Passenger Railway Services (Public Ownership) Bill

Viscount Hanworth Excerpts

2nd reading
Monday 7th October 2024 Lords Chamber

[Viscount Hanworth (Lab)]

My Lords, I have been pre-empted in much of what I wished to say by my colleague, the speaker before last—but that pleases me.

The period following the First World War saw a rapid process of consolidation, or grouping, as it was called, which created what were described as the “big four” companies. These were the Great Western Railway, GWR; the London, Midland and Scottish Railway, LMS; the London and North Eastern Railway, LNER; and the Southern Railway, SR. The companies were created by the Railways Act 1921, which came into effect on 1 January 1923. A quarter of a century later, on 1 January 1948, the companies were nationalised to form British Railways as a result of the Transport Act 1947. However, during the Second World War they had been effectively united when operating efficiently under the direction of the Railway Executive Committee, albeit that there had been no investment during that period.

Many regard the interwar years as the golden age of the railways, notwithstanding their poor economic performance; throughout that period, the LNER never made a profit. During that period, the engineering works at Crewe, Derby, Doncaster and Swindon provided the locomotives and rolling stock for their parent companies. They also profited from exporting their products in quantity to Africa, India and South America.

The romance of the railways was sustained by the magnificent main line express trains such as the “Flying Scotsman” of 1923 and the “Mallard” of 1938, which were both LNER locomotives designed by Nigel Gresley. Also memorable was the LMS “Coronation Scot” of 1937. That romance was in the mind of John Major when he oversaw the denationalisation of British Rail, which began in 1994 and was virtually complete by 1997. He relished the revival of the names of the big four. The process resulted in seven, later 25, rail franchises. The number is now down to 17, albeit that there are fewer controlling companies or consortia. These include companies partly or wholly owned by various national rail operators, including those of Italy, France, Germany, the Netherlands and Canada.

Since the beginning of privatisation, many of the train operating companies have ceased to exist, for reasons that include the withdrawal or expiry of the franchises, the bankruptcy of the firms or their mergers. In 2004, Labour, on perceiving the inefficiency of the system, decided to reduce the number of franchises to align them with the structure of Network Rail, which maintains the railway infrastructure. The costs of the fragmentation and disorganisation of our rail system that have resulted from its privatisation are evident from comparisons that can be made with the efficient, nationally owned rail systems of some European countries.

The privatisation of 1994 saw the creation of a separate organisation charged with the maintenance of the railway infrastructure. That was Railtrack, which operated from 1994 until 2002. It owned the track, signalling, tunnels, bridges, level crossings and all but a handful of the stations. Many of the operations were outsourced to other companies. The consequence was that the infrastructure fell into disrepair and the state of the rail track was blamed for two major train accidents. The company was eventually taken into public ownership under the title of Network Rail.

Another problematic feature of the privatisation has been the creation of the so-called rolling stock leasing companies, or roscos, which own the locomotives and carriages that are leased to the franchise owners. There are six rolling stock companies operating in Britain, as we have heard, three of which own 87% of the rolling stock. They are owned by consortia, structured in complicated ways, which embody a large proportion of foreign capital. These consortia derive substantial profits; according to a document of the RMT rail union, between 2012 and 2018 the roscos passed a total of £1.2 billion in the form of dividends to their parent companies or consortia.

These companies are motivated to prolong the life of the rolling stock. It is notable that the average age of the rolling stock rose from 16 years in the first year of privatisation to almost 20 years in 2017-18. The rolling stock companies have no obligation or incentive to maintain a steady and co-ordinated stream of new orders for rolling stock. Their failure to do so has been to the detriment of our native manufacturers, which have also passed into foreign ownership and been subject to a series of takeovers and closures. The roscos might continue to lease their trains and rolling stock to a nationalised rail network for as long as they are serviceable, but there is no reason why they should be relied on to purchase new equipment. Such purchases should be made exclusively by Great British Railways, the new publicly owned authority.

All the major political parties have called for the reintegration of our rail system, albeit that the Conservatives have been coy about calling it renationalisation. The process will entail a massive reorganisation, which will take time. The current Bill, which is the first small step, does little more than relieve the Minister of the obligation to invite competitive tenders from parties proposing to run sections of the system. Placing the system under a coherent central direction which can address strategic matters will relieve the Minister for Transport of the continual interventions, described as micro-management, that have been necessitated by the disjointed nature of the privatised system. This will enhance the efficiency of the operations. At the same time, it should facilitate regional planning within a wider national framework, which should be able better to meet local transport needs.

It has been observed that the process of renationalisation, as far as it concerns the train operating companies, will be virtually costless. The franchises will fall into the Government’s hands when they expire. Already ScotRail, Welsh railways, the east coast main line, TransPennine, Northern, Southeastern and the Caledonian Sleeper are in public ownership. The Department for Transport currently controls these train operators via rail transport’s operator of last resort, which is known unaccountably by the initials DOHL. Someone might explain that to me; I cannot find what those initials signify. Although it is proposed that the expiring franchises will fall under this umbrella, there is an allowance in the Bill for the extension of franchises in case DOHL finds itself overwhelmed in coping with its new acquisitions.

It seems that there is no intention at present to nationalise the rolling stock companies, presumably because to do so would be too costly. However, control must be exercised to ensure that there is a steady stream of orders to support the train manufacturers in the UK. The three firms that are manufacturing trains in the UK—Alstom, Hitachi and Siemens—are in foreign ownership, and each can fulfil its orders by manufacturing its trains elsewhere. The Government must guard against the ever-present danger of losing our train manufacturers.

Britain was the original railway nation—it began its railway exactly 200 years ago—but, since its privatisation, the nation has been in danger of losing ownership of its rail system. The hope is that we can repossess it, at least in part. The system has been widely subject to a predatory profit motive. By alleviating that, one can expect a better return for taxpayers’ and passengers’ money. Even greater gains are in prospect, which should come from reducing the inefficiencies of a disjointed and dislocated system.