Renationalise the railways

THE GOVERNMENT'S budget for Britain's rail system is facing chaos. First Great Western wants to walk away from a vital updating contract without footing the entire bill of £1.1 billion.

Other train operating companies (TOCs) are in a similar position and they expect the government and rail passengers to bail them out. Mark Pickersgill reports.

FOR THE first time since rail privatisation, TOCs' revenues are going down because the credit crunch has cut passenger numbers. However, these companies aim to maintain their profit margins and shareholder dividend returns and want huge government bailouts on top of cuts in services, job losses and fare rises.

More than 2,500 jobs have been cut in the past three months. Train company Stagecoach plans to shed 820 posts, Go Ahead group wants to cut 300 jobs and First group intends to cut ticket office staff and reduce ticket office opening times on their First Capital Direct route.

Representatives of National Express, First Group, Stagecoach and Go Ahead met transport minister Geoff Hoon earlier this year. The railways received £5 billion of government money last year and train fares in Britain are on average 50% higher than the rest of Europe, but these companies were pressing to renegotiate their contracts and get more subsidies.

When these contracts were first negotiated 18 months ago, they expected fares revenue to keep on growing (just like house prices), so the government would pay less subsidy to the TOCs while these companies pushed up fares still further.

However, the contracts pegged some fare rises to inflation as measured by the retail price index (RPI), plus 1%. By the end of the year, RPI inflation could be negative, so the TOCs may not be able to raise fares on some routes.

In January the TOCs announced huge fares increases, way above the rate of inflation, for 'peak' and 'off-peak' journeys. These increases are the highest since the railways were privatised 16 years ago.

Train companies are meant to offer discounted saver fares, renamed 'off-peak' fares, but they are exploiting loopholes that allow them to expand the definition of 'peak'. This means for example that East Midlands Trains raised fares by up to 34.5% by extending its restrictions. Virgin trains pulled a similar scam with a standard class return from London to Glasgow now costing £252, up from £102.90.

Costly failure

Problems such as the lack of spare capacity inconvenience passengers during engineering works. Billions of pounds are needed to upgrade the system. New Labour, however, continues with the policy of privatising the public sector and has let big business extract huge profits from the railways. More government money is spent on the rail network now than in the final years of the nationalised British Rail.

Under the present system the TOCs do not own any assets, instead they lease their trains and carriages from three rolling stock companies owned by banking groups HSBC, RBS and Santander. The rolling stock firms charge £1 billion a year to lease their trains, the cost being passed onto taxpayers and passengers by the TOCs.

The government set up a 'competition commission' to investigate these rolling stock companies who enjoy near-monopoly status, and who have been accused of overcharging for use of their trains.

So, having been bailed out by the government once before, some of Britain's biggest banks will again be helped out through more government subsidies to the privatised railways!

Rail privatisation has been a total failure. The government has had to intervene to save Network Rail and then Metronet (the company that maintained part of London Underground). Private enterprise is unwilling to underwrite the huge amounts of capital needed to maintain the infrastructure and invest in improvements.

New Labour has tried to invent new methods of funding, such as PPP (public-private partnerships) on the London Underground but as always it is only the losses that are nationalised.

Nationalisation is the only way to run an efficient, fully integrated transport system. However, it should be run under democratic workers' control and management, where people working in the industry and using its services would have full participation in how it is run.