The new UK government’s plans to nationalise rail services are thundering down the parliamentary tracks faster than most trains on the country’s rickety rail network. They add up to a major reversal of one of the flagship Conservative privatisations of the 1980s and 1990s. The commitment of Sir Keir Starmer’s Labour to “move fast and fix things” is commendable; fixing the railways is important not just for passengers but to boost economic growth. But in prioritising ownership it is focusing on the wrong issue.
A bill that received a lightning third reading on Tuesday will return franchised passenger rail services to public hands when existing contracts end or reach a breakpoint — which at least means this renationalisation has little upfront cost. The government says it will produce a more centralised network, under the “directing mind” of a still-to-be-created arms-length body, Great British Railways. It touts the potential to cut costs by removing duplicative bureaucracy, and to simplify the unpopular maze of ticketing.
The danger, though, is that as with British Rail in the 1970s, public ownership will mean poor management and cost control, and empower rail unions with which Labour has just expensively settled long-running pay disputes. Recent experience shows state control does not guarantee better service. Ask long-suffering passengers of Northern Rail, one of four previously franchised services already taken back by the state.
The flawed franchising system created distorted incentives; several large franchises failed after overpromising on revenues. But the Conservative government committed in 2021 to shift to passenger service contracts with private companies, which pay a fee for providing tightly specified services with penalties for failures to meet targets. This was a sensible concept that avoided full nationalisation. Several countries, including Germany and Sweden, use service contracts on some services. (In Japan’s famously reliable rail network, the private sector takes the lead on almost all routes, though with a very different structure to Britain’s.)
With about half of cancellations blamed on infrastructure owners, the biggest problem dogging Britain’s railways is not ownership of operators but constrained and crumbling capacity. This follows years of inconsistent and inadequate government-led investment in rail infrastructure, most of which was returned to public hands under Network Rail in 2002. Sustained higher investment in tracks is vital — but Labour, though it has promised a more detailed rail reform bill in due course, has so far said little on this subject.
The need is all the greater after then prime minister Rishi Sunak last year cancelled the remaining northern leg of HS2, the high-speed project from London originally to Manchester and Leeds. Though costs had ballooned, HS2 promised new capacity as much as speed. The government must urgently find other ways to ease congestion on the West Coast main line, where commuter and intercity services share tracks in places, and which is vital for the net zero priority of shifting freight from roads to rail. It should study a plan from city mayors and engineering firms for a cheaper, privately funded line along HS2’s axed Birmingham-Manchester route.
It would also be helpful for the government to clarify its view of Northern Powerhouse Rail, the proposed east-west line connecting northern English cities that is central to revitalising services. And it should draw up coherent plans for redirecting funds no longer being spent on HS2 to other projects.
In doing so, Labour should heed the advice of a policy review it commissioned, and seek private funding too. The report led by former Siemens UK boss Juergen Maier recommended new partnerships, akin to those often used in Europe and Asia, involving “blended finance” — with the private sector taking on delivery and recouping a return later. In revitalising rail, Britain’s new government would be wise to create room for more private sector investment and involvement, not less.