Privatisation may be on its knees, but ministers can make a mess of the railways too

The collapse this week of Southeastern trains and the investigation of its accounts by the Serious Fraud Office signals the death knell of rail privatisation, after a quarter century of ideological turmoil, political interference and waste. Passengers have surged, until now. Trains have run, some of them on time. Subsidies have trebled in real terms. But the model is a shambles. Railways north, south, east and west have surrendered their franchises to the government. Only the transport minister, Grant Shapps, refuses to call it nationalisation.

Anyone who remembers British Rail in the 1980s will have an image of dirty stations, clapped-out trains, exhausted sandwiches and lateness. At the time the Tories were selling off coalmines, telecoms and public utilities, so what could be a nobler gift to private enterprise than a railway? Margaret Thatcher herself refused. She treated trains, like the Post Office, as objects of inexplicable public affection that she would not reform. John Major had no such inhibition. In the bright dawn of the 1990s, private meant freedom. The one challenge was how to privatise monopolies. Could regulators really face down private operators? Could ministers fix prices? And what of the railway?

Members of the old corporate British Rail board, of whom I was then one, did not oppose privatisation but were convinced that what mattered more than anything was not breaking the railway’s line of command. Track, signals and train operation had to be under one management. A privatised British Rail should either be a single corporation or return to the old regional companies.

This argument back in the early 1990s became a classic Whitehall power clash, outlined in Terry Gourvish’s epic biography of British Rail. The Department for Transport was on the board’s side, as it seemed was Downing Street under Major. But the Treasury of Norman Lamont and his terrier-like privatiser, Steve Robson, refused to concede. It wanted the railway smashed and it eventually won. Privatisation was a cobweb of contractual relations between private entrepreneurs. Nel 1993, the corporate railway vanished.

The result initially worked. A private infrastructure company, Railtrack, was created in 1994 under a galaxy of regulators. They all rode high on the Europe-wide boom in rail travel, mostly of middle-class commuters. But it grew ragged at the edges. Operating companies would overbid and then blame Railtrack, or the government, for late running. There was a lawyer in every signal box. It would take 50 pages of legal jargon just to get a train out of Paddington station.

Railtrack was then effectively bankrupted after the Hatfield rail crash in 2000, to be renationalised as Network Rail. The franchising system turned sour and kept fracturing. Connex, Stagecoach, Virgin, National Express, TransPennine and others came and went, all complaining of regulatory torture. Restless ministers set up strategic authorities and numerous “rail reviews”. Disaster struck in 2018 when the shambolic edifice of track control, timetabling and driver training imploded and trains simply failed to show up at stations. Lawyers feuded in backrooms while a parody of privatisation was played out in parliament and Chris Grayling pretended to be in charge.

Despite rising passenger numbers, privatised trains were now costing the taxpayer triple, in real terms, what they had under nationalisation. The reason was that every contract had embedded profit. Investment controlled from Whitehall was chaotic and behindhand on everything from digital signalling to line electrification. The amount needed to catch up is now estimated at £100bn over the next two decades, precisely the sum being blown on Boris Johnson’s vanity project, HS2.

A year ago Shapps admitted defeat, when train company Northern had to be taken into government control following years of major disruptions. In truth, Britain did not have a privatised or a nationalised railway but a politicised one. In Latin America it would be called a “parastatal”, a charge on the state to the benefit of private investors.

Now Shapps has ordained that Britain’s railways are to come under government control as Great British Railways. Private companies will survive as operators but on something called a performance contract. As they will still have no control over their infrastructure, it is hard to see virtue in this. It brings the railways ever closer to what has clearly failed: the ever more intimate involvement of Whitehall in the running of trains.

Industrial ideology must grow up. It is hard to escape the conclusion that the arm’s-length public corporation, invented by Herbert Morrison in the 1940s, was actually the best model for a railway. It brought Britain out of the age of steam, guarded the industry through a long decline in demand and, for all its failings, was one of the cheapest, safest and most efficient networks in Europe. Shapps should have the guts to tear up his Treasury pseudo-privatisation models and return to the argument that was lost in the 1990s.

The essence of a railway, be it national or regional, is to be a corporate unity. It must control its assets, own its investment and have a budget – subsidised if need be – agreed with the Treasury. Ministers and officials should not be allowed near it. Shapps should go away and manage roads. They need him.

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