Passenger Railway Services (Public Ownership) Bill

Lord Sikka Excerpts

2nd reading
Monday 7th October 2024 Lords Chamber

[Lord Sikka (Lab)]

My Lords, it is my great pleasure to welcome the noble Lord, Lord Grayling, the noble Baroness, Lady Pidgeon and my noble friend Lord Cryer to this House. I thank them for their excellent maiden speeches, which have given us plenty to ponder and think about. I look forward to their future contributions and to joining them for a cup of tea or coffee as well.

The privatisation of the railways has been a failure, although it has managed to secure an entry for Prime Minister John Major in the annals of privatisation. It was a service which Margaret Thatcher was not willing to privatise because of the huge problems, but John Major was desperate to get an entry in the annals of privatisation, so here we are. In 1994, when the old British Rail was broken up into more than 100 companies, it was one of the most efficient in Europe. It had one of the cheapest fares per mile in Europe and a punctuality rate of 86.4%; it was receiving, at that time, an annual subsidy of £1.7 billion. The ideological break-up of British Rail resulted in the fragmentation of the system, the neglect of the long-term and the multiplication of administrative structures. Suddenly you needed 100 boards of directors, 100 accounting systems, 100 HR systems, 100 sets of auditors and 100 sets of accountants, and all that inevitably pushed up the costs of the privatised system.

Even worse, there was no real competition. I use the c2c line when I come to the House. There is no competition: I have absolutely no choice and I have to pay whatever it demands. Today, I had to stand all the way from my home in Essex to London because there are simply no seats, and the wifi was non-existent. There is nothing I can do about it; I am just a captive customer.

Thirty years after John Major’s excursion into privatisation, train companies have a punctuality rate of 70.1%, the UK has one of the most expensive train fares in Europe, and last year the subsidy was £11.9 billion. I will not say anything about catering and the awful sandwiches on long-distance routes at the moment, as many noble Lords have possibly experienced.

Any move to curtail privatisation is most welcome, and I support the Bill. That said, I have a number of questions that I hope the Minister will be able to clarify. Clause 1 states that passenger services will in future be provided by a public sector company. How are these public sector companies to be made accountable to the people? I recommend that at least 50% of the board of directors of this public sector company, which could well be a number of companies akin to the railway boards that we used to have, should be directly elected by customers. Customers should also vote on executive pay, not only of those companies but of the regulatory boards. That way, people can exercise some influence. They cannot be taken for an easy ride and cannot be ripped off on a regular basis by suboptimal services. I hope the Minister will be able to give some commitment to that form of democratisation.

I also have a question about how the new public sector company is going to acquire the necessary rolling stock. Let us look at the current situation. Rolling stock is not owned by train-operating companies; they lease it from rolling stock companies and pay an exorbitant amount of rent. Last year, some £3.1 billion was paid in leasing payments by train operating companies to roscos, or rolling stock companies. Just three rolling stock companies—Angel Trains, Eversholt and Porterbrook—control about 87% of the market, and they have a profit margin of 41.6%. That is exorbitant. There is absolutely no justification for that kind of profit margin because the payments are absolutely certain—they are paid either by customers or taxpayers. I hope that the Government are getting ready to investigate profiteering by these rolling stock companies and put an end to the gravy train that has been operated.

These three rolling stock companies are foreign owned and registered in Luxembourg, which means they are obviously not paying taxes there. There are only two reasons for companies to go to places such as Luxembourg: one is secrecy and the second is tax avoidance. There is no other reason whatever for going to such places. Last year, these roscos paid a dividend of £409.7 million, and in the past decade they have paid more than £2 billion in dividends. This dividend is typically 100% of their pre-tax profits, and no tax is paid on those dividends either because the recipients are outside the UK. I hope that the Government will not continue with these roscos, and perhaps the Minister can confirm that. The Government have choices: they can purchase rolling stock directly from the current manufacturers and eliminate all intermediaries, such as the current roscos; they can create their own leasing company and eliminate these roscos; or they can bring the manufacturing of trains and rolling stock under one roof to consolidate them. It would be helpful if the Minister could explain which route the Government are planning to take.

Judging by the statement made by the Transport Secretary in the other place on 29 July, perhaps the Government have something else in mind. She said that the rationale for the current Bill is,

“the failure of privatisation to deliver reliable and affordable services for passengers”.

She added:

“It also makes financial sense, saving tens of millions of pounds each year in private sector fees. That money can now be reinvested in the railways. Running the railways in the interest of passengers and taxpayers, not to the benefit of shareholders, also makes operational sense”.—[Official Report, Commons, 29/7/24; col. 1074.]


That statement was echoed by the Minister earlier, so I assume that it is reasonable to expect that the current roscos will not remain in control or operation and that the Government will not be leasing any trains from those companies. I hope the Minister can confirm that. If my interpretation of that statement is erroneous, I would like to hear that as well.

In addition, can the Minister say what will happen to freight services? Why are they not being brought into public ownership? They are highly lucrative as well.

Finally, I ask the Minister to end what train companies call dynamic pricing. Actually, there is nothing dynamic about it; it is simply a way of fleecing customers. Two of my friends from Australia visited London and, on the spur of the moment, decided that they would like to visit Exeter. A quick search online for an economy class return the next day quoted them £700 each—that is more than a flight to China. Needless to say, they did not travel by train. I wonder how many other tourists have refrained from visiting wonderful parts of this country as a result of this kind of fleecing and how many business trips have been put off. There is absolutely no excuse for this. Can the Minister assure the House that public ownership of passenger services will end this abusive practice? We need a fixed price, regardless of the time at which anybody travels, not £700 returns to Exeter. That is just criminal, and I hope somebody gets prosecuted for it.