Chris Grayling, the current Secretary of State for Transport, has today announced that the government will renationalise the East Coast Main Line, a 393 mile long railway link between London and Edinburgh. The line was privatised as part of John Major’s 1993 Railways Act.
Grayling confirmed that he will terminate the contract with Virgin Trains East Coast on June 24. Private operators since 1997, when the railway was nationalised, have complained of losing money on the line. In the last year Stagecoach, who operate alongside Virgin Trains, lost £200m on the line.
The Transport secretary told Stagecoach and Virgin that he would take the line back and give it to an “operator of last resort”. The service is expected to be run by this operator until at least 2020, when it will then be handed to a “public private partnership”.
Stagecoach announced it would lose almost £260m as a result of Grayling’s decision, including a £165m bond, and a one-off charge of £75m. This has raised the prospect of job losses within the employees: Stagecoach currently employ almost 40,000 people.
‘Bring Back British Rail’, a campaign for nationalisation, said: “We’re over the moon. That’s what we’re fighting for”. It has been reported that Grayling initially favoured giving the Virgin franchise a management contract, effectively keeping them in control of the service but with no risk to their profits. However, it seems there were concerns at Number 10 due to the current Tory instability. The party is in its weakest position in years so there were doubts whether the government could take any political backlash.
Indeed just today, Jeremy Corbyn stated “if the prime minister cannot negotiate a good deal for Britain why doesn’t she step aside and let Labour negotiate a comprehensive new customs union and living standards backed by trade unions and business in this country.”
Comment from Henry Jones – Director of Communications
The decision to renationlise the East Coast Main Line shows one thing. The Tories have seen how popular Labour’s policies are, and have decided to implement them themselves. In short, the Tory government is taking a leaf out of Labour’s book:
“On our railways, we pay some of the highest fares in Europe for increasingly unreliable and overcrowded services.”
Labour Party manifesto, 2017
In 2017, Labour said they would start ‘bringing our railways back into public ownership, as franchises expire or, in other cases, with franchise reviews or break clauses’. This was one of their most popular policies of the election, and especially appealed to me. I frequently travel by train, and fares are ridiculously high, and getting higher. Furthermore trains are consistently late. The tweet below encapsulates the current state well:
Returning to a more serious point, the case for nationalisation of our railways is clear. Integrating the UK’s expensive and fragmented rail network under public ownership could save hundreds of millions and also provide a better service for everyone.
For those who argue for privatisation, let me present you with maths. A one way ticket from London to Manchester has increased by 238%, from £50 in 1995 to £169 today.* That is more than three times the rate of inflation.
Official figures show that all but one of the private train operators in the UK receive more in subsidies than they return in the form of franchise payments to the government due to the subsidies paid to operators when they make losses. Subsidies to the rail industry have increased dramatically and the British taxpayer now pays 5.1p for every km travelled by a passenger on a private rail operator.
A program of nationalisation would reduce costs for the government in a number of ways. The amount shareholders claim in dividend payments are currently £200m a year. When in public hands in 2013 East Coast Mainline made £217 million for the taxpayer. Money that would have gone to shareholders if it would have been in private hands.
In the current system, the taxpayer pays for the infrastructure and foot some of the bill if the operators make a loss but take home none of the profits. It’s a fool’s deal for passengers and taxpayers, but good for the few rich men who own the operators.
‘Transport for Quality of Life’ estimate that £76m a year could be saved on private subcontractors by creating the staff positions in house. Finally, more than £2m per year could be saved in admin costs.
Instead of this being paid to shareholders, this amount could be reinvested into the railway and reduce the taxpayer’s contribution. This windfall into the exchequer could also be used on other public services. Teachers, nurses and police officers could finally be awarded the full pay raise they deserve.
Private firms like Virgin hike up train fares and profit from commuters. Our railways, although initially look competitive, are a monopoly. If I want to get the train from my home in Sherborne, Dorset, to London Waterloo, the only choice I have is to use South West Trains. They can charge whatever they want and I have no choice but to pay it.
Prices are high, and trains are inefficient. Prices are high because firms are incentivised to make a profit. The Government is not. A national rail service can afford to lower prices until they trains just break even without causing financial damage to the company. Our trains are late because, similar to the previous point, they’re more incentivised to make money than to be on time. Train companies would rather cut their engineers and save money through wages and then just take the delays that come with the longer repair times.
Nationalisation is the solution. Gayling’s decision today is a rare bold move from the Tory government, and a good one. But we mustn’t hide from the fact that the Tories are implementing Labour party policies. I echo Mr Corbyn’s comments today. If May cannot provide a fair and efficient system for the United Kingdom, she must step aside.
*Figures correct as of 1430, 16th May 2018. London Euston (EUS) to Manchester Piccadilly (MAN), departing 0720. Source: Trainline