.
For example, if National Express trains were to make £70m profit but were delivering £100m of extra ‘value’ compared to a nationalised situation, then there’s a net benefit of £30m to the taxpayer.
There is some evidence that this ‘value’ is being created – train punctuality has increased, infrastructure and rolling stock investment is happening and this is part-funded by track access fees and franchise operating costs that the train companies pay. Overcrowding is still an issue, but can only be resolved with additional line capacity (allowing you to run more trains) or additional carriages, both of which are being addressed but will take a number of years. As you rightly point out, fares are high by European standards (particularly for regular commuters), but that tells us more about the UK’s policy – that rail users rather than taxpayers should fund the system – than whether the overall cost is too high given the benefits. And there are reasons why the overall cost of the system indeed SHOULD be higher than in Europe. Decades of underinvestment for one, including under the old British Rail. Or that most of even our regional trains are nice and modern compared to the creaking carriages widely used on the continent for all but the ‘prestige’ services.
That, in a nutshell, is why I’m not prepared to simply accept that high net profit indicates regulatory failure. Mistakes have undoubtedly been made, but that doesn’t mean re-nationalisation is the only option. Franchises could be automatically extended if certain conditions were met, breeding the necessary confidence to invest for the long term, stipulations could be made about minimum levels of investment relative to profits, and service level agreements could be signed.
Finally, I have no issues with your anti-government stance or the manner in which it flows from your pen, however if you are going to call for a change of government (“We need another government, though.”) it would have to be on the basis of a detailed and reasoned critique of the government’s failures across a wide range of areas, not its rail policy alone. To simply parrot an (admittedly popular) sentiment without further substantiation is to buy in to the very tribe mentality you disparage.
Dear Simon
I have studied this subject extensively, and would be very interested to see whence your claim that ‘punctuality has improved’ derives. From when, and against which benchmarks? During the first eight years of privatisation costs to the taxpayer rose dramatically, as did fares, while InterCity punctuality – measured as on-time arrival and departure, for example, worsened. Let’s not even discuss regional services, which were curtailed, suspended etc. often to be replaced by buses. The standard propaganda was years of under-investment – true up to a point, but the subsidies were patently not applied to track and rolling stock improvements in anything like a systematic manner. The tragedies at Hatfield and elsewhere were firmly attributed to cost-cutting on maintenance. We won’t even go into a discussion about National Express here, but a scruffy bus company became a lot sleeker when it acquired a train franchise – coincidentally or otherwise. There is precious little evidence that the bus journeys changed much. As for these wonderful carriages on regional trains you boast of, compared to European competitors – which competitors are you benchmarking? Swiss? German? French? Spanish? All of these countries charge passengers between 33 – 50% of the UK price. Their services are at least on par, if not far better in the case of Switzerland, France and Germany.
Why should UK fares be higher than the rest of Europe? Why should the infrastructure costs be higher? I really can’t subscribe to the ‘But we are different’ argument. It mitigates against sound business sense. The fact is that the country has been bled white by scoundrels, abetted by a culpable administration. Rail policy is an indicator of this failure.
Which brings me to my last point. Failure should not be rewarded. This government has failed, and the decisions they are now enacting will have irrevocable consequences for the next and future generations. This is neither a trite nor a trivial argument, nor is it ‘parroting’ any sentiment. This Prime Minister was not elected, promises have been broken, the country is in £ 2 trillion deficit. Home repossessions are at record levels, we may see 3 million out of work by the end of 2009, the government is engaged in an unwinnable war of aggression on another continent, has been complicit in torture and unlawful detention, our civil liberties have been eroded, the wealth gap is greater than at any time in history and has widened over the past 12 years. Is this sufficient substantiation? I don’t know if the alternatives will be any better, but, facing the most serious economic crisis in recent history, the country should be given the right to choose who should lead it. At the moment, we have an unelected failure at the head of a flaccid administration. This government cannot run a whelk stall. This is not politics, it’s a statement of fact, with absolute respect.
Best, John
Dear John,
As regards punctuality, I was basing my assertion on the latest National Rail Trends publication from the ORR, which uses the Public Performance Measure (PPM). (Source: http://www.rail-reg.gov.uk/server/show/nav.2026, Chapter 2.)
I would suggest this is more relevant than looking at ‘the first eight years of privatisation’ (presumably 1993-2001?), which seems a curious choice. Until 1997 Labour wasn’t even in power. Since then, you need to look not only at the failures but whether changes have been made in response and whether those changes have ultimately been effective. Which brings me to my figures. They would seem to indicate a consistent improvement across a wide range of indicators over several years, including things like complaint levels which take more creativity to manipulate than selective punctuality statistics.
Turning to international comparisons, you posit two important questions – why should UK fares be higher than the rest of Europe, and why should infrastructure costs be higher?
As far as fares go, the 33-50% figure makes headlines, but as per my previous comment, when you factor in the higher level of public subsidy for European rail operators UK fares have to be higher to compensate. The remaining differences might be accounted for by a range of structural factors: that our network is older and more intensively used, and therefore requires more maintenance; that past underinvestment must be corrected; that passenger levels are increasing rapidly and large infrastructure projects are needed to cope with this increase; and that some aspects our services are better than in other European countries. (I imagine you probably spat out your coffee when you read that last point but stay with me.) For example, the fastest trains in France may have the highest speeds, but the UK has more frequent services. Rolling stock on commuter and regional services is generally more modern than on the continent, where most investment goes into a relatively small number of high-speed links.
Which really leaves a single policy question – assuming the overall cost of the system is justified, what should the split be between public funding and revenue from passenger fares? I’m not as yet convinced there’s a reason for increasing public funding relative to fares. There’s no real argument around encouraging train use – services are already at capacity, and fares are already structured to ensure this remains so. There are access issues – train travel should not be the preserve of the rich – but again the pricing structure does target those who are more able to pay (commuters) while providing cheap tickets to those with less income but able to travel at off-peak times (students, the elderly, the unemployed etc.) If anything, the higher prices paid by commuters help fund their travel.
So to your last point – I agree completely that the question of whether the government as a whole has failed is neither a trite nor a trivial one, and your paragraph does much to expand upon your reasons for holding that opinion that weren’t evident from your original article. It would be interesting to see an article dedicated to exploring the policy failures you highlight in more detail.
(I did reply to your comment No. 7 but for some reason it hasn’t appeared on the page…?)
Dear Simon
Thank you for your comment, which was shunted into the sidings of in our somewhat under-subsidised site. My apologies.
To respond in order of importance – it’s relatively immaterial that Labour weren’t in power in 1993. The Conservatives privatised British Rail in a cackhanded fashion. New Labour promised to reverse it, but didn’t. Punctuality statistics are relevant, however. It is an unqualified myth that train efficiency improved under privatisation. It didn’t and hasn’t. I have no interest in party politics. The Tories created this golem, Labour have nourished it. The citizenry are suffering.
You suggest that a comparison of punctuality figures from an 8 year period before and after privatisation is ‘curious’ and propose instead that we look at Chapter 2 of the Office of Rail regulation (ORR) measures of Public performance statistics. Curiously (your term) these (government) figures do not go into historical detail and certainly don’t highlight punctuality – the key performance indicator, especially as far as commuters are concerned – on time departure and arrival is what passengers value most. Fair, transparent pricing comes next. Network Rail were fined in 2007 for once again missing punctuality targets: see http://www.telegraph.co.uk/finance/markets/2814795/Network-Rail-braced-for-second-fine.html. levels of complaints are, in fact, easier to misinterpret since they don’t take into account the sheer exasperation of passengers who may well have despaired of complaining, or those who have deserted the railways because they have been terminally let down or overcharged. In passing, this is why voter turnout in general has fallen. By this logic, this would be because people are so happy with the government’s performance that they don’t feel the need to vote. We know instinctively that this is far from the case. Even Network Rail’s spinning publicity can only highlight an ‘improvement’ in punctuality from 85.8% to 86.8% on commuter services. in their most recent gloss. This elides the key question as to why the figure isn’t in the high 90s. If it were indeed a business, 14 percent failure to arrive and depart on time would render the business bankrupt. Compare these figures to Switzerland, Germany – and, before you say ‘but we are different’ – Japan, which has several times more commuters than the UK.
As far as subsidies are concerned, the present subsidies are far ahead of the investment levels when BR was in the public sector – again, use a direct comparison from 8 years prior and 8 years after privatisation. The UK subsidises its rail system in ‘tapered’ grants to the train operators, which they appear to turn into profits. Our passengers pay the highest prices in Europe, meanwhile, so the customer, and indirectly, the economy, loses on both sides. It is ludicrous to claim that commuters travelling 10 km are rich enough to pay 3 times the price of a Swiss annual season ticket for a substandard experience, much less to claim that they are ‘rich’. They are targeted because they are a captive audience. This is purely and simply a case of abuse of monopoly, the pernicious effects of which the government has no mechanism or inclination to mitigate.
It is a no-brainer that more people and goods need to be moved from the road to rail. Indeed, it is an EU directive to which the UK government enthusiastically subscribes, in principle, if not in practice. So it’s a strange argument that since our trains are close to capacity, we shouldn’t try harder to make them work better and increase capacity for the benefit of the passengers. My point is that after 15 years of large subsidies to the train operators, our rail fares are amongst the highest in Europe, our service offerings are patchy, our infrastructure (Network SouthEast, for example) is creaking, cross country services have been decimated but a few lucky people have become billionaires. It doesn’t have to be that way, as we can clearly see from the example of other European countries, where passengers are not as complacent as their British counterparts. Overall, the UK rail customer experience is lousy, overpriced and unfair, and biased against those who need to use it in favour of occasional and leisure passengers. Until we face up to this reality, with clear, objective benchmarks against countries who do it better (and there are plenty) our railways and our country will continue its slide towards second world status, regardless at to which tribe is in power.
Best, John
Dear John,
Good discussion and some interesting further points. We’ve both set out our positions in some detail now and a further reply would add too much further material, so I feel I should let you have the last word on this one
All the best,
Simon
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