This week, to little fanfare, the Government passed a major piece of legislation that will result in the biggest overhaul of the rail network for more than a generation.
Louise Haigh’s departure from the post today, after a historic criminal conviction came to light, is unlikely to derail the Government’s plans in regards to who runs trains. But it will deprive the huge changes to rail the system of one of the biggest proponents of a policy that industry experts are warning could create significant problems for the Government as the years progress.
The Passenger Railway Services (Public Ownership) Act – to give it its formal name – was given Royal Assent on Thursday and kicks off the process for the Government to begin bringing rail services back under public control.
Public ownership a major political gamble
But while the move has long been expected, with Labour making it a key plank of its transport policy ahead of the general election, the decision is still being viewed by those currently running the railways as a major political gamble.
“To use a rail analogy: the train has pulled out of the station with absolutely no idea what its destination is,” one senior industry figure told The i Paper.
The legislation that has been passed has one overarching aim, which is to end the era of privately owned franchises operating the country’s railways, and to allow the Government to take over rail service contracts as they expire.
The Department for Transport argues the reforms are necessary as the current system means 14 different train operating companies and results in a “competing and conflicting” rail network.
According to ministers, the delays, cancellations and general misery suffered by passengers and commuters is a direct result of the byzantine system that has developed in the past 30 years of privatisation.
But the private rail companies are warning that simply moving to public ownership is unlikely to solve the network’s problems.
Writing for The i Paper today Andy Bagnall, chief exec*utive of Rail Partners – which represents the operators said: “Four in ten passenger train miles travelled across the UK are already on trains run by public operators and the evidence shows that public and private operators face the same challenges.
‘Nationalisation won’t lead to more reliable train services’
By Andy Bagnall, Rail Partners chief executive
The Passenger Railway Services (Public Ownership) Act has now received Royal Assent. This is a watershed moment that means the Government has assumed responsibility for the UK’s railways. It is expected that next week the first train company to be brought into public ownership as a result of the Act will be announced, with over half of train companies set to be under government control by the end of next year. The Transport Secretary must now set out how she will deliver improvements for passengers, taxpayers and freight customers.
Andy Bagnall, chief executive of Rail Partners.
Train companies have been calling for radical reform of the railway for several years and want the same outcomes as the Government – a better railway for those who use it and those who pay for it. But, simply changing who runs the trains won’t mean more reliable or affordable services. Four in 10 passenger train miles travelled across the UK are already on trains run by public operators and the evidence shows that public and private operators face the same challenges.
Changing who runs the trains is also unlikely to reduce fares because of nationalisation alone. We already know in the short term that they are in fact going to increase in price, with the recent Budget revealing a 4.6 per cent rise in rail fares from March 2025. Going forward, rail will now be competing for investment with the demands of other public services, including the NHS, schools and defence. This is particularly challenging in the current financial climate.
Of course, with Royal Assent, train companies have lost the argument. We advocated for a public-private partnership on the railways that delivers the best of both worlds for passengers and taxpayers – commercial focus under public control – but the Government has a mandate to deliver on its plans for rail renationalisation. Rail Partners and its members care about the future of the railway regardless of our role in it.
This first Act alone isn’t going to solve any of the big issues on the railway. With responsibility now falling to the Government, the test is how they will deliver a successful railway for the future, to help drive wider economic growth.
And rail operators and industry figures are increasingly concerned about a more immediate problem about to hit the Government and the rail system. The first private franchises due to be handed over have contracts that are due to expire by the spring. But the body charged with taking control of them, Great British Railways (GBR), has yet to be legally established and currently only employs around 15 members of staff.
‘How can they run a service with just a handful of people?’
“It’s like buying all your furniture before you have bought your house,” one senior rail executive said. “How will they hope to run a service with just a handful of people?”
The Department for Transport is due to launch a consultation in the new year before tabling a new, far larger piece of legislation that will contain the vast majority of the Government’s reform plans, including the creation of the new GBR.
But the bill is unlikely to be passed into law until 2026 and the industry estimates that it will take years before GBR is properly up and running. Despite this, the DfT is expecting most, if not all, private rail contracts to be under public ownership in three years’ time.
The department expects to increase its staffing as more rail contracts lapse, meaning personnel will double from the current 15 members of staff next year, and then double again the year after that and so on.
There remain doubts as to whether this will be sufficient, however, with a senior industry insider stating: “It’s a very thin structure to absorb all those operators at the pace the Government wants and run them in a meaningful way that’s going to drive improvements.”
‘Private consultants will be needed’
For many within the rail sector, this means that even after the trains are back under public control, private rail companies will have to be employed as consultants to prop up the system and to provide their expertise.
“We will offer our services as consultants,” the executive said. “For us it is more straightforward, because we can offer our expertise without any of the operating costs, but it is not great for the taxpayer.”
Ministers are expected to set out the Government’s timetable for taking rail services into public hands, but a separate industry figure warned that the speed the Government is moving meant there is “there is no way they will be able” to run the services without support from existing operators.
“The headline train operator might move into the public sector, but there’ll be a long, long tail of support required, on either a straight up commercial basis or on a consultancy basis to support that,” the source said. “That’s the only way they’ll be able to do this at the pace that they’re talking about.”
The likelihood of the Government having to employ rail operators as consultants also raises the prospect that the nationalisation plans could end up costing the public more, despite ministers insisting the reforms would save money.
Asked whether this would lead to the Government being charged at higher rates to keep the trains running, the source replied: “Goodwill is going to be much, much lower than it will have been previously. Operators are sensible businesses and where there’s a market opportunity, they will endeavour to meet it.
‘Goodwill has gone – private operators won’t do the Government any favours’
But the insider added: “I don’t think people will profit gouge or hold them [the Government] to ransom. These are professionals and they will approach transition in a professional and orderly way, they will want the railway to succeed. But they’re not going to do the Government any favours. Something that might have previously been done on goodwill, because you’re part of a mixed public private partnership, none of that will happen. It will now all be on an absolutely hard commercial basis.”
The prospect of handing over rail services is also likely to mean less investment in the system by the rail companies.
As the senior rail executive explained: “If you’re selling your house you will want to ensure it is in a good condition, but that does not mean you will spend money on a brand new bathroom.”
Above all, however, there is bemusement within the sector as to why the Government has decided to take on the political risk of running the railways. While there are obvious vested interests involved with the doom-laden predictions, the political benefits of being able to blame private companies for poor train services was obvious to many working in the sector.
“The political risk is very high indeed,” the same rail industry chief said. “The Government is now taking responsibility for improvement. But things go wrong on the railways all the time – cows on the level crossing, storm damage, union relations. The private sector gave the Government a bit of a buffer. That has now been removed and all the problems we’ve seen in the last four years – that’s all on them.”
William Barter, an independent rail consultant, said it was “inevitable” that the DfT will be forced to turn to the private operators to keep the trains running but insisted that the question of who is ultimately responsible for the service is largely irrelevant.
“We’ve had every type of model possible over the last 100 years. This government has decided to go back to public ownership, and yes there is a risk with that, but there was just as much a risk for the Tories with privatisation,” Barter said.
Risk of a battle with unions
He added that the big questions remain on how the Government will try to rationalise all the different employee terms and conditions across the 14 different operating companies.
“Privatisation effectively created a job market, particularly for drivers, where there wasn’t one before. Trying to bring all of those under one central body might well set up a fight with the unions, which could bring about the prospect of a national strike, but it depends on how it is handled,” Barter said.
Such reforms are due to be set out next year by the Government ahead of introducing the more substantial rail reform bill in the summer.
For her part, before her resignation Haigh admitted she was under no illusion of the scale of the task the Government faces. Speaking in a select committee hearing two weeks ago, she told MPs: “I do not want anyone to underestimate the scale of the reform challenge that we are undertaking.
“I have always been clear that public ownership and simply bringing the operators under the current operator of last resort is not a silver bullet.”
It may not be a panacea, but passengers will be expecting improvements from Labour’s rail reforms, for the Government it is a great rail gamble.
The Department for Transport said its existing “operator of last resort” had “a proven record of swiftly and safely bringing services into public ownership, already managing four operators – with plans to significantly increase its capacity by the end of 2025”.
“Now, our Public Ownership Bill has become law, we’re getting ready to get Britain’s railways back on track,” a spokesperson added. “To ensure the remaining services are seamlessly brought into public ownership, delivering the efficient, reliable rail network passengers deserve.”
