The spending review demands value for money from the railway industry. To achieve this the government must consider a move to public ownership.
By Katy Clark MP
There is a lot going on which could have a massive effect on the structure and the service we receive from our railways.
The Department for Transport is being asked to make 11% in the Comprehensive Spending Review and there is understandable concern that these cuts on the railways could be damaging the very infrastructure we need to drive us toward economic recovery and indeed help us meet the ambitious targets set in the Climate Change Act.
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The previous government established a Value for Money review of the railways headed by Sir Roy McNulty with "no no-go-areas".
There is also a Government review of rail franchising which has generated headlines of the train operating companies clubbing together demanding the government hand over longer franchises. These companies are demanding more say over and eventual control our railways track, signals and stations and would be like to re-create the private regional privatised rail companies that existed before the nationalisation of our railways.
We have read reports in the press that protection afforded by regulated fares may be weakened leading to rises of 30% or more on what are already the most expensive fares in Europe. Passengers will find this hard to stomach when the senior directors of the five big transport companies are continuing to pay themselves massive salaries. Even more so when we know that the railways are almost entirely dependent on annual public subsidy - in the region of £5 billion - and revenues generated by fares. In effect the hard pressed tax payer and fare payers are subsiding Executive excess on the railways. Many will be shocked that:
Moir Lockhhead recently of First Group which runs First Capital Connect, First Great Western, Hull Trains, First TransPennine and ScotRail which was paid well over half a million last year as was Ray O'Toole of National Express which runs Anglian and C2C railways.
David Martin the highest paid director of Arriva which runs cross country and Wales Trains was paid last year a salary of almost three quarters of a million pounds.
Brian Souter of Stage Coach was also paid over three quarters of a million pound for the privilege of running our railways on South West Trains and East Midlands Trains.
Keith Ludeman of Go ahead which runs the lucrative southern and south eastern railways services and London Midland who was paid £916,000 last year. This however was not enough so this year Mr. Ludemand has been award a salary of £1.2 million pounds and increase of 35%.
Surely our transport bosses should exercise pay restraint just as everyone else is being asked to tighten their belts.
If we take the big five transport companies alone they have over the last ten years or so paid dividends to shareholders of over £2 billion while over a seven year period the three Rolling Stock leasing companies, the organizations which own our trains, have paid out dividends of over a billion. Independent reports estimate that since privatization dividends have been paid out of over £10 billion pounds.
Richard Murphy of the Tax Justice network undertook a study which looked at the available sets of accounts for six railway operating companies and three railway leasing companies operating in the UK for the period 2002 to 2006. His analysis found that for this period alone the companies owed £1.3 billion in unpaid tax which the government has not yet chase down.
So there has been a lot of money leaking out of our railways. The previous Labour government invested substantially in our railways and we have seen real improvements as a result. Yet the privatized rail companies propose to threaten this progress. They want their companies to take over the Network Rail infrastructure. The train operating companies have promised that this will incentivize them to invest in the railways but have not provided any evidence to say how this will be done. What we are really talking about here is the fragmentation and further privatization of our national railway infrastructure.
The 2009 European Commission report into the railway market clearly shows that the structures of the UK's railways are radically different from those in the rest of Europe. Essentially the railways in Europe, both in terms of passengers operations and Infrastructure Managers are publicly owned and accountable whereas in the UK they are not.
It is also the case that compared to railways in Europe the organisation of our railways are horribly complex, fragmented and with numerous interfaces. The UK industry currently consists of 24 train operating companies, 3 major freight operators, 3 rolling stock leasing companies, 2 infrastructure controllers - Network Rail and Euro tunnel, 7 major infrastructure renewal companies.
This has resulted in huge inefficiencies caused by duplication of functions and losses of economy of scale, increased profit margins and transaction costs required by individual companies and legal and consultancy fees, resulting in cost inflation, skilled personnel validating and monitor contrast instead of getting on with running the railway and a damaging loss of the traditional 'rail culture' which focused on 'getting the job done', being replaced by an unproductive 'blame game' and adversarial relationships between stakeholders in the industry.
I understand that the review has already indicated that the railways could save hundreds of millions of pounds a year by reducing this fragmentation.
We need to ask serious questions about why our rail fares are so expensive and where the money we have put in has gone. In these tighter economic conditions we must resolve to get real value for money on our railways but also ensure we see the significant investment we need to see to deliver economic growth and indeed a more environmentally friendly transport system.
I believe to do that we need to move towards a unified, accountable, publicly owned railway service and I very much hope this is very seriously considered as this will be the only way we get value for money, cheaper fares and indeed a better service.
Katy Clark is Member of Parliament for North Ayrshire and Arran
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