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Stagecoach Chief Exec comments on re-nationalisation rumours


Government must work with us to keep our railways on track, not seek a return to nationalisation

The lesson of recent years is that while many public services have shrunk, our railways have continued to grow


As politicians eye next year’s General Election and put forward ideas on the future of our rail system, it is crucial voters fully understand the challenges faced by today’s railway and its customers. Policy debate must be focused on what passengers want, not on political smokescreens about structures.

The lesson of recent years is that while many public services have shrunk, our railways have continued to grow. A key driver – even during tough times for the country – has been the role of commercial train operators, who have been incentivised to attract more passengers. But looking ahead, we face challenges: high costs, managing the continuing huge growth in demand, and tackling the backlog of investment in new train capacity and infrastructure. The public and private sector have a shared responsibility to deliver solutions and work together to set the right future direction for our railways.

This year is the tenth anniversary of two government decisions which fundamentally changed the way Britain’s rail network is funded. In 2004, the then Labour government decided passengers should shoulder more of the cost and taxpayers should pay less. Today, only a third of the £12bn cost of the rail network is funded by taxpayers. Ministers also scrapped the previous policy of reducing the real-terms cost of travel each year. Instead, for nine years in a row, season tickets and other regulated fares rose above inflation until, in January 2014, these ticket prices went up in line with RPI.

These two political decisions have resulted in two different railways. Commuters and others whose tickets are regulated have been targeted by government to pay more. Many other passengers, though, are benefiting from the discounted tickets offered by train companies. There is also a stark regional dimension, with passengers in London and the South East paying 81pc of the cost of their rail service, while on regional networks 61pc of the cost is paid by the taxpayer.

Throughout all this, the profit margins of train companies have remained low – around 3p to 4p for every £1 of ticket income – and have even fallen in recent years. Our trains are carrying record numbers of passengers. But this has put a strain on our largely Victorian-built infrastructure and many trains are overcrowded. We are suffering from a backlog of repairs inherited from nationalised British Rail and the days of Railtrack, with most spending having been on maintaining, not enhancing, the network.

There are around 12,500 vehicles in the UK rail fleet, nearly half of them built since rail privatisation. But industry estimates suggest we may need double that number over the next three decades. Contracts have been placed by the current and previous governments, but we are playing catch-up, and dealing with this capacity crunch will also need new platforms, signalling and tracks.

So what does all of this mean for customers? What is the rail industry doing? And what should be the priorities for politicians?

The good news is that a huge £38bn programme of rail investment will be taking place over the next five years. By 2019, it will deliver more seats for commuters, new trains and quicker services, as well as a major expansion of electrification and the revamp of hundreds of stations. There is the landmark prospect of construction commencing on HS2 which, with a sound business case, can deliver a huge economic and social premium to our great city regions.

Even with the challenges we face, we have the safest and fastest-growing railway of any major network in Europe. Independent research shows we are frequently better at managing costs than our European counterparts. Overall net government funding of train operations in Britain is now zero, with public spending focused on improving the country’s rail infrastructure.

Private franchised rail companies have been central to these outcomes, but we can’t stand still. I want passengers to benefit from lower fares, more investment and better services. That is the best way to have a vibrant and successful rail system for the future and build a sustainable business. The innovative alliance between Network Rail and South West Trains, where one management team is responsible for both trains and track, shows how we can become even more efficient and more joined up. We must also be relentless in our focus on improving customer service.

But here’s the heart of the matter: our politicians – both in government and in opposition – have a responsibility, too. Passengers don’t need or want the pointless political battles of the past over ideology, ownership and structures. Some obsess nostalgically about nationalisation, a one-way ticket to higher taxes and worse services. Others hide behind unworkable and unnecessary policy-wonk concepts such as public-sector comparators to bid for rail franchises, misleading the public about the performance of the East Coast franchise.

None of this politicking or buck-passing will solve the challenges of our railway or address real passenger priorities. The message to politicians and train operators from passengers is clear: give us better value for money, punctual services and more comfortable trains and stations.

Our experience from our bus networks in the UK is that you can deliver a virtuous cycle of continued investment, rising customer satisfaction and passenger growth built on a policy of lower fares. But partnership is key. All of the challenges we face – prices, costs, capacity and investment – are interlinked. Each has consequences for the other. Politicians cannot cherry-pick and all those with an interest in a strong railway must not let them duck the tough choices.

The huge growth delivered by franchised train companies has provided a significant multi-billion-pound premium to the taxpayer. Governments have the opportunity, should they choose, to use that money to benefit passengers by bringing down fares, investing in new trains, upgrading tracks and improving stations. Together, the public and private sector has already delivered a step-change in Britain’s railways.

Train companies and our industry partners are already working on plans to make further improvements. To make that a reality, we need political leaders of all parties to work with us.

Martin Griffiths is chief executive of Stagecoach Group, which runs South West Trains and East Midlands Trains, and is joint operator of Virgin Trains

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