Economy & sustainability

UK General Election 2019: Railways proposals are high on cost, low on reforms

Commentary
Posted on: 5th December 2019
Jeegar Kakkad
Head of Productivity and Innovation

UK railways aren’t working for passengers. Complex fares, over-crowded trains and disrupted journeys have left passengers frustrated and feeling they aren’t getting the best fare or the quality of service they deserve.

But the election manifestos largely ignore the needs of passengers, with the main parties offering up high-cost proposals that won’t solve the real problems with the railways.

Looking first at the Tories, they promise to spend £500mn reversing the Beeching Axe. But this level of funding would only pay for about 30-40 miles of new track, or just 0.5% of the cuts and only a handful of projects at most. Apart from the spending pledge, their manifesto provides no details on how they would prioritise which stations to reopen or whether the services would be viable without subsidy. In the absence a coherent strategy, the pledge risks politicising decisions to reopen individual rail stations, leading to either disappointed communities or unsustainable costs for the taxpayer.

And while the Tories are happy to make small-scale promises, they are unwilling to commit on the biggest capacity decision: proceeding with HS2. This ambiguity lacks strategic coherence, as HS2 is critical to the Tories’ proposals to invest in the Northern Powerhouse Rail and the Midlands Rail Hub. In fact, both of these projects have repeatedly argued that completing HS2 is the most cost-effective, flexible, and efficient way to unlock capacity and services to over 70 stations across the existing network.

Labour, in turn, believes that privatisation has led to passengers paying high prices for old, unreliable trains while private companies get rich off taxpayer subsides. In Europe, they argue, passengers pay less for faster, greener, more modern trains run on a state-owned railway. While this paints a pretty picture, ideology blinds Labour to reality.

Labour’s plans to nationalise rail differ from their proposals for other industries: they don’t need to borrow to buy the train operators as they can simply wait to take over services once a franchise ends.

Ten franchises are set to end over the next five years, and given their average profits, this could give Labour an additional £100mn-£150mn per year to invest in the railways. The problem for Labour is that this would not be the transformational change they are promising passengers – that ‘saved’ profits amount to around 1% of what Network Rail already invests in the railways. Nor is it a free lunch: the state taking over rail franchises comes with transitional and operating costs and the taxpayer taking on all the financial risks of operating railways.

Given the wealth of evidence on rail passengers’ real concerns, Labour’s latest plan to cut regulated fares by a third will likely lead to more overcrowding in the short-term before capacity can catch-up and is an expensive distraction from delivering value for money for passengers. In fact, Labour’s focus seems to be squarely on producer, rather than passenger interests. Promises to put more staff on trains will come at a cost, even though the Rail Standards and Safety Board (RSSB) have concluded that there is no evidence that more guards and conductors improve passenger safety on or off the train.

Ultimately, nationalisation won’t fix what’s wrong with the UK railways, not least because the solutions – genuine fares reform, investment in capacity, and a rail structure that puts passengers first – are already within government control.

What passengers really want

Extensive surveys of passengers by independent watchdog Transport Focus shows that passengers care more about value for money – paying a fair price for a seat on a reliable service – than they do about lower rail fares. In fact, rail fares having risen by just 1.9% in real terms over the past five years.1ORR, ONS and author’s calculations The real problem with fares is the complexity: fares regulation dating back to 1994 have combined with two decades of reforms to franchising agreements to create 55 million different fares, making it hard for passengers to feel like they’re getting the best deal. Only a complete overhaul and simplification of the fares and ticketing system will help address this problem.

Passengers also have to put up with overcrowding, as one in every six passengers in cities must stand and with relatively high increases in standing in Birmingham, Leeds and Liverpool since 2017. And there’s every chance passengers will be standing for longer, as only 65% of trains arrive on time.

Improving reliability, however, requires investing in new capacity. British railways have hit the limit of what they can achieve by simply putting more trains on the same track. Tensions between commuter, regional and freight results in a lower and slower capacity than would otherwise be the case. While new signalling on tracks can help, moving faster, express trains onto their own tracks by completing HS2 is the most sustainable solution.

In addition, the incentives and contracts used in the rail system don’t put passengers first. Too often, Network Rail and train operators are set over-specified, and conflicting targets and incentives, which ultimately raises costs, hurts reliability, and fosters a blame game. As seen during the 2018 timetabling disaster, it’s passengers that suffer from a rail system that isn’t designed to focus on outcomes for passengers.

But rather than address passengers’ concerns head-on, the Conservatives and Labour miss the mark because they don’t appear to understand the reforms that will really deliver for passengers: fares reform that radically simplifies ticketing, a significant investment in capacity to free up more services, and restructuring incentives for train and track operators to put passengers first.

The policy answers being offered by Labour and the Tories on rail are, therefore, a perfect metaphor for this election: the parties are stuck in the economic populism of the left and right, offering simple answers with high costs rather than deep reform and improving outcomes for citizens.