Shadow transport secretary Mary Creagh attacks rail franchising system after prospective parliamentary candidates call for renationalisation

The Labour Party has indicated that it is considering a radical revision to the structure of the rail industry. Speaking this week shadow transport secretary Mary Creagh made a scathing attack on the value for money the franchising system provides to passengers and government.

“Labour is looking at how our rail system could deliver more for passengers and taxpayers, who are paying for this out-of-touch government’s franchising fiasco through higher fares and more public subsidy,” Creagh said. “Commuter fares have risen by 20% over the last four years and a series of sweetheart [Direct Award] deals with train companies mean their profits are set to rise. A whole new generation of people is discovering that you can’t trust the Tories with the railways.”

Creagh’s comments came a week after The Observer published a letter from 31 prospective parliamentary candidates calling for wholesale renationalisation. It suggested that taking franchises back into public hands would enable fares to be controlled. It also argued that public ownership of  franchises would prevent potential funds being siphoned off in TOC profits, as at the one current publicly-owned operator, East Coast. It also claimed that state-owned foreign operators were using UK profits to keep fares down in their home markets.

The arguments were dismissed by the Rail Delivery Group which pointed out that “successive governments instructed operators to increase the average price of commuter fares in real terms every year from 2004 to last year”.

The arguments were dismissed by the Rail Delivery Group which pointed out that “successive governments instructed operators to increase the average price of commuter fares in real terms every year from 2004 to last year”.

The RDG also said that the introduction of Advance purchase fares and other discounted tickets by TOCs meant the average fare was the same as 20 years ago.

Stagecoach chief executive, and RDG chairman, Martin Griffiths added in a response published in The Telegraph that subsidy for train operations has now reduced to zero and the train operator profit margins are typically “low” at 3-4%.

“Passengers don’t need or want pointless ‘right versus left’ battles of the past over ideology, ownership and structures,” he said.

“Some obsess nostalgically about nationalisation, a one way ticket to higher taxes and worse services. Others hide behind unworkable and unnecessary policy wonk concepts such as public sector comparators to bid for rail franchises, misleading the public about the performance of the East Coast franchise.”

Senior TOC sources have privately said that they are “appalled” at the destruction of yield and value by East Coast’s pricing policies.

He concluded: “All of the challenges we face – prices, costs, capacity and investment – are interlinked. Each has consequences for the other. Politicians cannot cherry-pick and all those with an interest in a strong railway must not let them duck the tough choices.”

 

This article appears inside the latest issue of Passenger Transport.

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