There’s a scene in The Permanent Way, David Hare’s verbatim play about the railways, in which two old hands talk about John Major government’s privatisation of British Rail. Ministers, we are told, were so keen to bring the rigours of private competition to the network that they’d devised a plan to have two trains serve the same route almost simultaneously. “First one to the next station picks up the passengers,” says an engineer. “Just the overtaking they hadn’t worked out.”
The Conservative party never did work out how to solve that conundrum – but such was its ideological commitment to the idea that “private good, public bad” that privatisation went through all the same. Rail was one of the last of the Thatcher/Major governments’ sell-offs of bits of the state, and it remains one of the most controversial: polls have consistently found public support for renationalisation, but the party’s commitment to private enterprise has remained undimmed.
There’s some irony, then, in the fact that it’s a Conservative government that’s now going a long way towards reversing the work of a predecessor. When individual train operators, such as Northern or KeolisAmey in Wales, have failed, national or devolved governments have stepped in to run trains as “operator of last resort”. And in March, the system of franchises that has held sway for nearly a quarter of a century was suspended, before finally being put out of its misery in September. This is, for passengers, taxpayers, or, indeed, anyone a very good thing.
It’s natural to assume that it was the collapse in passenger numbers brought about by Covid that rendered the existing franchise system untenable. Actually, it was already on its last legs, and seemed almost certain to be unwound over the next few years when the rail review, chaired by Keith Williams and launched in September 2018 after a summer of rail chaos, finally gets round to reporting. The pandemic simply finished it off.
To understand what has gone wrong, it helps to know some history. First: private enterprise is not new to Britain’s rail network. It was built in a flurry of activity in the mid-19th century, as dozens of companies competed for the profits arising from the exciting new technology. As with internet companies a century and a half later, some of those who invested made their fortunes; many more lost their shirts. The Railways Act 1921 grouped the survivors into the “Big Four” mega-companies, which ran the track and trains covering specific regions, but these weren’t nationalised until 1948. The British rail network was only really state-run for about a third of its history.
Its origins mean the network has always been a ramshackle affair. Other countries, which built their networks later, learned from Britain’s mistakes and properly planned their strategic rail networks. Britain, by contrast, ended up with all sorts of oddities, such as a vast network of lines covering rural north Norfolk, or towns with multiple stations. (The three big termini lining a half-mile stretch of London’s Euston Road, each serving points north, is one of the most obvious examples.) This gave the network plenty of redundancy – the Luftwaffe couldn’t knock it out – but it also meant that many of those routes never had a hope in the age of the car. The 1963 Beeching report has gone down in history as an act of vandalism, but it was, in some areas, simply a recognition of reality.
In 1994, the Major government broke British Rail into assorted units and began selling them off, and instead of magically overtaking trains, we got the franchise system. Except on a few particularly busy routes, private train operating companies didn’t compete for passengers; but they did compete for the right to run the trains in the first place. The theory was that the need to bid for a franchise would maximise the revenue (or at least, minimise the cost) to the taxpayer; while the fact that profits were dependent on fares, and thus passenger numbers, would compel better services.
This worked better than one might imagine: correlation is not causation, but passenger numbers, which had declined for much of the 20th century, have risen steadily since privatisation, and reached an all-time peak in the early 2010s. On the other hand, the reality of the modern British rail network has often been crowded trains, cancelled services, ludicrously high ticket prices and, as if that weren’t enough of an insult, toilets that talk to you in the voice of a comedian who you can never quite place.
What’s more, the system had three big weaknesses. One is that train operating companies with short-term contracts were simply never going to have the incentive to invest for the long term. Another is that strategic planning was difficult, because the people running the trains were not the same as the people in charge of the infrastructure (first the privately owned Railtrack; later the state-owned National Rail).
The other problem is more recent: there simply isn’t that much commercial interest in the train game any more. In the early days of privatisation, there was room to grow passenger numbers and cost savings to be found. But now the network is full, all the easy efficiencies have been found, and – despite how it may sometimes feel – the government limits ticket price increases. The profit margins available on any given franchise are fairly clear and, perhaps surprisingly, not that high: about 3%, way below, say, supermarkets. So franchisees have stopped bidding. If you’re not a lawyer or consultant responsible for sifting the large piles of paperwork the franchising system generates, it’s hard to see the point of it.
The Williams review, launched after months of chaos on the Thameslink and Northern rail networks, is expected to advise the government to replace franchising with a system in which companies bid to run both infrastructure and trains across entire chunks of the network: a model often compared to Japan, but one that’s not a million miles away from the Big Four. That would mean infrastructure and services are planned together once again, and give operators a reason to invest in improvements themselves – or hammer the government until it does the job for them. Either way, it should eventually lead to increases in capacity and even, since prices are used to manage demand, reductions in costs.
For now, the government has already abandoned the franchising system in favour of “management contracts”, which pay operators a set profit margin of the cost of operation. That means the risk of any collapse in fare income, such as the one we’ve seen this year, would be on the state, not the operator. (Since the operators could always walk away from their contracts, while the government could not in practice allow the trains to stop running, that was arguably always true.) The management contract system has also been successfully used already on London Overground or Merseyrail – so successfully, indeed, that many passengers probably don’t realise they’re privately run.
But who runs the trains won’t magically fix the problems on the network. There’s a trade-off between fares and overcrowding: cut one, and you increase the other. Getting past that means investing in better infrastructure, so you can run more trains: it was government failure to deliver on promises to do that which lay behind the Northern Rail mess back in 2018.
So who runs the trains matters a lot less than the tracks they run on. But even if nationalisation isn’t on cards, the franchise system has already followed British Rail down the line into history.
• Jonn Elledge is former assistant editor of the New Statesman