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Rebuilding Rail: a blueprint for rail industry reform

The Rebuilding Rail report was commissioned by rail unions ASLEF, RMT, TSSA and UNITE in order to examine how a better structure for the railway could be created in order to deliver better value for taxpayers or passengers. It calls for a complete overhaul of our fragmented, franchised network, putting rail back into the hands of the public who both use and pay for the service.

It conservatively estimates that, since privatisation the cost to the public purse of running the railways has risen by a factor of between two and three times, from about £2.4 billion per year before privatisation to around £5.4bn per year today. Over the same period the amount of money that is ‘invested’ into the railways from passenger fares has also increased in real terms.

The report found that key drivers of the exorbitant cost increases are higher interest payments in order to keep Network Rail’s debts off the government’s balance sheet, debt write-offs and costs arising from the fragmentation of the network into so many different organisations. It also examines the profit margins of layer upon layer of contractors and sub-contractors, along with dividend payments to shareholders. Added together these represent a cumulative, conservatively estimated cost to the taxpayer of more than £11 billion of public funds since privatisation or around £1.2bn a year. If these wholly unnecessary costs were eliminated and the resultant savings invested in reducing fares, it could deliver an across-the-board fare cut of roughly 18 per cent.

In practical terms the report suggests that the Labour party could promise that no new franchises will be signed under a future Labour government and that any on-going negotiations with train operators be halted or at least subject to a value for money test. It says that Labour could commit to bringing Network Rail’s debt onto the public balance sheet which would save £156 million per year with further savings of at least £200 million a year by progressively bringing renewals and enhancements in-house. It urges Labour must make the case for the UK railway be as integrated as possible within the constraints of EU law.

An incremental reform programme would enable the government to reacquire the railway assets, resulting in huge savings as the process progresses. As franchises expire, or when a Train Operating Company fails to meet the conditions of a franchise agreement, the franchise could be taken back under public control at no cost which could guarantee the kind of long-term investment required.

Money saved from reintegrating the railway could be used to cut fares while additional savings could be made by reducing the amount of money that ‘leaks’ from the railway in dividend pay-outs, and by imposing a 50% tax on all dividends paid out by train operating companies and rolling stock companies. Instead of leasing or ’hire-purchasing’ rolling stock we should purchase trains outright as well as having a strategic approach to train procurement which benefits the British economy. We should campaign in the European Parliament to enable this shift in emphasis to benefit those companies who manufacture trains in the UK. Public resources should not be diverted from investment in the railway to pay for disadvantageous leasing agreements.

Perhaps most significantly we need an over-arching strategy for the railway that would benefit all rail users as well as the public purse. This can only come from a re-integrated single railway entity owned by and accountable to the government, with responsibility for all passenger train operations as well as the railway infrastructure, maintenance and enhancement, signalling and station management.

The privatised railway has proved very profitable for some, including many banks and train operators, however companies which were happy to fleece the railway during boom years walked away from their franchises when things went bad, a clear case of profiteering at the public expense, and a system we should rid ourselves of at the earliest opportunity, once again placing rail at the heart of British life.

There is overwhelming public support for re-nationalising our railway. Support that can only increase once the true costs of privatisation, as shown by this report, are made clear.

Mick Whelan is General Secretary of ASLEF. Rebuilding Rail can be found at www.transportforqualityoflife.com

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