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Time for a fair, efficient national integrated railway under public ownership

Matt Dykes explains the impact of First Group's awarding of the West Coast franchise - and how privatisation has failed public rail.

The outcry caused by the government’s award of the West Coast franchise to First Group is understandable.

The premium payments quoted by First Group are underpinned by assumptions of huge increases in passenger numbers that suggest the bid is hopelessly optimistic and unsustainable or a cynical gaming of the system depending on your point of view.

One way or another, the likelihood of First Group having to implement cuts to staff and services in order to meet their payment schedule and/or walk away from the contract as the figures fail to materialise is something that everyone from the Labour front bench, to the rail unions and industry analysts all seem to agree on. After all, First Group has form in this respect, having chosen an early exit from their Great Western contract to dodge £800m owed to the UK taxpayer.

Less understandable are those calling for the franchise to be handed to Virgin instead.

It is testament to Branson’s PR acumen that significant public support for his enterprise has been manufactured, given that Virgin has soaked up more public subsidy than First while performing less well (according to the average of public performance measures).

And let’s not forget that whoever was awarded the contract, the government were tying up the franchise for 15 years, with greater commercial freedom for the operator to close ticket offices, shed staff on trains and stations, cut services and hike up fares. Whichever operator takes over the franchise, those who use the service and those who work on it are set to lose out.

The problem with privatisation

What this points to is the madness of our privatised rail system - a giant system of corporate welfare, where private train operators are allowed to pay dividends to shareholders while charging among the highest fares in Europe and taking up to £4bn a year from the taxpayer through direct and indirect subsidies.

Recent research by Transport for Quality of Life shows that additional costs of over £1bn per year are incurred through a combination of debt write-offs, dividend payments to private investors, fragmentation and transaction costs, including profit margins of complex tiers of contractors and subcontractors and higher interest payments incurred by Network Rail resulting from being kept off the government’s balance sheet.

The cumulative costs since privatisation could be well over £11bn. The researchers also stress that these reflect readily-quantified costs.

In addition, there are excess interest payments on ROSCO debt, excessive bonus payments and executive remuneration, costs associated with franchise bidding rounds, marketing and re-branding on franchise take-overs and tax avoidance.

This represents over £1bn a year that leaks out of the industry that could be otherwise invested in infrastructure, rolling stock, training, safety and tackling overcrowding. And these are costs that dictate pricing throughout the industry, from passenger fares to track access charges, the system is geared to accommodate these cash leakages that are a direct and unproductive result of rail privatisation.

No wonder then that, as the McNulty Review correctly identified, integrated state-run services in Europe achieve significantly higher efficiency while providing lower fares for passengers.

Another way of looking at this would be that if all unnecessary costs highlighted above were eliminated and the resultant saving was used entirely to reduce fares, it would equate to an across the board cut in fares of 18 per cent (or a substantially larger cut if applied only to regulated fares).

With 11 rail franchises up for renewal before 2015, these are pivotal times for the rail industry. The government has the chance to bring services back in house, putting our railways on an equal footing with the more efficient and affordable state owned networks in Europe.

Unfortunately, the government’s position is clear: "Privatisation works - let’s have more of it."

The government’s rail command paper made that clear: longer and more commercially orientated franchises for operators, more track and infrastructure put under private control and massive cuts meaning the possible loss of 20,000 jobs in the industry and the loss of less profitable services.

Action for Rail, the campaign jointly led by the TUC, ASLEF, RMT, TSSA and Unite, will continue to fight the government’s proposals as well as promoting the alternative of a fairer, more efficient national integrated railway under public ownership.

Our recent day of action against fare hikes and staff cuts, in partnership with our friends at Campaign for Better Transport, Climate Rush and Bring Back British Rail, was a huge success with intense media coverage across all parts of the UK. On the back of these successful actions, activists have been able to get in touch with passengers, raising awareness about the government's plans for our railways and the response has been terrific.

After two national days of action, we've had over 1500 postcards returned to us by passengers, which will be forwarded to their MPs calling for:

• an end to above inflation fare rises
• guards and catering staff on trains
• keeping ticket offices open and staffing our stations
• investment in trains with seats for all
• no privatisation or break up of Network Rail
• a publicly owned railway that puts people before profit

Action for Rail has a huge task ahead to build a coalition of passengers, unions and rail campaigners to resist these moves. As well as maintaining our presence at stations with direct face to face communication with passengers through our days of action, Action for Rail will be stepping up the campaign by:

• working in partnership with organisations representing different groups of passengers. We know that de-staffing of our trains and stations will have a particularly adverse impact on women, disabled passengers and young people. The Women's Institute joined forces with us recently to let the Secretary of State know
the threat that's posed to women passengers. Expect others to join us.

• building the evidence base on the problems of privatisation and the benefits of alternative, integrated and publicly owned rail. The Rebuilding Rail report by
Transport for Quality Life is one example of the kind of rigorous research we need to expose the failings of our dysfunctional, quasi-privatised rail system. Following the money and raising awareness of how our fares and taxes fund this peculiar system of corporate welfare is high on our agenda.

• developing a campaign approach that is able to garner support and target activity on a franchise by franchise basis. Follow the award of the West Coast franchise to
First Group, we can expect further details to follow on their plans for the staffing of trains, stations and ticket offices. We will look to use our growing network of
contacts in different parts of the country to co-ordinate action in response.

• linking the Action for Rail campaign with activists involved in other anti-cuts campaigns around the country. The issues in rail are the same as those across other
public services, government is slashing costs, diverting all the pain to the service users and workforce while ensuring that corporations and their financial backers
reap the benefits.

Most of all we need to continue to grow our activist and supporter base.

For more information on the campaign, visit us and get involved.

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