Anna Birley Policy Officer 1st March 2018 Blog Ownership Matters Transport Share Tweet Three years ago today, the Conservative Government privatised the publicly owned East Coast Trains. After more than five years under public control, services were put into the hands of Stagecoach and Virgin. When run in the public sector, East Coast returned over £1bn in premiums to the taxpayer, as well as several million in profits. It was one of only two firms, according to the rail regulator, which made a net contribution to government coffers between 2013 and 2015 – paying back more than it received in subsidy or indirect grants. In contrast, the private Virgin/ Stagecoach partnership running the route found itself in financial difficulties late last year after apparently overbidding to run the route. Taxpayers have been left to foot the bill, as the Transport Minister, Chris Grayling, announced that Stagecoach and Virgin would be allowed to walk away from the franchise early. When the railways were privatised in the 1990s, there was a promise from policymakers that passengers would benefit from a better, cheaper service, while requiring less subsidy from the taxpayer. However, the experience of privatisation on the East Coast speaks for itself. This is the third franchise on that line to collapse – after GNER failed in 2007 and National Express failed in 2009. As Frances O’Grady, General Secretary of the TUC, said: “Privatisation broke it. Public ownership fixed it. And now privatisation has broken it again. Ministers made the same mistake twice. The lesson of East Coast is that railways should be in public ownership.” But it isn’t only East Coast that’s broken. There is a more fundamental problem at the heart of our railways – competition doesn’t work. Even the thinktank founded by Margaret Thatcher, the Centre for Policy Studies, accepts that there is a fundamental failure of rail competition in their recent report ‘The Cost of Nationalisation’. Genuine competition for franchises is at an all time low, and instead of a competitive market, the awarding of contracts in the absence of any even nominal competition is now commonplace. The Department for Transport’s own Franchise Schedule shows at least six of the franchises are currently in, or have planned, direct awards. The other fallacy is one of funding – this assertion that privatisation would reduce the bill for the taxpayer. The reality, borne out of twenty years experience of the private system, is that the only real methods of funding a railway are from the pockets of the tax payer and ticket sales to passengers. Private investment has been minimal, and reported returns to the treasury are little more than neat accounting tricks. Meanwhile, as backroom deals are made between big companies and rail ministers about how our public transport is run, and at what cost, there is little voice for passengers or staff. There is a serious accountability deficit at the heart of our railways – when passengers, staff or politicians point to problems, the current arrangement is so complicated and opaque that companies can simply point the finger elsewhere. Our ability to track how public funds are spent, who our train fares subsidise, and where abuses of the system take place, is hindered by our private system. But another way is possible – and the current debate on public ownership opens up an opportunity to explore new approaches where public ownership replaces the profit motive with accountable decision making. The Co-operative Party argues that public ownership in rail and other sectors has to be about more than profits – a co-operative approach enables participation by workers and passengers, creating accountable and democratic structures which act in the public benefit. Indeed, co-operatives, by definition, are publicly owned – by the ordinary men and women who have come together to start up, own and run shops and businesses for over a hundred years. This common ownership means that the people using and working in those organisations, rather than distant shareholders, call the shots and benefit from their success. And today, those same principles can apply to our railways – a truly democratic form of public ownership which puts decision-making back into the hands of the people who work on our railways and the passengers who travel on them. The Co-operative Party has long explored mutual models for our rail services and infrastructure, such as in ‘A People’s Railways for Scotland’ and ‘Rail Cymru’ – and in the coming weeks we will be building on this thinking with our Ownership Matters report, setting out a blueprint for Government, to make good on the pledge to bring our railways, along with energy and water, into democratic public ownership.