Rail structures, ownership and reform

In the early 1990s the Major Government initiated a radical structural transformation of the British rail system, one that is yet to be repeated internationally (the system in Northern Ireland is entirely separate, state-owned and state-run). Over a relatively short period British Rail was split up into over 100 private companies. The infrastructure ownership and management was privatised and rebranded under Railtrack, the rolling stock companies and freight sectors were also privatised and the passenger rail operations were let to private operators under 25 separate franchises. Over the next fifteen years there followed further reforms, partly due to the change of government but also due to issues following the Hatfield disaster and the collapse of Railtrack.

There are different views about how successful GB rail privatisation has been. Some argue that it never delivered on its initial promise to introduce on-track competition. Some assert that while private sector involvement has been beneficial, the lack of vertical integration between track and train has been a mistake. Whereas others maintain that the whole thing has been a failure – leading to inefficiencies, spiralling costs and high fares – and the railway should be brought back into public ownership.

Great Britain was the only country to adopt its specific model of operation and was the only country to completely divest itself of any public stake in passenger operations (Sweden would be the closest European comparator). A host of other models have emerged following the wave of international reform in the 1990s. Despite this, there is still no consensus on the optimum structural model for the railway industry.

Indeed, logically a single model could never be suitable across all regions. The World Bank, for example, has argued that rail restructuring is a “pragmatic search for a model that works in specific markets and in which railway management objectives are reasonably aligned with national policy objectives for railways”. That said, cross-country evidence shows that there is a clear presence in almost all markets of a state-owned incumbent railway operator and infrastructure manager, particularly if passenger demand and service dominates the national rail network. Even in Sweden, where market opening has recently been taken to the point of including all train services, the state continues to be a major stakeholder in both operations and infrastructure.

Railway restructuring remains a controversial issue in Great Britain, twenty years after privatisation was completed. The Conservative Government is broadly supportive of the current structure, although Secretary of State Chris Grayling has said that he intends to bring back together the operation of track and train in some form. This is not a new idea – Sir Roy McNulty suggested it in his 2011 report on rail value for money. In contrast, the Labour Party is committed to bringing private rail companies back into public ownership as their franchises expire, as part of a wider renationalisation programme.

Information on other aspects of rail policy can be found on the Railways briefings page of the Parliament website.