Guest Post - Back on Track or Heading for a Derailment: The British Railway System

In today’s guest post, Jake Richardson discusses the potential future of the British rail network, both in advance of the changes that Brexit may bring, and also based upon the historical trends within the industry.

The British railway system has indeed been through some massive restructuring exercises throughout its history. Post-World War One and the Victorian era of Britain’s steam railway revolution, all private companies were rationalised into the ‘Big Four’ predominant companies under The Railways Act 1921, which included Great Western Railway (GWR), London, Midland and Scottish Railways (LMS), London and North Eastern Railway (LNER) and Southern Railway (SR). However, post-World War Two, the railways were once again run into the ground, meaning post-war nationalisation was inevitable and the British Railways, latterly known as British Rail, came into action through the enactment of The Transport Act 1947. For nearly fifty years the nationalised railway system, which was often associated with inefficiency, industrial strike activities and poor customer service – as embodied through the infamous British Railway sandwich - survived the ever-growing case of privatisation under the Thatcher-led Government during the 1980s. However, privatisation was eventually achieved during the late 1990s through the enactment of The Railways Act 1993. The question to be solved here is how should our railways be run? This, as many would agree, is not as clear cut as one would expect, since many economic, political, and some legal points need to be discussed. Therefore, this post will evaluate whether Britain’s railways should return to the era of the 1920s, if re-nationalisation is the preferred route, considering Labour’s manifesto under Corbyn supports this model, or whether the current system needs to be developed further.

Perhaps a return to the days of the ‘Big Four’ railway companies could be an option available. However, while John Major believed this to be a valuable option, he was nevertheless talked out of it because that model was deemed impractical to recreate; in the sense that each one of the four companies would have to own the rolling stock and infrastructure. We will use Great Western Railway as an example of the reasons why such a system could or could not operate. The profits that Great Western Railway enjoyed were obtained through the creation of a monopoly on certain routes, particularly the Bristol Mainline section. At the time, there were no other railway companies that could compete with GWR, which is still the case today. The only competition GWR faced was that from the Kennet and Avon canal which, most of the time, had water shortages and the slow alternative stage-coach services. Profitability was also enjoyed by GWR because of the lack of health and safety regulation. It was down to GWR to keep their own staff and infrastructure safe but, of course, profits took precedent back then and the infrastructure was not up to scratch, as demonstrated by the bridge collapse over the River Dee in 1847.  However, even in the midst of such issues facing GWR in its early days, it was the only one of the ‘Big Four’ to make a profit between amalgamation and nationalisation period. Yet, these were the days when the motor car and heavy goods vehicle began to take place and offer an alternative means of transportation of goods and people. Therefore, it is difficult to determine whether the 1920s railway system would work. Perhaps, with the increase in passengers and less people commuting to work by car in today’s society meaning that if there were to be a return to the ‘Big Four’ companies, then they would be faced with less competition. Throw in the issue of an ever-growing population, perhaps a return to just four large companies would mean that the issue of profitability would be of less concern and investment would be placed back in the privately owned assets.

Could a return to a nationalised railway, under the banner of British Rail, work? When the railway system was first nationalised, it went through a modernisation plan of around £30 billion in today’s terms. However, this was a missed opportunity because the investment work only sought to replace what already existed, instead of looking ahead and future-proofing the system. By the 1950s, the nationalised system was in decline, partly due to the increase in car usage and the Beeching cuts of the 1960s, which witnessed the cutting of about a third of the railway network. Recently, there has been a drive to have the railway system re-nationalised, with some viewing the current franchise system as being broken. Upon a closer and careful inspection of the franchise system you will notice that many of the train operating companies are foreign state operators, with some including Ariva, Keolis, Govia, and Go Ahead Group. Almost 90 per cent of the 1.73 billion railway journeys taken in the U.K during 2016-2017 were controlled and run by foreign-backed rail operators across Europe, with RMT suggesting that 70% of UK rail operators are now owned by foreign entities.  It seems ironic then that the British government allows for a state run railway so long as it is not British. Yet, the result of this causes fragmentation, with issues over ticketing, coordination, and waste; something which was foretold in 1993. To add insult to injury, the presence of foreign-backed operators running the railway system in the U.K means that the British population are the ones subsidising the state-run railway systems across the continent. Perhaps Britain’s departure from the European Union could ignite reform, meaning that the UK could be released from certain EU rail directives. The bigger question is how much does the railway system make? According to the Office of Rail and Road, the total income was £12.4 billion, which included fares and government subsidisation. As one can see, that is a lot of money. However, closer attention must be given to the government subsidies. In 2013, the University of Manchester published a report that found Welsh and Northern railway operators paid out dividends of £176 million between 2007 and 2011, but such profits would not have existed if it were not for the £2.5 billion in government subsidies. Thus, if the railway system was nationalised once again, government subsidies would not line the pockets of private shareholders. Instead, it would be invested into the publicly-owned railway system to reduce fares and maintain current or future infrastructure projects. In the midst of all this, there is still support for the current system to remain and continue. Railway operators like Chiltern or C2C are seen to have transformed rail services, with Chiltern Railways having invested £130 million of the £320 million cost of the new Oxford to London Marylebone line. Therefore, perhaps the franchise system can be further developed if rail operators have an incentive to invest, which can be achieved through longer periods of franchise agreements so that rail operators have a chance to recover money from such projects. Developing this line of thought could mean that if the rail operators oversaw the infrastructure as well as the rolling stock, with the government creating legislation that operators must abide to, then rail operators would recognise the need to modernise the infrastructure to increase train services and profitability.

What this post has aimed to do is demonstrate the need for the railway system to be reformed. As to how this should be done is different matter altogether, with points raised here open to scrutiny whilst others have not been discussed.  Indeed, there are major problems with the current model, as seen with the InterCity East Coast franchise having been taken into public ownership twice. Through taking back control of the East Coast mainline, the government is demonstrating that public services must be run for the people and not for profit; especially since a nationalised East Coast returned a healthy £209 million profit to the taxpayer. All too often, the British population look towards how other states run their rail services. Looking at how our European neighbours operate their services, one can see that rail travel is cheaper due to the higher rates of public subsidies which, again, raises the case for a publicly-owned system. Those in favour of the privatised rail system often look towards the Japanese model as being the epitome of transport success, because it is entirely privately controlled. Whereas, the British model is a collection of temporary and varying franchises tightly controlled by the government. However, something which is often overlooked is the current state of the British railway infrastructure. While attempts have been made to overhaul and modernise the Victorian model, such as modernisation projects like the Electrification of the Great Western Mainline, many have been hit with catastrophic delays to both the punctuality of train services and the completion of projects. If reform is on the table, then the Government need to decide how it is going to strike a balance between the need to continuously modernise the British railway system, whilst providing a service for its people. So far, this country has been through three models, each with their own strengths and issues. Times do change and perhaps the old saying of ‘what goes around comes back around’ may apply here.

Keywords – Railways, UK, Nationalisation, Trains, Business, @finregmatters

Mr Jake Richardson is an LL.B. student in Aston University. Jake can be contacted via LinkedIn here.