South Western Railways has become the first UK railway operator to be renationalised under the newly publicly owned authority “Great British Railways”.
This comes as a part of a wider government initiative to bring all train operating companies back into public ownership once their contracts have expired. However, the government is still permitting the use of open access operators to run to increase innovation on the railways by opening up new markets to passengers.
The establishment of Great British Railways will see the end of 31 years of a privatised railway system in Britain. In favour of creating a publicly owned unified system that focuses on reliable, affordable, high-quality, and efficient services. However, this begs the question of why Britain’s railways were privatised in the first place 31 years ago.
When British Rail (BR) was privatised in 1994, the company had established a successful business model that aimed to provide a service that put the demands of its customers first, rather than running a network that was production-led. This was achieved by BR making significant internal structural changes in the way it managed the railways.
Sectorization, as it became more formally known, merged the railway into five publicly owned rail business sectors, each responsible for its own set of annual finances and targets.
Sectorization was aimed at resolving the issue of different regional managers disagreeing with one another on whether or not they would take up cost-effective measures that BR wanted to introduce to reduce the annual costs of running the railways. By merging the railways through Sectorization, BR hoped to demonstrate to the government how it could run a cost-effective nationalised railway that provided good value for taxpayers’ money.
Indeed, from its introduction in 1984, Sectorization did allow BR to achieve this aim. As annually, BR was able to reduce its reliance on the Public Obligation Grant it received from the government, which was the annual financial aid provided to BR to cover the cost of services that were incurring a loss but were still deemed socially desirable to operate. With BR reducing the Public Obligation Grant from £1,137 million (1994-95 prices) between 1987– 88 to £699 million (1994-95 prices) between 1990 – 91.
However, despite the annual reduction in Public Obligation Grants BR received, this did not persuade the Conservative government at the time that a nationalised railway system was working. The Conservatives argued that the railway was becoming too expensive for the taxpayer to run, as the public had to keep covering the losses BR had incurred. The private sector, according to the Conservatives, could provide the long-term, sustained investment needed in the railways to provide a better quality and standard of service.
Henceforth, by the time of the 1992 General Election, the Conservatives made the privatisation of the railways a key part of their manifesto promise if they were returned to office. However, once the Conservatives won the election, the party was unsure about how this objective was to be achieved, and it wasn’t until the passing of the 1993 Railway Act that the government was provided with the legal and transitional framework needed for the privatisation of BR.
The Railway Act came into force on the 1st April 1994 with the establishment of Railtrack. This privately owned company would be responsible for the maintenance of all the railway infrastructure. However, Railtrack tenure was short-lived when the company entered administration in 2001 and was scrutinised by the government for how it had upheld the overall safety standards of the railway’s infrastructure. Railtrack was subsequently renationalised by the Department for Transport on the 3rd of October 2002 under the name Network Rail.
On the same date three privately owned Rolling Stock Companies (ROSCOs) – Angel Trains, Eversholt and Porterbrook – were established to lease rolling stock to the new railway operators. Although these new ROSCOs would be responsible for acquiring new trains when needed and for contracting with maintenance suppliers for all heavy maintenance and refurbishment jobs, they would not have in-house maintenance facilities. As the idea was that they should offer operating, rather than finance leases, which meant they carried most of the risk of holding and maintaining the rolling stock.
The 4th February 1996 saw the first privately run passenger railway services begin operations. Passenger services were divided into 25 separate franchises with Private Train Operating Companies (TOCs) bidding with one another to run services on one of these franchises. The government made the final decision on which of these TOCs should be awarded the franchise.
If a TOC was unable to continue running their services or had breached the terms of their contract they agreed upon at the start of their franchise agreement, the Government had the authority to retake direct control of a franchise (Operator of Last Resort), until standards were improved on the franchise that it was in a state that it could be resold to the private sector.
Most notably, in 2009, the East Coast franchise was returned to public ownership when its previous operator, National Express, entered administration. When the franchise was resold to the private sector in 2015, East Coast Trains was the most efficient railway franchise in the country at the time. Boosting a 91% customer satisfaction rate, requiring much less public subsidy to run, and paying back £1 billion to the Treasury during its 6 years of operations.
If the Government were able to successfully run the East Coast franchise under direct control, this raises the question of why privatise Britain’s railway in the first place. Likewise, there is greater support amongst the public for the renationalisation of Britain’s railways. A recent poll conducted by YouGov found that 33% of participants supported the idea of TOCs being brought back into public ownership, compared to only 4% of participants strongly opposing the renationalisation of Britain’s railways.
With the railway being a key social industry for keeping Britain connected, it is no wonder that there is a greater demand from the public to nationalise the railways to ensure it is run in the interest of passengers. Whilst some critics may still argue that the losses a nationalised railway system incurs would be passed on to the taxpayer to cover, others would argue that the railway’s losses are acceptable, considering it is a key social service used by all in British society.
