Labour’s race to nationalise the railway system risks costing taxpayers more than £1bn a year as financial discipline breaks down, train operators have warned.
The party’s plans for steep savings were dismissed as wildly unrealistic by Rail Partners, which represents nine passenger-train companies, because the cost cuts are based on Tory proposals. These include a tough pay deal for drivers that has now been torn up.
Rail Partners added that the private sector could be expected to deliver a 1pc gain in productivity over the long term when compared with public ownership, and about the same increase in revenue – equating to an additional £1bn a year within five years.
Labour has said nationalisation will save up to £150m a year in contract fees currently paid to private companies, or just 0.75pc of the overall cost of the railway.
Andy Bagnall, the chief executive of Rail Partners, said: “We think full nationalisation in the way that’s being proposed will increase costs over time. You can see that in the current Bill, where the savings from fees are looked at but not the opportunity costs of what you lose by removing competition.
“You lose the grit in the oyster that drives improvement in the system. You don’t get the investment, the innovation and the new ideas that international transport companies try to inject in order to win in the first place.
“You lose the customer focus in the system.”
Labour is also pledging to delivering £2.2bn in annual savings. Around £1.5bn of this was inherited from the Conservatives, who had aimed to secure it through manpower cuts at stations – since abandoned – and pay deals with drivers, leading to the current strikes.
Mr Bagnall said: “Unless Labour pursues those with the trade unions, which from early signalling doesn’t look likely, it’s very unlikely that these savings will be realised.”
The Telegraph reported last week that train drivers are demanding a 10pc pay rise worth around £6,000 per person to end their walkouts, which is equal to five times the rate of inflation.
Taxpayers would have to fork out around £114m to cover the costs of such a demand.
Rail Partners said that the taxpayer will also lose out on payments of surplus earnings to the Treasury previously made by train operators.
Operators generated a surplus of £400m a year for the public coffers in the decade before the pandemic, as passenger numbers doubled, services increased by a third and thousands of new trains were introduced.
Once passenger numbers recover to pre-Covid levels, it would not be unrealistic to assume that similar levels of payment would be possible again, Mr Bagnall said.
He said: “The biggest dividend of the privatised model was paid to the taxpayer. We can show over the last 25 years that there was a deficit in British Rail and we closed that deficit, and can do so again.”
Train companies are not seeking a return to franchising, Rail Partners said, but favour new arrangements as an alternative to nationalisation, with networks under public control but deploying private sector train companies “to inject innovation, investment and commercial expertise”.
Similar hybrid models are already used in London on the Elizabeth Line and Overground, in Liverpool on the Merseyrail network, and on Manchester’s bus and tram system, all of them under Labour mayors.
Mr Bagnall said: “Nobody wants to go back to the old franchising system but it really isn’t a binary choice.”
Evidence suggests that public sector operators will be no more effective in reducing train delays and cancellations either, Rail Partners said, citing the still parlous record at Northern Rail four years after four years of management by the Government operator of last resort, or OLR.
Nationalisation would also heap debt onto the public balance sheet which would otherwise have been on the books of train operators, putting the railway in wider competition for investment.
The Rail Nationalisation Bill is due its second reading in the House of Commons on Monday.
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