Not-so-Great British Railways?

The costs continue to rise for passengers and taxpayers

By Professor Len Shackleton, Editorial and Research Fellow at the Institute of Economic Affairs

This week’s increase in the cost of travel by train – 4.6% on regulated fares in England and Wales – reminds us of the continuing parlous state of our railways.

As one of its first actions on entering government, Labour settled long-running disputes with the rail unions by making expensive pay settlements without any commitment to reform of working arrangements or increases in productivity. This was, as always, only a temporary truce in an industrial battle which has continued for the best part of the near-150 years of this country’s railway history.

Photo by Sam on Unsplash

Already RMT, for instance, is taking action against Avanti on Sundays from the end of this month, which will add to the never-ending misery of travellers on the West Coast Main Line. With measures in the Employment Rights Bill to make calling strikes generally much easier, and the end of the admittedly unused Minimum Services Level requirement, we can expect another bigger round of damaging industrial action on the railways sooner rather than later.

Another thing Labour has done is to push through the Passenger Railway Services (Public Ownership) Act, which became law in November. This effectively ends the franchise system – already a shadow of its former self as many franchisees have already fallen by the wayside. The companies remaining in the business are now on post-Covid service contracts which give them no power to innovate, with all revenues going directly to the Department for Transport. Under the terms of the Act, as contracts reach their end, the services will be returned to public ownership. South Western’s contract will end in May, with c2c and Greater Anglia following later in the year.

However, the way our problematic railways are to be run in the future still remains unclear. It’s now more than six years since businessman Keith Williams was asked to conduct a review. Although his findings were complete fairly early on, the pandemic delayed publication and then Transport Secretary Grant Shapps stepped in to make various tweaks to what became known as the Williams-Shapps white paper, published in May 2021.

This envisaged setting up Great British Railways (a hubristic title allegedly dreamt up by Boris Johnson) as a ‘single directing mind’ to oversee a system which had become fragmented, expensive and over-complicated. GBR was to bring together Network Rail and train operations - divorced after privatisation thirty years before - and to develop rail strategies, manage budgets, own stations and infrastructure, and manage the procurement of contracts.

The Conservatives originally intended to legislate to bring this about before the election, but never got round to it. This was perhaps unsurprising as Shapps was replaced by Anne-Marie Trevelyan, in turn replaced by Mark Harper. The change of government last year brought Louise Haigh into the hot seat, but she was forced to resign after details of that fraud conviction emerged. So the current incumbent, Heidi Alexander, is the fifth Transport Secretary in less than four years.

The form which Great British Railways will take is to be specified in a new Railway Bill, but consultation is still going on and it looks unlikely we’ll get the Bill this year. Meanwhile a ‘shadow GBR’ has been set up, though it’s not clear exactly what this entails apart from spending money on new offices in Derby.

There are many unresolved issues about the future of the railways. One concerns the relationship between the future GBR and the devolved rail organisations. Transport for Wales runs trains in Wales; Scotrail runs services North of the Border. Transport for London runs various services including the Underground, the Overground (now rebranded into distinct lines with strange woke names) and the Docklands Light Railway. Merseyrail has similar powers - and Manchester mayor Andy Burnham is pressing for his own fiefdom. These devolved services are considerably better funded than the national rail system, for no very clear reason. Merseyrail for example received 30.2 p government funding per passenger kilometre in 2023-24, as against 6.9p for Great Britain as a whole. It helps to maintain their insistence on a pointless ‘train manager’ for every train.

Another issue is the place in the new set-up of private rail companies, those operating regular Open Access passenger services such as Hull Trains, Grand Central and Lumo, plus the increasingly popular rail excursions – and of course the freight companies. Freight is potentially a major growth area. Companies are free-standing and receive no government support, but have been disadvantaged by the priority accorded to passenger services. They find it difficult to get train paths on the busiest parts of the network, while some important freight routes are single-tracked and require significant modernisation.

Perhaps the most fundamental issue is the scale of subsidisation of the railways. In the last financial year the operational rail industry received received £12.5 billion of government funding as against only £11.0 billion raised by passenger fares. In addition the taxpayer forked out £7.5 billion for HS2 and £2.3 billion for Network Rail enhancements such as East-West Rail.

Subsidy to the railways was rising well before Covid, but the amounts involved since then have increased dramatically as travel patterns (including the sharp decline of lucrative commuting and business travel) have altered. Given the very poor productivity record of the railways – well below even our anaemic national average - it’s impossible to justify the current scale of public spending on the railways, particularly in light of our current financial straits and the Trump-mandated rush to rearm.

While passenger groups and rail enthusiasts are predictably reacting against the rise in fares, we should remember that this week’s increase is below the relevant rate of inflation. And remember, too, that most regular rail travellers earn well above median income, while four in ten people will not have used trains last year, and less than half used them more than once. Asking put-upon taxpayers to shell out yet more to support this overstaffed and inefficient industry is just not on.