Renationalising the railways – how will Corbyn do it?

Matt Bain

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As Labour’s general election manifesto is leaked, pressure will grow upon the new Labour leader to elucidate in detail how he will deliver each of his policies.

In his manifesto ‘A People’s Railway’ launched in August 2015, Jeremy Corbyn promised to start putting the rail network back into public ownership immediately after winning the 2020 election, with a new Railways Act. He promises a fairer deal for passengers by reintegrating the current system, which is a mess of public and privately run companies. The main obstacles Corbyn faces are vast costs and legal implications. Here is what he is up against.

The property, stations, tracks and signals and owned and run by Network Rail, a state-run company heavily criticised for poor management and for running up huge government subsidy debts. There would be pressure upon Corbyn to reform NR and assure voters that a publicly-owned system will not be similarly mismanaged.

The trains are owned by rolling stock companies (otherwise known as Roscos) which are then leased to private companies like Abellio and Virgin which run the train services. Firstly, Corbyn would have to buy back the passenger and freight trains outright. This in itself would mean a massive bill – estimates range from £6bn to £10bn.

Secondly, Corbyn would have to take back the franchises to run services, presumably handing them to publicly owned companies (like the now-defunct Directly Operated Railways which until March ran the East Coast mainline). These companies would be given a mandate to run the railways, much as they have been by private companies, but their profits would be invested directly back into the railways, rather than going to owners and shareholders.

The problem is that only three of the 14 English franchises come up for tender during the next Parliament (the rest will come up between 2025 and 2030).  Although Corbyn states in his manifesto that he wants to ‘progressively bring the railways back into public control’, if it is to happen during the next parliament he will have no option but to pass an act allowing him to seize ownership of each franchise. If he seizes without compensation, his government would surely face eye-watering legal bills from companies taking their case to court. For instance, it is hard to imagine that Richard Branson, who runs the profitable West Coast mainline, will take this lying down. Alternatively, Corbyn could compensate the private companies, which would also be hugely expensive given the value of some franchises such as East Coast – see its swanky new trains, about to be rolled out in 2018.

The big question is this; where will the money come from to pay for it all? In his manifesto, Corbyn suggests that Roscos make profits of tens of millions of pounds from leasing the rolling stock to the rail companies, which in turn adds to their overheads and forces them to drive up fares. By cutting out this convoluted process and taking the trains into directly into government ownership, this would simplify the whole structure.  A publicly-owned network would not need Roscos, pushing costs down and freeing up much-needed cash.

However, on top of this there is the question of EU legality. As Kate Hoey MP, chair of Labour for Britain, pointed out last month in an article for the New Statesman, the First Railway Directive (2012) enshrines the right for private sector companies to compete to run services on the same tracks to enable ‘cross-border competition’. Preventing ‘private companies’ from competing to run services is therefore illegal – even though (ironically) some of the biggest beneficiaries have been EU governments!

Unless we are to assume that companies like Abellio (aka the Dutch state railway) and Deutsche Bahn (read: German state railway) are running our train services out of the goodness of their hearts, it is safe to say that they won’t give up the profits they make running our train services here without a fight – one that the (secretly) Euro-sceptic Corbyn might be up for.

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