The state of Britain’s railway services is nothing to be proud of. For many of the nation’s commuters, staring hopelessly at a platform display with the words ‘cancelled’ plastered over it has become an all too familiar experience. But, while it may seem like the easy route, nationalisation is not the solution. How did the United Kingdom’s once revolutionary rail transport industry become such a laggard?
As it stands, Britain’s railways operate through a combination of both public and private entities, governed by both regulatory bodies and contractual agreement. Private train operating companies such as Greater Anglia are held on short-term contracts under Department for Transport specifications. Train Operating Companies (TOCs) lease their carriages from Rolling Stock Operating Companies (ROSCOs) whose carriages then operate on government-owned Network Rail’s infrastructure. But as we can see, this mix between the public and private sector is not optimal.
The Labour Party have pledged to renationalise British railways within five years of coming into power. With many train operating company’s contracts set to expire within the next Parliament, the lines will presumably be operated by a government-owned operator, as was proposed under Jeremy Corbyn’s regime.
But what this proposal seems to neglect is the fact that ROSCOs have brought about a lot of private funding into the industry, where in 2022-2023 they paid in dividends of over £409 million. They have also introduced new generations of trains which would not have been feasible for the British government under the previous rail setup. None of this has changed.
It would cost the government a hefty £50 billion to buy out the ROSCOs now. Considering that public sector debt has hiked to an eye-watering £2.7 trillion as of February 2024, this should not be a priority. We must learn the lessons from the post-war period where nationalised industries had to compete against other government priorities. With increased political interference will come an increased instability of investment. In all likelihood, the purchase of these vehicles will be funded from the pockets of British taxpayers. Is this really what we want?
Moreover, since the Covid-19 pandemic we have seen a higher number of people opting to work from home and therefore a decrease in the number of commuters. Despite seeing a post-Covid 39.9% increase from the previous year, between 2022-2023 passenger numbers are still 20.4% lower than than their peak. In a private market, this would act as a signal to service providers that there is a misallocation of resources which could then be dealt with through market forces – something which central planners would lack the information to do.
Unlike TOCs who operate under government contracts, fully private train companies would have greater incentive to grow and improve the market and would allow for further entries into the market on neglected routes.
As long as the government is involved, TOCs will have no incentive to maintain the highest standards on their trains. Prices will remain high and standards will remain suboptimal. These issues we are experiencing are not down to private ownership, but are the consequence of continued government intervention and regulatory failure. If we move away from this broken system, we can give Britain the efficient railway services it deserves.
