Trouble on the tracks? The success of privatisation

In one of his promotional videos, Jeremy Corbyn states that the privatisation of British Rail has been “a catastrophe. A catastrophic failure”. He goes on to say that “the only winners are the shareholders of the privatised franchises”. Instead, he promises, Labour will run them “for the passengers, not the profit of the few”. Do his arguments have any merit?

In reality, statistics demonstrate that privatisation has delivered a greatly improved rail sector. The number of rail journeys has increased by 117 per cent since privatisation.  Leftists argue that with the growth of our economy and population, this would have happened with or without privatisation. They are wrong, however, as UK passenger numbers have grown faster than comparable European countries like France and Germany, while in the 35 years prior to privatisation, UK passengers fell by a third. While lines and stations in France and Germany are being cut down or even closed, we are reopening lines and branches.

According to a European Railway Agency report, Britain has the safest railways in Europe, and when it comes to fares, they have increased at a slower rate than under British Rail, only 2.7 per cent more per journey in real terms than in 1994. Since privatisation, investment has increased ninefold. The European Commission even found that the UK rail network had improved the most from 1997-2012, outdoing all 27 other EU nations.

Corbyn extends his common attack on excessive profits to the private rail companies, bemoaning their exploitation of the “honest traveller”. The reality is, as always with Corbyn, very different. Train company profits across the country amount to only 3 per cent of total rail expenditure, while 26 per cent is committed to investment in the network. The Labour leader once again resorts to appealing on an emotional level to the public because the empirical facts don’t fit his narrative.

Common arguments against privatisation point to lower fares across the rest of Europe, as well as the overcrowding and unpredictability of many services. Fares are generally higher here in the UK because we do not subsidise them as much – and rightly so. Germany, France, Italy, and Spain subsidise rail substantially more than the UK.

Many rail services across the country also struggle with the surge of demand that we’ve seen over the last 30 years. Our Victorian infrastructure is not able to cope. Network Rail, a state-owned company, is responsible for rail infrastructure and improvements on the lines and has consistently failed to modernise our rail network.  Most of the problems encountered by rail passengers today are not caused by privatisation, but by the infrastructure already owned and operated by the state. But, again, this is rarely understood because it is more convenient for populist politicians on the left to blame the private sector.

For example, when a Virgin train taking delegates back to London from the Labour conference in Liverpool was delayed for half an hour because of a signal failure, Corbyn himself tweeted: “Couldn’t make this up. We need public ownership of our railways.” But his problem was with Network Rail, which is already publicly owned.

Indeed, the Rail Regulator has sanctioned Network Rail for its “approach to performance planning and its capability to recover services following incidents” and stated that it appears “to be contravening Licence Condition 1: Network Management”. Extending inefficient public ownership to the rest of the rail network would be extremely foolish. Instead, we should be considering how to bring more competition and private-sector incentives into the rail network, including the privatisation of infrastructure provision.

Another issue with current rail infrastructure in the UK is the need for train operating companies to purchase unique rolling stock for specific lines or regions. This prevents competition in rolling stock provision, allowing producers to charge largely what they want for their trains. Meaningful modernisation of infrastructure would arguably solve this issue. 

Still, punctuality and service are a huge improvement on British Rail, which didn’t even bother to publish its punctuality reports by the year. A key problem with any nationalised industry is that its operation, funding, and structure become vulnerable to political whims rather than market forces. For example, when the choice comes between pumping more money into the railways or the health system, which is Mr Corbyn going to do? A private system, therefore, helps protect the railways from vote-seeking politicians. 

Nationalisation would be a huge mistake that would reverse the progress we’ve seen in our rail transport over the last 30 years. If we can’t trust the government with signalling, we certainly can’t trust them to run the entire sector. Privatisation is the key to success, and we need more of it.

Written by Max Young

Max Young is Deputy Editor at 1828.