Link to this page: https://www.socialistparty.org.uk/issue/686/12820
Private rail companies - a licence to print money
Tory transport secretary Philip Hammond recently described Britain's railways as a "rich man's toy". As a millionaire, he should know. Hammond criticised high rail fares while ignoring the fact that his government gave the green signal to the publicly subsidised train operating companies to ratchet-up fares. Examining the failure of the privately run system, Mark Pickersgill calls for the renationalisation of the railways.
Next January, train fare prices are going up on average by 8%, that's 3% above the retail price index (RPI). Some fares are rising by 13%. Hammond justified this by saying that major rail infrastructure projects had to be funded and last November's comprehensive spending review aimed to cut the cost of running the railway by £1 billion by 2018.
So government subsidies will be cut to the train operating companies (TOCs) who run the system and they will, of course, pass on the shortfall to passengers. These increases will hit many workers hard. For many people, travelling costs take a big chunk from their salaries and on average fares will rise four times faster in 2012 than wages.
Running Britain's privatised railway system costs on average 30% more than similar rail networks in other countries and fares are Europe's highest. Britain's railways still receive nearly £5 billion in taxpayers' money.
Virgin for instance received £250 million in government subsidies over the last four years - privatised railways receive more in government subsidies than did the old nationalised British Rail.
In 1993 the railways were privatised and fragmented to allow 'get rich quick' entrepreneurs to extract huge profits. There are now 20 rail franchises run by TOCs who bid for franchises which last for about seven years.
The TOCs are virtually asset-free, leasing their trains from rolling stock companies owned by banks such as HSBC, RBS and Santander. The most expensive part of maintaining the system is funded with public money through Network Rail.
Even when the TOCs cannot pay back money owed to the government because of falling profits, the debt is written off.
When National Express was exposed to £1.4 billion of debts in the East Coast Main Line franchise they simply pulled out and handed the franchise back, forcing the government to run it.
Overcrowding is rife. Today, as many passengers use the system as in the late 1950s but with only half the rail network in place after 50 years of closures and cuts.
But the private TOCs' main responsibility is to look after the interests of shareholders not passengers. That is why, while Tories, New Labour and Lib Dems all favour private enterprise having a stake in public transport, the Socialist Party calls for the renationalisation of the railway system.
The renationalised railways should be run under democratic workers' control as part of a properly planned and integrated public transport system for the benefit of the whole of society not for the profits and high lifestyles of the privateers.
In The Socialist 21 September 2011:
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