deregulation model. Passenger numbers have consistently risen year on year but this has come at a huge cost. Out of total operating revenue( 2011 / 12) of £ 1.956 million only £ 1.117 million comes from fares with the rest coming from public funds: £ 519 gross public transport support; £ 210 million concessionary fares and £ 111 million BSOG. As London’ s subsidy edges towards £ 1 billion per year, it is clear that London’ s buses would be much cheaper to run if brought back under direct public ownership and control.
The disastrous rail privatisation
If bus privatisation was a failure, rail privatisation was an unmitigated- and expensive – disaster. An integrated national network was split three ways – infrastructure, train operations and train leasing – leading to hundreds of private companies selling and contracting services to each other, with each transaction creating a profit rake-off. Total government subsidy soared from £ 1 billion per year pre-privatisation to almost £ 5 billion under the last Labour Government. In spite of this huge subsidy, rail fares in Britain are now the highest in the world.
' In spite of a £ 5 billion per year government subsidy, rail fares in Britain are now the highest in the world '
The most scandalous failure was the privatised infrastructure company Railtrack which maximised shareholder return by minimising spending on maintenance and renewal. The result was catastrophic track failure and the deaths of scores of passengers and workers in horrific rail accidents. The Labour Government was forced to rescue the company by a massive public injection of funds and converting it into a not-for-profit company Network Rail – a renationalisation in all but name.
Subsequently both Labour and the current ConDem Government have been taking desperate steps to control the ever-rising costs of a privatised railway. Network Rail has priced running and improving Britain’ s rail network from 2014 to 2019 at £ 37.5 billion, a cost to be funded from a combination of above-inflation fare rises, shrinking government subsidies and massive cost savings. The McNulty Report recommends unstaffed stations, reduced safety manning levels, and more freedoms to train operators to increase fares and lower service standards in order to reduce the public cost of running the railway from £ 4.5 billion this year to between £ 2.6 billion and £ 2.9 billion in 2019.
Private sector investment in rail accounts for only 1 % of all rail investment, so the public purse is funding almost all infrastructure investment. Meanwhile most attention has been focused on the failed train operating franchise model which sees train operators receive £ 3.88 billion government subsidy per year, of which £ 1.17 billion is paid back to the government on the more profitable franchises – a net subsidy of £ 2.71 billion.
Trouble first hit the headlines when Network Rail was forced to take back the franchise from Connex Rail due to appalling failures in service delivery. Then National Express spectacularly withdrew from its East Coast franchise just at the point when significant premiums were due back to the Government. This franchise has since been run successfully and profitably under public ownership via Network Rail.
The biggest crisis of all occurred last year when the Government wrongly awarded the West Coast franchise to FirstGroup following chronic Department of Transport( DoT) bid assessment failures. This failure was only exposed when incumbent Virgin took legal action to challenge the decision. Three junior DoT civil servants were made the public scapegoats yet the root of the problem is the incredible complexity and expense of assessing long-term franchising bids. Whilst all rail franchising is put on hold, the question now remains whether governments actually have the
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