Will Labour’s plan make them cheaper?

2 hours ago

By Mitchell Labiak, Nick Edser, Business reporter

Getty Images Woman buying ticket on phone at train station

The newly-elected Labour government used the King’s Speech on Wednesday to lay out its plans for renationalising the railways.

But what will this mean for passengers, and how will it work?

What will it mean for train tickets?

The government has not guaranteed lower fares, but has promised a “best fare guarantee”, to make sure people are always paying the lowest fare for their journey.

It has also promised its reforms would make buying cheaper tickets simpler.

However, railway specialist Tony Miles – who has covered the industry for over 40 years – told the BBC when the plans were first announced that any savings were likely to be minimal.

He said this is because the private operators’ profit margins are already so small, at just a few pence for each passenger journey.

He argued this would mean Labour would only be able to pass on very small savings per journey.

What does nationalise mean?

From just after the Second World War until the 1990s the UK rail system was fully nationalised, with the government owning the rail networks and all of the trains.

The industry was privatised in the 1990s, with services run by a variety of train operating companies.

At the moment the infrastructure is managed by Network Rail, while passenger train services are run by individual operators.

The situation is different in Scotland and Wales, where passenger services are already run by the devolved governments. In Northern Ireland, the system is fully nationalised.

How will Labour’s plans work?

Labour wants to move further towards nationalisation, confirming plans to establish Great British Railways (GBR).

This publicly-owned body would oversee the rail system across England, Wales, and Scotland.

It would take over the service contracts currently held by private firms in England as they expire in the future.

However, the government has not said GBR would buy back “rolling stock’ (an industry term for the train carriages) from private firms. This implies it would continue to lease them.

There is also no suggestion the rail freight companies will be nationalised, with the government instead saying that GBR will support and promote freight operators.

The government also plans to set up an independent watchdog, the Passenger Standards Authority, which would “champion improvement in service against a range of measures”.

Whether this will make the trains run better “comes down to how they’re going to fund things” and whether it will allow major construction projects to move forward, says Mark Simmons, deputy editor at International Railway Journal.

Mr Simmons also queried what expertise GBR would have, suggesting there could still be a “skills deficit” at GBR, a problem which he said was affecting rail systems across Europe.

“If lots of people leave as rail operator contracts terminate, what we could see is an exodus of talent,” he said.

Are other countries’ trains under national control?

Luxembourg operates a fully state-run system where all train journeys are free, and train tickets in other European countries with more state control than the UK can be much cheaper.

However, those networks also receive lots of government investment, which can mean higher taxes.

Mr Miles argues the UK’s franchising system, whereby the government owns the network through National Rail and hands out operator contracts to private companies, was the “envy of Europe” before Covid hit.

He said passenger numbers have increased as a result of the franchise system, but added that the contracts written during Covid were done so “in a rush” and are “too generous”.

He pointed to Transport for London and the Manchester bus service as examples of where a state run franchising system to private contractors can work.

Mr Simmons says trains in the UK are “not as bad as people think”.

“Sometimes the perception is that everywhere else is better, and that’s very much not true.”

However, he said other countries were “powering ahead” with long-term planning for major projects.

Will Labour’s plan really cost nothing?

If Labour waits until the current franchise contracts run out and takes them on itself, as the previous government did during Covid, this would not necessarily cost the taxpayer anything.

However, doing so would also mean taking on the railway operators debts, leases, and liabilities, such as their pension fund pots and the lease contracts for the rolling stock.

Labour says its plans would save the taxpayer £2.2bn a year, but the government has not guaranteed that all this money would be reinvested in the railways.

When could it actually come into effect?

“It could happen very quickly,” says Mr Simmons, given the plan is to transfer train networks to public ownership as the current operator contracts begin to run out.

Some train operators are already under public control after being taken into the government’s Operator of Last Resort.

Many train operators’ franchises come up for renewal in the next few years, but some have an earlier “core term” expiry date, which would allow the government to take control sooner.

All railway operators’ contracts or core terms will expire by October 2027.