The history of rail privatization in the UK is a complex one. The government of John Major originally privatized the rail system in 1996, splitting the assets into infrastructure (to be maintained by an infrastructure corporation named RailTrack) and franchises for regional services. The Labour government continued with the model and associated processes.
RailTrack effectively went bankrupt in 2001, after major issues with its stewardship were exposed following the Hatfield rail accident, and had to be bailed out by the government and re-constituted as a new company (Network Rail). The bailout was a costly process that also involved litigation against the government and the former Transport secretary.
A number of franchisees have had their contracts terminated over the years (which created its own set of problems, since the new franchisees did not inherit the old franchisee leadership and management, and key operational knowledge went missing and had to be rebuilt), and several franchises, most notably the East Coast franchise, failed. Some former franchisees are now banned from bidding, due to performance and other issues. There is compelling evidence that several franchises in recent years have met the definition of what Modern Railways termed “zombie franchises” – operators that are losing money and who will eventually default and lose their franchises. A small-print table in the article shows that apart from the service disruption and transition issues of failing franchisees, there is a significant cost to the taxpayer in simply managing the re-bidding process for franchises.
This history of rail privatization and operations is interesting reading, not only because it shows that extensive government control and support for the UK rail system continues decades after the system was supposedly privatized, but also because it shows the extent to which the franchisees are foreign-owned. Many current UK franchises are partially or wholly owned by European companies or European government bodies.
Problems with even finding qualified companies to bid on franchises have led to a government review of the operation of the entire UK rail system. The report has just been issued, and it looks likely to lead to a much higher level of government involvement in rail operations.
The report does not mince words. The publication summary admits that the entire current franchising and operational model is now unsustainable. This was kind of obvious given the recent franchise failures, and the failure of some franchises to even attract qualified bidders.
The solution appears to be a complete reboot of the infrastructure-train operating company model, but the responsibilities of the train operators will be much narrower, with more of the basic business parameters such as fares being set by the government. This is probably a response to massive continued criticism of fare increases by the franchisees, who under the old model had freedom to set fares.
The new government-supervised infrastructure and operational parameters corporation will be named Great British Railways. You could not find a better example of desperate over-compensation in naming if you tried.
The irony of the history is that the government is now just as involved in railway operation as it was before initial privatization, the amount of government support is still considerable, and many of the operational franchisees are foreign-owned. The last aspect is the least-understood, a consequence of the Thatcher-era free market approach which did not care who ran businesses, as long as they did the job properly. Whether UK electors understand the extent to which European countries run and control aspects of the UK’s infrastructure is doubtful.