Can nationalisation fix England’s rail network?

Britain’s experiment with rail privatisation will come to an end on Thursday, closing three decades of controversy and starting the complex challenge of renationalising an industry in crisis.

The Labour government’s flagship “public ownership bill” will become law when it receives Royal Assent later on Thursday, and state takeovers will begin within months.

This will end the privatisation era which began in 1994 and was designed to bring in a mix of corporate efficiency and swashbuckling entrepreneurship, but ended a byword for failure.

The private sector delivered passenger growth and investment before the pandemic. But it ended with several failed operators, fare rises and a collapse in reliability.

About 40 per cent of services are already being run by the state after four failing services were taken over by the previous Conservative government.

This broader state intervention in recent years was precipitated by the Covid-19 pandemic which forced passenger numbers to drop dramatically. Ministers subsequently put train operators on tightly specified contracts.

Now, Labour ministers have promised to complete the job of nationalisation within this parliament, setting the scene for state takeovers on a scale virtually unseen since the 1945 Attlee government.

“Don’t underestimate the size of the task, it is huge,” said Graham Eccles, a veteran executive who was involved in the privatisation of the old-state owned British Rail in the 1990s, and went on to manage private train companies. “But if you get it right it is very much worth delivering.”

Under the bill, contracts to run train operators which are currently let to private companies will be permanently returned to the government when they expire.

Staff, rolling stock leases and other assets must be transferred overnight, while the railway continues running.

Overseeing this transition will fall on the “Operator of Last Resort”, a public body which runs nationalised trains on behalf of the government. It currently has around 30 staff but plans to double its headcount by March 2025.

Several people with knowledge of the government’s plans said Greater Anglia, Southwestern Railway, c2c and West Midlands Railway are expected to be nationalised within the first year. But they warned that putting the industry back together will be more complex than dismantling British Rail because it has become so fragmented.

Private operators run fleets of different trains, while staffing practices and pay have diverged, with some companies contracting drivers and guards to work seven day weeks, and others reliant on unions agreeing to work overtime to run trains.

The state is set to take on a struggling, cash-strapped railway. Only 70 per cent of trains in Great Britain ran on time in the second quarter of this year, according to the most recent official data, amid ageing infrastructure, a shortage of drivers and timetables which are reliant on overtime.

The government spent £11.9bn supporting the industry in the 2022-2023 financial year, the most recent for which figures are available. That compares with £5.1bn in 2018-2019, the last year before the pandemic hit.

“When we got British Rail ready for privatisation we were doing it with a well performing railway. Today’s guys need to do it against the background of a seriously underperforming railway,” Eccles said.

Supporters of nationalisation said it will save the Treasury roughly £120mn a year paid in management fees to private companies, and simplify the byzantine structures created since privatisation, including around 55mn different train fares currently on sale.

“We are going to see . . . an end to the failed fragmentation of our network, and a railway brought back into the public sector, where it belongs, to be run as a public service,” said Mick Whelan, general secretary of drivers’ union Aslef.

Ministers plan to bring new legislation next year to further reform the industry and hand control of the operators to a new public body — “Great British Railways” — which will unite track and train for the first time since British Rail disappeared in the 1990s.

People on all sides of the debate agree it will be these reforms which determine the success or failure of Labour’s plans.

But those involved in the process are aware that it will be judged on one simple metric: can the trains run on time again?

To do this, the nationalised industry will need to recruit more drivers, invest in infrastructure and try to harmonise working practices to reduce its reliance on overtime.

The outgoing private sector believes the whole process will distract from the basic task of fixing the railway’s performance, and overhauling its structure.

“This is a watershed moment that means the government has now assumed direct responsibility for improving the UK’s railways,” said Andy Bagnall, chief executive of Rail Partners, which represents private companies.

The first operators to be nationalised under Labour will join four in England already in public ownership: LNER, TPE, Northern and Southeastern. The Welsh and Scottish railways are also already under devolved government control.

Their experience suggests that nationalisation in itself will not be a silver bullet.

An FT analysis of official data showed that just over 6 per cent of trains run by nationalised operators were cancelled or delayed by more than 30 minutes in the year ending August 2024, compared with 6.4 per cent for those still under private franchises.

At LNER, which runs trains from London to the north east and Scotland, government subsidies fell from £96mn in 2023 to £36mn this year. Its cancellations — poor for much of this year — have improved since the government signed off a new pay deal with drivers.

Meanwhile the biggest rail operation outside London, Northern Rail demonstrates the sharper end of the challenges lying ahead. Its subsidy has ballooned from £598mn in 2023 to £648mn this year.

It was brought under emergency control in 2020, after years of poor performance. Another surge in cancellations earlier this year resulted in Northern breaching its contractual obligations.

The government recently agreed to fund new overtime deals with unions, resulting in an improvement in reliability. But such agreements cost significant amounts of money. And replicating these across the industry would be hugely expensive.

Meanwhile, Northern is still expecting to slash its Christmas timetable in order to avoid more waves of ad hoc cancellations.

“There is a lot of naval gazing and fretting,” one industry chief executive said. “But if I am a passenger I want the trains to turn up and run on time and be reasonably priced. That’s kind of it”.

Additional reporting by Rachel Rees in London