Renationalise the railways?

The West Coast franchising debacle has highlighted serious shortcomings in the structure of the railways – but it should not be used to justify renationalisation.

Indeed, the role of the Department for Transport in the scandal shows the railways were never properly privatised in the first place. Politicians and officials retain tight control over the industry, deciding service levels, fares and investment priorities.

Such interventions explain why privatisation hasn’t worked as well as initially hoped. While there have been successes – including a large increase in ridership and better safety – the level of taxpayer subsidies has risen to unacceptable levels (about £5 billion a year).

High subsidies reflect the complex, artificial structure imposed on the industry. Layers of bureaucracy mean costs are far higher than on comparable networks abroad.

Another factor is wasteful investment. Economic objectives have tended to be outweighed by politics and the desire to please powerful special-interest lobbies. The recent decision to electrify loss-making branch lines in Wales is a recent example of this tendency.

Renationalisation would only make these problems worse. It would inevitably lead to even more bureaucracy and political interference. The historical record bears this out. Nationalisation was tried before and outcomes were poor.

Rather than going back to the 1970s, the government should restructure the railways along genuinely private lines. The entrepreneurship and innovation of the private sector should be unleashed to deliver lower subsidies, cheaper fares and better customer service.

November 2012, Director