What will nationalisation mean for Britain’s rail network and passengers?

There seems little chance that rail users will see the magic combination of lower fares, higher investment and improved services, writes Sean O’Grady

The rather dry-sounding Passenger Railway Services (Public Ownership) Act 2024 has received royal assent and is thus now law. It means most of the remaining parts of the British railways sector will be nationalised in the coming years – a quiet, slow revolution but potentially transformative nonetheless. The “guiding mind” of Great British Railways will take over the contracts from the various, often foreign, operating companies. The first to return to full public ownership under the new arrangements will be South Western Railways, which will be renationalised in May 2025, followed by c2c in July and Greater Anglia in the autumn. Although she didn’t stay in office for very long, the former transport secretary Louise Haigh has left behind a considerable legacy. But it’s not that clear what happens next...

What will change?

Remarkably little on day one, which has already passed without fanfare, and perhaps not much thereafter. The main business, staff, fares and services won’t necessarily be very different, and the business challenges remain identical. Historically, most train operators run at a loss. While investment in some areas rose impressively under privatisation in 1994, much could be done to improve connectivity and passenger satisfaction – and help boost economic growth. Passenger numbers also increased after British Rail was wound up in the 1990s but traffic remains below pre-pandemic levels. Given the state of the public finances, there seems little chance that rail users will see the magic combination of lower fares, higher investment and improved services.

What’s it all costing?

Nothing for the operating franchises, which will all expire by 2032, and not much to set up Great British Railways. Far bigger, but contingent, is covering losses, subsidising fares and investment. Flagship multibillion-pound rail infrastructure projects seem to have gone out of fashion.

Why nationalise the railways?

Partly because the government – like its Conservative predecessors – has no choice in the matter. The Tories were extremely reluctant, naturally, to have to bring train operations back into public ownership but short of allowing them to fail, with rail services having practically ended across significant parts of the country, nationalisation was the only option. Thus, ScotRail, TransPennine, London North Eastern, Northern and Southeastern have already been nationalised. The rail track and infrastructure were similarly rescued by the state when RailTrack went bust in 2002 – it is now Network Rail, 100 per cent publicly owned. However, the rolling stock, train manufacturing and station retail services, for example, will remain in private hands.

What’s the benefit to passengers and taxpayers?

Probably modest, given that major projects such as HS2 have been radically cut back or cancelled. What is left is some further electrification projects, for example on East Midlands Rail services, and selective work in removing bottlenecks. There should be some savings from removing any remaining profit margins and dividend payments to shareholders, and ticketing should be simpler too with a more integrated service. There’s a new consumer watchdog, the Passenger Standards Authority, which ministers say will “independently monitor standards and champion improvement in service performance against a range of measures”. The recent pay award for train drivers will probably do the most, in the short term, to improve punctuality and reliability and end the strikes that have caused so much disruption in recent years.

What’s in it for the voters?

Not that much, though nationalisation was a popular policy, even if some in the Labour leadership might have had misgivings. The problem for Labour, as with other public services, is that reality may not live up to expectations. We already know, for example, that rail fares will go up by 4.6 per cent next March, and the cost of most railcards will rise by £5, or about 17 per cent. Someone has to cover the losses on most rail operations, not to mention the investment needed just to keep up with wear and tear, and passengers will have to make their contribution.

Logically, nationalisation will mean that disgruntled commuters will blame the fare rises on the government rather than the wicked capitalists, and, with many marginal seats lying in the suburbs of the major conurbations, Labour MPs in those constituencies, including large swathes of the South East, will be especially vulnerable.

Worried commuters/voters can take no comfort from the new transport secretary, Heidi Alexander, who is honestly gloomy about the outlook: “The commercial realities for the railways are very challenging at the moment. Even under public ownership, we’ve got to make sure that we’ve got enough money to provide the services that people want, otherwise you can enter into a little bit of a death spiral.”

What does the opposition say?

The shadow transport secretary Gareth Baker, obscure even by the usual standards of this post, hasn’t really got his engine stoked up yet: “Labour have voted against our plan to strengthen the rights of passengers and commuters. We are concerned that the government's plans are simply an ideological undertaking that does not put passengers first.” It seems unlikely, given lingering public resentments, that he’d commit to privatising the trains all over again in a Badenoch administration.