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Empty Train Station

Proceeding with caution

 

While a renationalised railway may lead to better organisation and communication, think tank research suggests it might not be the ticket to price decreases. 

 

“The fundamental thing is that our railways are a hugely expensive operation to run, and there isn’t any very obvious way of cutting these costs,” says Len Shackleton, from the Institute of Economic Affairs (IEA). 

 

Shackleton’s research points to the historic aspect of UK rail’s inefficient “over-engineering” as the reason behind its high costs. The model is old-fashioned ‘heavy rail,’ which involves a huge investment in manual checks, safety and signalling. Unlike almost any other railway in the world, UK rail was invented by the private sector, constructed using different technology in different regions and, over time, linked.

 

Another expensive aspect of UK rail is the complicated landholding system. “This was the reason why HS2 was colossally expensive,” says Shackleton, “unlike Spain or Italy, they had to negotiate every inch of the way, because the land was all privately owned”.

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'A red herring'

 

When it comes to private company profits as a reason for renationalisation, Shackleton says that some of the figures circulating are misleading, for example Mick Lynch’s 2023 statement that “£1.5 billion or more leaks out of Britain’s railways every year”.

 

“If you look at the figures, the maximum amount that’s been paid out in dividends has been something in the order of 3 per cent”, says Shackleton, “which is trivial. If this was a sector which was paying out 20 per cent of its revenue in dividends, it would be a different story”.

 

Many people hope that renationalisation will pave the way for higher financial contribution from the government, easing pressure on passenger fares.

 

Recent IEA research highlights that last financial year the government subsidised the railways £12.5bn, already exceeding the £11bn of passenger revenue. An even higher state contribution may be unlikely in the current economic climate, with a £22bn fiscal black hole.


“I think four or five years down the road, when fares don’t come down, people will say ‘ah, why don’t we privatise the railways again?’” says Shackleton, “this nationalisation thing will be an ongoing dance”.

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