Putting profit first
After 30 years of privatisation, writes Vernon Price, it remains clear where the government’s priorities lie
Last week the government finally published the Williams/Shapps review into the future structure of the railways. This has the format of a white paper entitled ‘Great British Railways’ (GBR), and we are told new legislation will follow and the new structure will be in place within two years.1
The ‘Williams review’ was set up by the government in the wake of the May 2018 timetable change. Readers will recall the chaos this caused, particularly affecting the trains branded as Northern, Southern and Thameslink. The new routes and improved frequencies being introduced clashed with an insufficient number of trained drivers and the inability of the tracks to handle the increased train volumes, leading to meltdown. The integrated nature of the railway network meant the collapse rippled through to other franchises operating over the same tracks, affecting services over a much wider area.
However, by the time the Williams review’s terms of reference were announced in September 2018 there were bigger issues to address than how to develop and introduce timetable changes: “The panel will consider all parts of the rail industry, from the current franchising system and industry structures, accountability, and value for money for passengers and taxpayers.”2 It was clear that the entire model of privatisation, as applied to the rail industry, was deemed unfit for purpose, and former British Airways chief executive Keith Williams was to come up with a replacement, with his report due in 2019.
British Rail was privatised by the John Major government in the early 1990s. The infrastructure was split from the train operations and became the private company, Railtrack, in 1994. Its attempts to reduce costs undermined the safety of the network, leading to the Hatfield crash in October 2000. Investigations highlighted a huge deficit in investment, and within a year Railtrack was placed in administration and the state-owned Network Rail took over running the infrastructure.
The Major government also sold off nearly all the freight operations of British Rail, and the passenger rolling stock, which was leased back. The passenger train operations of British Rail were packaged into 25 franchisable units to be let to private operators for fixed terms. The first services ran under this model in February 1996, and by April 1997 the entire passenger network was in private hands. We were told this privatisation would bring increased use, improved customer service and more investment, but the main plus would be falling state subsidies due to the higher premiums being paid by the successful franchise bidders. It did not quite work out like that …
Franchises tended to be won by companies from the previously privatised bus industry, then later by state-run rail companies in other countries. The few franchises won by management buy-outs tended to be underfunded and short-lived, gobbled up by the bigger players. Some franchises were stripped from their holders due to poor performance. Also there were cases where the victor had overbid, leading to the franchise bleeding cash and being handed back early.
Originally franchises were awarded to the highest bidder, but under New Labour this was changed to reward the bid that best matched a list of performance commitments specified in the tender document. As the bidding process became more complicated, the cost of preparing a bid escalated into the millions. This, and the opaque awarding process, inevitably led to litigation from sore losers. The classic example of this was the west-coast competition in 2012. The incumbent Virgin Trains lost out to a bid from FirstGroup, but this was challenged by Virgin. After investigations the government declared the contest void, having discovered significant technical flaws in the awarding process. First Group lost out, and Virgin kept the west-coast franchise for a further seven years.
The stagnant UK economy in the late teens spelt doom for the rail franchising system. In April 2018 the respected railway journalist, Roger Ford, declared: “By my calculation almost half of the franchised train operating companies are struggling to meet the revenue lines on which their franchise agreements were based.”3 He coined the phrase ‘zombie franchises’ for these, and it was not long before the east-coast franchise was handed back to the government - for the second time!
The franchising model was unfit for purpose, an open goal for Jeremy Corbyn’s Labour Party to shoot at with its demand for renationalisation of the railways. Indeed the Williams/Shapps document has to admit:
Even before the pandemic, it was clear that this system was no longer viable. Such competition as there was had diminished, and UK companies were increasingly reluctant to even bid for franchises. Two franchises failed and were taken over by the government’s operator of last resort, whilst others were heading the same way. Other franchise competitions were delayed or never progressed, and direct awards made instead. Since 2012, around two-thirds of contracts have been awarded without competition.4
The Williams report finally arrived after 18 months of delay, caused partly by the unfolding disasters it was supposed to be reporting on, and then by the need to take on board the impact of Covid-19. Now it has morphed into ‘The Williams-Shapps Plan for Rail’, with huge tweaking and extra input from the Tory secretary of state for transport, Grant Shapps.
So how have the Tories managed to salvage private sector involvement in the railways when the lessons of the last 25 years have shown that privatisation failed to cut government subsidies and provide better experiences for the passengers, but instead left us with a fragmented structure riddled with unnecessary duplication and incompatible fleets of train vehicles?
What can be learnt about GBR from the white paper is far from convincing. Reading the seven points in the mission statement, ‘Our promise to passengers and freight customers’, I realised it is full of wishful thinking and marketing buzz-words that obscure contradictory ambitions. For example, it claims to introduce a “single, national leadership” to “mark the end of a quarter century of fragmentation”, but then also promises to contract out the services to “private partners” in a way that avoids a nasty “one size fits all” model, and insists it will still be made up of regional railways that are locally rooted and accountable.
More platitudes follow in the 10 ‘vision’ ‘outcomes’ that summarise “how the railways will change for the better”. The rest of the document outlines the 62 ‘commitments’ that will deliver these outcomes. Examining them in detail requires reading between the lines to guess how it will all pan out.
Let us start by considering GBR - the new company that will bring together under a single brand Network Rail, the Rail Delivery Group and rail-based activities of the Department for Transport (DfT). We know that Network Rail maintains the railway infrastructure - the tracks and signalling. The Rail Delivery Group is less well known, mainly because its activities are pretty obscure. It allocates ticket revenue amongst the rail operating companies; it runs the National Rail Enquiries service and manages various railcard schemes. When you add in the DfT element the new company will draw up the timetables, set the fares, let contracts to the private operating companies, specify the service levels and, crucially, take the revenue risk. This is different from the current franchising system, where the operating companies only make money when they sell enough tickets to cover their costs.
Under GBR these companies will get paid the same, irrespective of ticket sales. This is actually what has been happening already, during the pandemic, when trains have been running almost empty.
The big caveat here is devolution. Many of the above roles have been devolved to national governments and regional authorities in an uneven way. None of the devolved powers are being taken back, so the ‘single leader’ selling point is fraying already.
The white paper claims that service contracts rather than franchises will remove the need for a whole layer of accounting and delay attribution. To an extent that is true, but many parts of the network carry the trains of multiple operators. Take Crewe, where I live - we have seven passenger operators, plus freight operators. If something goes wrong and trains are delayed, then operator performance statistics will be impacted - some mediation process will be required. If there was just one operator - call it, say, British Rail - then at a stroke the disputes would cease to exist.
The next benefit we are promised is financial stability, which will facilitate long-term planning. The government assures us that its rolling, five-yearly infrastructure funding settlement will continue as before. They must have very short memories. It was only last December that £1 billion was cut from Network Rail’s ‘enhancement’ budget for the current period, leading to infrastructure projects being put off into the future.
Warning bells begin to ring when we read that GBR “will be mandated to increase efficiency”. Interestingly many of the arguments used here are the very same ones advanced against franchising 25 years ago: removal of duplication, economies of scale, common interfaces, etc. Then the need for ‘reform’ is introduced, with a savings tag of up to £1.5 billion a year after five years. The problem is the ‘reform’ card has been played before at Network Rail, with no real gain.
The railway has a ridiculously complicated fares structure. The variety of fares that may be available for a journey is huge, before you add in elements like season tickets, railcard discounts and regional rangers. Consequently passengers are often unaware of their ticketing options and end up paying more than they need. Recognising this is not new, but earlier efforts to simplify matters just ended up adding new layers of mystification. The GBR method of dealing with the problem attacks the physical form of the ticket. Passengers want a ‘modern’ experience, so buying a paper ticket from a human ticket seller is deemed inconvenient and anyway costs £500 million per year. The government is committed to ending this and will replace it by Oyster-style, pay-as-you-go, contactless payments and digital tickets. Well, good luck with that one.
GBR will “simplify the current mass of complicated fares and tickets”, but the document is careful to avoid telling us which products will go. Instead it hints at new additions to the operator-specific ticket type. You have to feel sympathy for the PR firm which put together the white paper. The text pledges to “protect the ‘turn up and go’ railway … by ensuring affordable walk-up fares”, while illustrating it with a mobile phone hosting “the new LNER app and seat reservation feature”. The irony being that LNER currently enforces mandatory seat reservations, preventing ‘turn up and go’ passengers from using their trains.
The big innovation that has captured media attention is the new ‘flexible season ticket’ for those who now work from home some days of the week. This appears to be a simple ‘eight days in 28’ carnet product, but it is a welcome additional option. It will be interesting to see if this ticket is implemented in an electronic format.
The document appears to back a programme of further network electrification to help meet the government’s decarbonising objectives. Again this is not new. The tap of investment into electrification has been turned on, and off again, many times since the west-coast got the wires in the 1960s. Usually it is delays and cost overruns that cause the plug to be pulled and the skilled workforce to be disbanded. Obvious projects have been ready to go for some time - perhaps GBR will facilitate a serious rolling programme of electrification.
Early in the document, where current problems are identified, we are told that “There are around 75 different types of train in passenger service on today’s network, imposing greater costs in maintenance, regulation and crew training”. I missed any attempt to address this issue. Rolling stock construction is now a global industry, so the option of resurrecting British Rail Engineering may not be there, but this does seem a glaring omission.
What there is, near the end, is a section on “Empowering rail’s people”. Here we learn that
Over 30% of total rail costs in 2019-20 were staff costs; rail industry wage growth has increased on average above the rate of inflation over the past decade and over 250 ‘days of strike action’ have occurred since 2016.
Whilst I thought these were encouraging statistics, clearly the authors were not so impressed. The very last “commitment” - number 62 - contains an innovative approach to curbing the power of the rail unions. In an effort to reduce costs (that is, the wages bill)
the government will introduce new transparency requirements and reporting and analysis on productivity and pay. The Office of Rail and Road [the government regulator] will collect and publish comprehensive data on salaries and provide comparisons with other sectors and labour markets.
Using this data, they hope to inject lower, external wage levels into the rail industry - something else to guard against.
According to the UK Parliament website, “a white paper provides a basis for further consultation and discussion with interested or affected groups and allows final changes to be made before a bill is formally presented”, so I expect much comment and analysis around GBR in the coming weeks and months.
How did the rail unions respond to the white paper? Aslef directed its attack at the continued involvement of the private operators, with general secretary Mick Whelan declaring:
The big question is, why are private operators still involved in what is, and will always be, a service monopoly where there is, and can be, no real competition? The old arguments of ‘risk and reward’ don’t apply. There are no risks, so why should there be rewards?
Under these plans the private companies will still pocket a profit, but all the risk - the revenue risk - is being dumped back on the public purse. The government is changing the model, but protecting the privateers, and privatising any profit …
We fear that, with capacity falling through the floor because of Covid-19, and a £2.9 billion shortfall in revenue at the fare box, the government is going to use the Williams-Shapps plan to try and justify cuts in services.5
The TSSA struck a similar chord with its general secretary, Manuel Cortes, commenting:
Grant Shapps might like to pretend this is the biggest shake-up of the railways in a quarter of a century, but that is misleading. Rather than take the bold action that our rail network desperately needs, this is an attempt merely to paper over the cracks. A concessions-based model will still see passengers and taxpayer money leak out of our industry in the form of dividend payments for the greedy shareholders of the private operators …6
The RMT joined the chorus, with its new general secretary, Mick Lynch, throwing down the gauntlet to the bosses of the yet-to-be-formed company:
The government talk about ending a generation of fragmentation, but then leave the same private companies in place under this arrangement to extract management fees that could be invested into building a truly integrated national rail network. The taxpayer carries all the risk, while the train companies carry out bags of cash …
It’s important ministers and members of this new Great British Railways board understand that you don’t build for a bright future by threatening staff with job cuts and attacks on pay and pensions. Our chief priority is to defend our members and if the industry chooses the road to confrontation they will meet the stiffest industrial resistance from this trade union.7
The next day Lynch had another go at the new plans, this time highlighting how the private rail operators had taken £88 million in government handouts during the pandemic. But his main concern was that over £40 million was going overseas to ‘foreign’ railways: “Not only do we once again see pandemic profiteering, but we are also faced with the bitter irony that the Great British Taxpayer is in fact helping to send money abroad to fund Great Overseas Railways.”8 This Brexit-style patriotism colours much of the RMT’s politics.
Perhaps the biggest impediment to strong working class resistance to the government’s plans is the fact that we have three competing unions organising on the railway. This hangover from Victorian sectionalism is well past its sell-by date and will be used to divide and rule in the struggles ahead.
And what about the Labour Party - how did it weigh in, given that renationalisation of the railways was one of its more popular policies during the last general election? First some context. In the pre-Corbyn era, when Labour was still Tory-lite, the opposition to rail privatisation was limited to calls to allow a state-owned company to compete with the private sector for franchises.
Under Corbyn state ownership was back in vogue, and his shadow transport minister, Andy McDonald, took his brief seriously. In anticipation of the Williams Review his team put together a comprehensive ‘rebuttal white paper’, which amounts to a plan to push the nationalisation envelope as far as any pro-capitalist Labour government would dare.9 It remains, however, a social democratic model for a state-run monopoly within a capitalist economy. The problem for McDonald was that the Corbyn project ran out of steam well before the Williams/Shapps document saw the light of day. ‘GB Rail’ was rushed out at the end of March 2020, just days before the arrival of Starmer as leader of the opposition, and McDonald’s redeployment as shadow employment rights secretary. Interestingly there are many similarities between the McDonald ‘GB Rail’ offering and Shapps’ ‘Great British Railways’, aside from the latter’s private-sector involvement.
Labour’s current shadow transport minister is Jim McMahon, who also sits on the party’s national executive as a representative of Labour councillors - he was on the rightwing slate opposed by Jo Bird in the 2020 NEC election, and is reported to have backed Liz Kendall and Owen Smith in earlier leadership elections. He spoke in the House of Commons in response to Shapps, and one of his first questions was with regard to the new train operator contracts: “Can he confirm whether a publicly owned provider will be able to bid for these concessions?” It was as though Corbyn never happened. He asked a number of further questions, including about the scale of possible cutbacks and job losses, but it was all very technical rather than combative.
So what priorities should Marxists have when it comes to the railways in the current period of capitalist rule? First we must be clear that, while we support state control of sectors like finance, utilities and transport infrastructure, we oppose the illusion that nationalisation equates in some way with socialism. But nationalisation does provide opportunities for a degree of democratic control, so the commonly accepted model of just another business with management imported from the private sector must be rejected.
We recognise that rail workers remain one of the better organised and most militant sections of the trade union movement, and as such have come under sustained attack in recent years. The GBR reorganisation will signal further battles in this class war, so promoting solidarity with workers in struggle, whether over wages, jobs or terms of employment, goes without saying.
There can be no doubt that train travel can be much more eco-friendly than traditional cars and aircraft, so we must demand greater investment in the railway. That investment should target electrification, capacity enhancements and new routes like HS2. It should also include modern signalling and train management systems to allow for greater speeds, frequency and safety. Modal shift away from cars to public transport and from lorries to freight trains must be planned and implemented.
The solution to the ticketing jungle is to drastically reduce fares, with free local travel - obviously that requires more trains and greater capacity. On the other hand, in the post-pandemic world many journeys will no longer be made, with some commuting replaced by working from home, and some business trips replaced by online conferencing. This freed-up capacity must be used to lure road users onto the railway rather than provide justification for a new round of closures and rationalisation.
The word ‘revolution’ is used 11 times in the white paper - apparently it is one of the most overused terms in marketing hype. The Williams/Shapps plan is the 31st review of the rail industry since 2006, and is unlikely to herald a “revolution”. Instead we should ask, ‘How long before review 32 is necessary?’
The full document is available at assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/987752/gbr-williams-shapps-plan-for-rail.pdf.↩︎
See Great British railways p18.↩︎