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Northern rail renationalisation: your questions answered

<span>Photograph: Danny Lawson/PA</span>
Photograph: Danny Lawson/PA

The Northern rail franchise is to be terminated and the network taken back into public ownership, the government has announced – putting the current system of privatised rail in further doubt.

How does the current system of rail franchising work?

Supporters of rail privatisation wanted competition – but there are very few places where sufficient track, stations, depots or demand exist for competing services. Instead, firms bid for franchises, usually lasting seven to 10 years, giving them the right to run trains across particular routes or networks. The bidding process costs millions of pounds, and winners have to commit to meeting detailed specifications from the Department for Transport on how, where and when they will run trains. Companies bid blind on how much they will either pay – or in the case of loss-making networks like Northern, be subsidised by the government.

What has gone wrong with franchising?

In blunt terms, firms have bid too much, betting on passenger growth rates that have hit the buffers, as rail’s vaulting ambition ran up against financial reality. A huge planned programme of engineering overran and blew its budget, just as Network Rail’s ability to spend its way out of trouble was curbed due to new Treasury constraints. That meant fewer upgrades and fewer services than expected, contributing to fewer passengers and lower revenues. The government at the same time mandated private firms winning new franchises to force through changes to train operation, on places like Southern, that all but guaranteed strikes. Passengers experienced massive disruption, ever higher fares – and for the first time in decades started to turn away.

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Yet multibillion pound bids were placed on the expectation of far more people travelling, year after year. While firms share much of the risk with the government, several are still losing money hand over fist. A row over liability for rail’s huge pension deficit has seen another of the UK’s biggest transport firms – Virgin’s partner Stagecoach – follow National Express in quitting the rail business.

And what about Northern in particular?

Similar financial pressures loomed, and its operational troubles were worse than most. The Arriva-run franchise had fully expected to ditch the much-derided Pacer trains – ministers had already decreed that they would be gone by 2020 – and to institute a new timetable using upgraded tracks and electric trains. Instead, especially in the run-up to the May 2018 timetable change, an industry-wide debacle led to it retraining scarce drivers for a schedule it had not planned to run. It got locked in a standoff with the RMT union, and persistent strikes. By late 2019, its parent company was running out of cash to sustain the franchise, and the brand was becoming a byword for calamitous punctuality and cancellations.

So will nationalisation make any difference?

For Northern passengers, there will be no overnight change: there remain significant problems with the infrastructure that will take time for the government’s “operator of last resort” to iron out, even with the pledges of cross-industry support and money for crucial works. Politically, however, it is likely to secure the goodwill of unions, and may be more palatable to passengers as profits – or more accurately, subsidies – will not go to a private firm, Arriva, which is ultimately owned by the German state railway, Deutsche Bahn.

Supporters of full-scale nationalisation of rail argue that it would allow better, cheaper, more efficient integration of the (state-owned) track and train operations, rather than the current separation and sometimes adversarial relationships between the component parts of the railway. Either way, the failure will likely hasten moves for an entire overhaul of the franchising system.

What will happen next?

A government-commissioned review into the whole rail industry has been filed but not yet published by the Department for Transport. The review chair, Keith Williams, has already said franchising cannot continue in its present form. While the Conservatives have long opposed a “return to British Rail”, much of it is already in public hands. Northern will join LNER in state operation, with South Western and TransPennine Express at serious risk of also going bust soon and needing the government to take over.