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Rail privatisation unspun

Rail campaigners have staged 48 hours of action in support of public ownership at stations up and down the country on 31 March and 1 April. Public ownership of rail isn’t a fringe issue, it has widespread public support - a YouGov Poll in 2014 showed that 60% of respondents support running our railways in the public sector, and if we look at the evidence, it’s not surprising why this is the case.

Public ownership could deliver real cost savings for passengers, taxpayers and families. According to new research released yesterday – £1.5bn could be saved if the 11 franchises up for renewal in the next five years were run in the public sector and this money could be used to cut fares. The research by Transport for Quality of Life for the Action for Rail campaign, shows that the biggest saving would come from capturing the money that train companies operating these routes pay to their shareholders – which would amount to around £520m. More money could be saved by eliminating the bidding costs for train companies which is added to their cost base – this is estimated at £40m per franchise competition. So over the next five years – another £320m could be saved.

The research includes a number of areas where savings could be made including from the additional costs of interfaces between the 11 franchises; dividends paid to Network Rail contractors; and duplicated management and marketing costs.

The 11 franchises up for renewal in the next five years are: Northern, Transpennine, Greater Anglia, West Coast, London Midland, East Midlands, South Eastern, Wales & Borders, Great Western, South Western and Cross Country. If these routes were operated by the public sector, the following could be possible:

• The introduction of free off peak travel for children travelling with their parents,  by the end of 2015.
• A 10% cut in regulated fares, including season and anytime day tickets, from 2017.
• A 3% cut to all fares from 2020.

If we compare the possibilities of the next five years with the last five years under privatisation, the case for public ownership is stronger still. Over the last five years, fares have increased over two and a half times faster than wages, and the average season ticket has gone up by 27%. We now have the highest fares in Europe. In January 2015, Action for Rail released analysis showing that commuters in the UK could be spending more than twice as much of their wages getting to work than commuters using publicly owned railways in France, Germany, Italy and Spain. Cheaper fares under privatisation is one of several myths that private train companies and the government have peddled to maintain the charade of privatisation.

When we’re out campaigning – commuters sometimes express concern that under public ownership, it’s the public that will end up paying for the railways. It’s not surprising that this concern is raised – because train companies’ and the government’s slick PR would lead us to believe that the private sector brings lots of investment into the railways. But that’s the second myth.

A comprehensive analysis of the rail industry by Transport for Quality of Life, Rebuilding Rail, concludes that private investment represents just 1% of all the money going into the railways. Most investment comes directly from taxpayers or via Network Rail borrowing (underwritten by the government), not from the operators themselves. If we take the example of upgrades to the West Coast Main Line, which have no doubt benefited Virgin Trains, these cost nearly £10bn and were substantially covered by taxpayers, not private train companies. Similarly, the government has committed £38bn in investment for rail infrastructure over the next five years, but this will be delivered by taxpayer funded Network Rail.

As well as funding the vast majority of investment that goes into the railways, under privatisation taxpayers are effectively subsidising company profits. In 2013/14 taxpayers contributed £3.8bn to the rail industry, while private train companies paid out £183m in shareholder dividends. ‘Privatisation is a better deal for taxpayers’ – is another myth. The cost of running the railways has more than doubled in real terms since privatisation from £2.4bn in 1990/91-1994/95 to around £5.4bn per year in 2005-2010.

Yet another myth repeated by advocates of privatisation is that it has led to increases in passenger growth – but there is no evidence to substantiate this. A report by CRESC, the Great Train Robbery, shows that the growth in passenger numbers is driven by three factors that have nothing to do with the train companies. These are:

• Long-term growth in GDP.
• Changing commuting patterns as employment has concentrated in major urban areas, particularly in London and the South East
• The increase in motoring costs over the period since rail privatisation.

It is a worry that our democratically elected government colludes with train companies and adopts the same language to peddle the myths of rail privatisation – lining up against the interests of passengers and taxpayers. But, in the next five years – we have a real opportunity to make progress towards public ownership. The Action for Rail campaign is calling for a national, integrated and publicly owned railway – because we know from the evidence that this would deliver a far better deal for passengers and taxpayers.