Impact of the privatisation of British Rail

The impact of the privatisation of British Rail has been the subject of much debate, with the stated benefits including improved customer service, and more investment; and stated drawbacks including higher fares, lower punctuality and increased rail subsidies. The privatisation of British Rail began in the 1990s.

Development of British rail since privatisation

Customer service

Passenger satisfaction, according to the National Rail Passenger survey, has risen from 76% in 1999 (when the survey started) to 83% in 2013 and the number of passengers not satisfied with their journey dropped from 10% to 6%. However, the impact of the Hatfield rail accident in 2000 left services seriously affected for many months after.

According to a 2013 Eurobarometer poll, satisfaction with rail of UK respondents was the second-highest in the EU, behind Finland. The poll found that average UK satisfaction over four different areas was 78%, ahead of France (74%), Germany (51%) and Italy (39%).

Level of traffic

Since privatisation, the number of national rail journeys had increased by 128% in 2019-20 and the number of passenger-km had increased by 126%, after a period of mostly decline during nationalization. There is controversy as to how much of this is due to privatisation, and how much is due to other factors such as rising fuel prices, road congestion, low unemployment, and in particular, GDP growth. Critics of privatisation such as the RMT union have pointed out that passenger numbers started rising 18 months before the privatisation process began, as the economy started recovering from the recession of the early 1990s. However this growth has only ever really stopped during the COVID-19 pandemic, with passenger numbers growing faster than comparable European countries such as France or Germany (60% compared to 25% and 23% respectively from 1998–2015).

Fares and timetable

In an attempt to protect passengers' interests, certain fares (mostly commuter season fares) and basic elements of the timetable were regulated. However, the train operating companies (TOCs) still had quite a bit of latitude in changing unregulated fares and could change the number of trains run within certain regulatory and practical limitations. Overall, fare increases have been at a significantly slower rate than under British Rail (BR). According to the ''Global Railway Review'', the average annual real-terms increase between 1996 and 2011 was 1.3%, compared to 2.2% during the last 15 years of British Rail. So far as the timetable is concerned, many more trains are being run each day than under BR as operators have tried to run more frequent - but usually shorter - trains on many routes to attract more customers.

Twenty years after the privatisation the increase in fares hasn't been uniform: standard single fares have increased by up to 208% whereas season ticket price rises hover just below or slightly above the rate of inflation, with an increase of between 55% and 80%,Have train fares gone up or down since British Rail?
, BBC News, 22 January 2013 while the price of Advance tickets has decreased in real terms: the average Advance ticket in 1995 cost £9.14 (in 2014 prices) compared to £5.17 in 2014. This is to try and reduce the huge number of people travelling at peak times. For example, over half of National Rail journeys into London occur in the three hours from 7am to 10am, with half of these journeys (a quarter of the days total) occurring between 8 and 9.
In January 2018 fares across all operators were 20% higher in real terms than they were in January 1995. The number of journeys per person and travel time has increased, while the average journey distance has decreased.

New trains

The promoters of privatisation expected that the rolling stock companies (ROSCOs) would compete against each other to provide the TOCs with the rolling stock they required. In practice, in most cases the individual TOCs required specific classes of trains to run their services, and often only one of the ROSCOs would have that class of train, resulting in their having to pay whatever the ROSCO concerned cared to charge for leasing the trains. Old rolling stock was extremely profitable to the ROSCOs, as they were able to charge substantial amounts for their hire even though British Rail had already written off their construction costs. As trains grow older, the cost of their lease does not decrease. This was due to the adoption of ' indifference pricing' as the method of determining lease costs by the government, which was intended to make purchasing new trains more attractive when compared to running life-expired trains. The average age of trains in the UK has decreased from that under the last years of BR, as average rolling-stock age fell slightly from the third quarter of 2001–02 to 2017–18, from 20.7 years old to 19.6 years old, while orders for new stock will bring down the average age to 15 years by March 2021.

Rolling stock manufacturing

The rolling stock manufacturers themselves suffered under privatisation; with the hiatus in new orders for new trains caused by the reorganisation and restructuring process, the former York Carriage Works (acquired by ABB) had been severely downsized and eventually closed. It was reopened by Thrall Car Manufacturing Company in 1997, to manufacture 2,500 wagons for EWS, closing again in 2003.

The former Metro-Cammell plant in Washwood Heath (later owned by Alstom) followed suit in 2004, closing its doors once the last of the Class 390s rolled off the assembly line. Of the original manufacturers, only the former Railway Technical Centre and associated British Rail Engineering Limited works in Derby and Crewe survive to the present day; now owned by Bombardier. Hitachi opened a new in Newton Aycliffe in 2015. CAF opened a new plant in Newport in 2018 while Siemens are to open a new factory in Goole.

Punctuality and reliability

The key index used to assess passenger train performance is the Public Performance Measure, which represents the percentage of short-distance trains arriving within 5 minutes, and mid-to-long-distance trains within 10 minutes of schedule. From a base of almost 90% of trains arriving on time in 1995, the measure peaked at more than 92% in 1996, before dipping to around 78% in 2002, mostly due to stringent safety restrictions put in place after the Hatfield crash in 2000. However, in 2018-2019 the PPM stood at about 86%, after the annual moving average increased to almost 92% in 2012.

Safety

The railway can point to continued improvements in safety under privatisation; in fact the rate of improvement increased compared to that experienced in the last years of BR, according to research by Imperial College London. The researcher said their findings showed that 150 people had probably lived who might have been expected to die in crashes had pre-privatisation trends continued.

In 2013, according to a European Railway Agency's report, Britain has the safest railways in Europe based on the number of train safety incidents.

Several major rail crashes occurred in the early years of privatisation including the Southall rail crash (1997), Ladbroke Grove rail crash (1999), Hatfield rail crash (2000) and the Potters Bar rail crash (2002). The 2020 Stonehaven derailment killed three people.

* List of rail accidents in the United Kingdom

Investment

Since privatisation, the amount of investment has gone up nine-fold, from £698m in 1994–95 to £6.84bn in 2013–14. There is Government investment across the network in speed improvements, electrification, in-cab signalling on the Cambrian Coast Line (paid for by the Welsh Assembly Government), the Northern Hub, the Thameslink Programme, and High Speed 2.

Due to the Hatfield accident in 2000, Railtrack undertook large-scale track relaying without sufficient planning, and much of the work was substandard and subsequently had to be re-done. Railtrack's poor project management abilities were exemplified with the West Coast Route Modernisation project, which was intended to deliver a 140 mph route in 2005 at a cost of £2 bn, but which finally delivered a 125 mph route in December 2008 at a cost of £9 bn, which was a major factor in the company's financial collapse.

Subsidies

After initially decreasing by over half, rail subsidies spiralled after the Hatfield rail crash in 2000. In 1994, the total government support received by British Rail was £1,627m, (£2,168m in 2005 terms, adjusted by RPI), while in 2005, government support from all sources totalled £4,593m. Once the extra safety investment after the Hatfield crash had finished, subsidies have since been brought under control. Rail subsidies have increased from £ billion in 1992–93 to £ billion in 2018–19 (in current prices), although subsidy per journey has fallen from £ per journey to £ per journey. However, this masks great regional variation, as in 2014–15 funding varied from "£1.41 per passenger journey in England to £6.51 per journey in Scotland and £8.34 per journey in Wales."

Efficiency

One of the principal expectations from privatisation was that the railway service could be delivered more efficiently in the private sector because of the profit motive. According to Dr David Turner, the expectation that there were considerable costs that could be slashed from the system was not fulfilled; new operators found that BR had already done much of what could be done to improve efficiency. According to one dataset published by the Rail Delivery Group, "day-to-day industry costs have increasingly been covered by non-government revenues, as industry-generated revenue covered 99% of industry running costs in 2013–14 compared with 72% in 1997–98". Since 1997–98, train company operating costs per passenger mile have reduced by 20% in real terms. The privatization of British Rail generated £800 million in savings due to efficiency gains by 2001.

However, the revenue earned from the rail companies from their operating activities has decreased when looking at the percentage of total rail system revenue, and public funding has increased in real terms. The British rail network has never at any point in recent history managed to cover its costs from passenger fares. Government in recent years has reportedly set a target of recovering 75% of costs from passengers, a figure achieved only once since privatisation, but several times before.

Expenditure can be broken down as follows:

Profitability

Journalist Aditya Chakrabortty published calculations by the Centre for Research on Socio-Cultural Change indicating that "in the financial year ending in March 2012, the train companies gained an average return of 147% on every pound they put into their business." However, fullfact.org found that in reality the amount of return made after subsidy and paying money back to the government was 3.4% for the financial year ending March 2012 (i.e. the same period).

Political control

One of the benefits promoted for privatisation is that it would remove railways from short-term political control which damaged an industry like the railways, which had long-term investment requirements. This has not happened and, with the latest changes that have been made to the railway structure, some say that the industry is more under government control than ever before. This was consolidated in September 2013 when the borrowing needs of Network Rail were once more taken under HM Treasury control and added to the Public Sector Borrowing Requirement effectively re-nationalising the Government-owned Not For Profit company which had been created by Transport Minister Stephen Byers after the collapse of Railtrack.

Ownership

In theory, privatisation was meant to open up railway operations to the free market and encourage competition between multiple private companies. Critics have pointed to the fact that many of the franchises have ended up in the common ownership of the few dominant transport groups such as Abellio, Arriva

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