Rail privatisation is failing and here’s what the government plans to do about it – Jonathan Walker

The current system of rail franchising isn’t working, Transport Secretary Grant Shapps has admitted.

Mr Shapps made it clear that he plans major changes to the way our rail industry works, as he announced that private sector operator Arriva was to be stripped of the Northern rail franchise, which will instead be handed to a government-owned business.

The Transport Secretary admitted that the failure of the Northern franchise wasn’t a one-off, but was a symptom of a wider problem in the way the UK’s rail industry is set up.

This would be addressed in a review currently being carried out by Keith Williams, chairman of Royal Mail, and commissioned by the Government.

Mr Shapps also defended privatisation, but the overall message in his statement to the House of Commons was clear.

He said: “Today’s announcement will inevitably raise questions about the future of rail privatisation.

“Over the past 20 years privatisation has reversed over two decades of declining passenger numbers and passenger journeys have almost doubled to nearly 2 billion.

“However, it is clear that the current model is now struggling to deliver. Across the country a number of franchises are failing to provide the reliable services that passengers require.

“We know change is needed, and it is coming. The Williams Review is looking at reforms across the railway to ensure customers are at the heart of the system.

“The railways were invented in the north of England and last year the Prime Minister promised that we would give the railway back to the places it was born.

“With local leaders having more power over local services, timetables, fares and stations.

“Today marks the first small step in that journey.”

The Transport Secretary made the comments in the context of his announcement about the Northern franchise, which operates services in Leeds and Manchester, which probably explains his particular focus on the North. His suggestion that local leaders could have more power over local services presumably applies to the Midlands too.

What’s happened to Northern could happen to West Midlands Trains too, in the near future.

West Midlands Mayor Andy Street has told West Midlands Trains, which is owned by private firms Abellio, JR East and Mitsui Group, that he will ask the Department for Transport to strip them of the franchise if they fail to improve by this Friday.

He’s expected to announce his decision next week. But the deadline is clearly looming.

If Mr Street gives West Midlands Trains the thumbs down, then the Government is likely to look sympathetically at his call for the firm to lose the franchise.

But it’s not clear what he will decide. Officials in the mayor’s office say he will take into account the fact that services do seem to be improving; that the business has replaced its managing director, and that it has offered compensation to passengers. In other words, Mr Street might not carry out his threat.

Even if West Midlands Trains keeps its franchise, things are going to change in the long term.

We know that the Williams review was asked to look at devolving rail services, so that local and regional transport bodies had some control over them. The comments from Mr Shapps make it clear that he’s keen on this idea.

Another proposal that was floated when the review was set up was that management of trains and management of rail infrastructure should be integrated.

At the moment, private firms bid for franchises to run the trains.

Meanwhile, Network Rail, which is owned by the Department for Transport, is responsible for infrastructure across the country.

The alternative favoured by Chris Grayling, the last Transport Secretary, was to create public-private partnerships which would do both of these things at once.

Another alternative would be simply to transfer responsibility for operating trains to the Government-owned business, which goes by the title of “operator of last resort”.

This is what Labour favours, but it seems more likely the government will eventually go with something like the Grayling plan.

And there was a hint of this in Mr Shapp’s announcement about the fate of Northern.

Setting out how the public sector train company will improve services in the North of England, he said: “Improvements can’t be delivered in isolation, so the public-sector operator will work hand in hand with Network Rail to make sure the railway delivers as one, with a single-minded focus on the interests of the passenger.”

Northern, in other words, is set to become a partnership – working “hand in hand” – between the rail operator and the body responsible for infrastructure.

In this case, they’re both publicly owned businesses (given that the trains are now to be run by the operator of last resort). But in other parts of the country, private firms are still running the trains.

If there is to be a continuing role in the long term for privately-owned train companies, they’re likely to be working far more closely with the publicly-owned body that manages infrastructure.