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Revitalising Rail: We need a partnership which gets the best out of the public and private sectors

Revitalising Rail: We need a partnership which gets the best out of the public and private sectors

Rail Partners - Revitalising Rail: We need a partnership which gets the best out of the public and private sectors
29 September 2022
Robert Girgis, deputy director of policy

It’s not a case of the private sector is good and the public sector is bad for the railway, or vice versa – what’s needed is a reinvigorated public-private partnership to get the best of both to help meet the challenges the railway faces.

Earlier this week Louise Haigh MP, the Shadow Secretary of State for Transport reconfirmed the Labour Party’s commitment to renationalising the railway. While not surprising, we still found the announcement disappointing. To distil the issues facing the railway to a single matter of ownership, is to discount a hugely positive track record of private sector operators and to place unsustainable expectation on the public purse permanently.

To be clear we’re not calling for a continuation of the status quo. The franchising model was no longer fit for purpose even before the pandemic hit. The passenger market is, in some areas, permanently altered and there are different opportunities to be taken in others, such as the leisure and the freight market. What we must continue to work towards is a reinvigorated public private partnership, not for the sake of the industry, but to maximise the economic and environmental benefits for Britain that flow from a vibrant railway. That means a new public body to coordinate the railways but private sector partners to deliver in areas where they are better able than the state to do so.

Previously, the ingenuity, commercial acumen and knowledge of the customer, has enabled private sector operators to double passenger journeys, achieve revenue growth at twice the rate of GDP, overturn a £2 billion annual operating loss, and introduce innovative products such as cheap advance tickets. At the same time, freight operators leveraged significant private investment to grow freight movements and take more polluting HGVs off our roads. It’s a track record we should be proud of and look to retain the best elements of.

Today, where they have the commercial freedoms, private sector operators are already demonstrating how they can grow revenues faster than those on tightly specified contracts. If we are serious about reducing the burden on taxpayers who are currently plugging the revenue gap, we have to turn on dormant revenue incentives in National Rail Contracts, which most operators are working under, to unleash their expertise. If you look at the examples of operators on revenue risk, as we set out in our latest publication released today, they have restored and maintained revenue collectively at levels 7% higher than those who are not. That’s worth hundreds of millions of pounds.

Its not just about the financials, as important as they are. An invigorated private sector takes risks to innovate in the interest of its customers. Examples of such new innovation already on the market include extending booking horizons for advance fares for people planning leisure trips, and a new ‘no frills’ offering on the east coast mainline to compete with more polluting modes like air travel to Scotland. The private sector is also investing in significant R&D and investment in new products for the benefit of customers, including a rail specific 5G solution, innovative passenger rolling stock to achieve net-zero and investment by freight operators in new rolling stock to further improve the green credentials of rail freight, attracting customers looking for low carbon alternatives and increasing modal shift. In a constrained fiscal environment innovations such as these would be squeezed out if the private sector contribution is jettisoned.

Private operators, in the right policy environment can deliver again for Britain. There is a danger of a hiatus given other political and economic pressures, but we must get on with implementing successful reform.

Great British Railways and the associated legislation to establish it, can provide the central co-ordination function and accountability the railway needs, if we get the detail right. Despite being a public body, it must be established with a commercial mindset baked in from the point of legislation and it should focus on good outcomes, being a guiding rather than a controlling mind – empowering those closest to customers to respond to their needs rather than specifying inputs from the centre.

Similarly as we look to evolve rail contracts, they must have the commercial freedom which allows operators to do what they do best - chase revenue and grow rail usage by making the railway more attractive to customers. Equally we must be ambitious and set a freight growth target that seeks to secure modal shift to meet net-zero goals, and then put in place the policy framework to deliver that target.

To finish where I started, this isn’t a case of the private sector being good and the public sector being bad. This is about a partnership. A partnership within which all players know their roles, their strengths and their weaknesses, and have a shared vision for success which sees a thriving railway run in the interests of customers and taxpayers.

Our 'Revitalising Rail' document can be read in full here

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