How Dutch and German train and bus firms are taking UK taxpayers for a ride
The UK government has poured money into transport infrastructure. And thanks to privatisation, state-owned European bus and rail operators reap the benefits
James Meek’s book on the privatisation of Britain, Private Island, highlights the perverse outcome of an energy industry sell-off that saw vast tracts of our power infrastructure fall under the ownership of the French government-owned EDF. “France in effect renationalised the industry its neighbour had so painstakingly privatised. Renationalised it, that is, for France,” he writes.
If privatisation was designed to introduce the rigor and efficiency of the market to the operation and ownership of public infrastructure – with the private sector generating profit for its constituents in exchange – then the presence of EDF in our energy landscape is a rebuke to that notion. EDF is a state-owned business making money from an industry that started out under state control and is perhaps better off staying there given its strategic importance.
A similar inversion has been taking place in the transport arena, which is now dotted with fiefdoms carved out by state-owned European bus and rail operators whose domestic governments lock up their own markets to outsiders while availing themselves of opportunities here.
The latest example last week saw Abellio, a unit of the Dutch national rail operator, win the 10-year ScotRail franchise for running train services in Scotland. Arriva, which is owned by Germany’s Deutsche Bahn, runs five UK rail contracts, including CrossCountry and Arriva Trains Wales, while Keolis, controlled by the French state rail company SNCF, is the joint operator of four franchises, including Southeastern and London Midland. The latter is also shortlisted for the London-to-Edinburgh east coast route in a joint bid with SNCF-backed Eurostar.
For a snapshot of how a public asset has inadvertently transferred profit to taxpayers elsewhere, it is worth looking at a review of the industry’s 2013 finances published by the Office of Rail Regulation. Northern Rail, a joint venture between Serco and Abellio, paid £36m in dividends to its owners after receiving government subsidies totalling £713m. Transpennine returned £21m in dividends to owners FirstGroup and Keolis, having received £52m from the government, which also paid £145m in track grants.
Since the railways were privatised in the early 1990s, punctuality and safety have improved from the chaos of the Railtrack era. That cannot be ascribed to the risk-taking and innovation of franchise operators, but to the billions of pounds invested by Network Rail, a government-controlled entity. London’s world-class transport system is the consequence of a multibillion-pound investment programme funded by the government and carried out by the publicly owned Transport for London authority.
Depending on where you stand on the privatisation issue, there can be a debate over how you describe a privatised rail system that has been renationalised by fellow EU states. Ironic is probably too generous. An ideological failure, certainly. The most tangible results achieved under rail privatisation – improved safety and punctuality – are down to a government-funded investment programme under the auspices of Network Rail.
If we follow the logic of what is happening to the franchise system to its conclusion, then nationalised rail operators are the most efficient owners of rail routes. In that case, there is a solution already waiting. Directly Operated Railways, owned by the Department for Transport, has been running the east coast line since 2009 and has returned £1bn to the taxpayer since then. It has not been entered for the auction of the new east coast franchise, unlike its close relative SNCF. If SNCF wins the east coast auction, then voters will be justified in asking whether, as with all the franchises awarded to Abellio, Keolis and Arriva, the government should not just hand the lot to DOR. From ScotRail to CrossCountry, the state evidently knows best
