What is rail nationalisation and will it make fares cheaper? What we know

Labour leader Sir Keir Starmer and deputy Labour Party leader Angela Rayner arrive by train to Selby, North Yorkshire, to meet with newly elected MP Keir Mather after his success in the Selby and Ainsty by-election. Picture date: Friday July 21, 2023. (Photo by Stefan Rousseau/PA Images via Getty Images)
Labour is planning to nationalise the railways if it wins the next election. (PA)

Labour has pledged to renationalise the railways if it wins the next general election, in a move that they say will not cost taxpayers a penny.

The party, which is way ahead in the polls ahead of an election within months, says the policy marks the “biggest overhaul to our railways in a generation”. A Labour government would expect to transfer rail networks to public ownership within its first term, the party says.

Nationalisation is when the government takes over control or ownership of private companies. Currently, train companies are run independently of the government, but Labour plans to bring back control to ministers.

A government wanting to nationalise companies could buy up majority shares. But full nationalisation would involve the government taking control of the an industry’s entire assets and operations – in this case, the rail industry.

However, compensation would have to be paid to the previous owners for all their assets. Labour says their plan – to fold existing contracts into a new body after they expire, as the government did during COVID – would mean the taxpayer would not have to pay any compensation payments as a result.

It claims transitioning to public ownership could save money by cutting out franchise bidding costs, reducing the duplication of resources and lessening friction between operators.

Labour leader Sir Keir Starmer during a visit to a housing development in the Nightingale Quarter of Derby, to set out Labour's five
Labour, under leader Sir Keir Starmer, say their plan would not cost the taxpayer a penny. (PA)

Four train operators – Northern, Transpennine, the East Coast mainline and Southeastern – are already under public control after being taken into the government’s operator of last resort, while Scottish and Welsh railways are run by the devolved governments. Northern Ireland's railway system is already fully nationalised.

Britain’s railways have often come up for criticism from both passengers and politicians. Data released throughout the years has seemed to back up this negative view.

According to European Commission statistics, the UK was among the worst in Europe for rail services cancelled in 2018 (see chart below).

Britain’s railways had also previously been judged the worst for fares, efficiency and comfort, according to a report by the Just Economics think tank.

The report said rail services in the UK were slower, more expensive, less comfortable and more inefficient than those in major European countries such as France, Germany and Spain.

In 2017, MPs on the Commons transport committee said the railway system in the UK was “not fit for purpose” and recommended a review of its franchising functions. They concluded that the model “fails to deliver for passengers”, adding that “passenger satisfaction with the railways is falling”.

According to YouGov polling in 2023, most Brits felt the railways were not good value for money.

Labour say that train fares have risen nearly twice as fast as wages since the Tories came into power in 2010. However, shadow transport secretary Louise Haigh could only say that it was Labour’s “ambition” for fares to reduce after nationalisation, as they are “incredibly complex”.

Nationalisation would therefore not automatically mean a decrease in fare prices. In fact, the short answer, according to professor of accounting practice at Sheffield University Management School Richard Murphy is: it depends.

Murphy, a railway enthusiast for the Funding the Future blog, told Yahoo News UK that a Labour government would not necessarily mean a reduction in fares once railways are nationalised.

Currently the government subsidises train operating companies and Murphy said that it is these that Labour will set, rather than the fares themselves. He explained: “If the government decides they want to cut the level of subsidies, fares will have to go up come hell or high water.

“Subsidies are running very high at the present because the number of people using railways is down from pre-COVID days… and therefore at present it will be a question for the Labour government to decide how much do they want to spend or not.”

Train on platform with departure passengers
An expert on nationalisation told Yahoo News UK that the policy would not automatically mean a reduction in train fares. (Getty)

Murphy said that there is a “direct relationship between the level of subsidy and the level of fares”. He went on: “But presuming they carry on with the current level of subsidy… and they didn’t change the overall environment of the economics of railways and the number of passengers stay the same… fares could go down in that case under nationalisation.“

Murphy also explained that if rail traffic was under common ownership, there will be less time and effort needed on trying to argue who is responsible for problems – which would “massively reduce the costs”. However, this would not automatically mean Labour would pass on those savings to commuters, arguing they could instead choose to cut subsidies. On this, he said: “Who knows whether it will actually reduce fares or not.”

The idea of an act that "guarantees the lowest fare is incredibly important”, due to commuter confusion when buying tickets digitally from train ticket websites such as Trainline. He added: “The reality is they can cut out so much admin by running a single railway that they will definitely win. Could fares go up? If they [Labour] want to reward themselves with unpopularity they could. But If Labour is sensible they could make a real victory out of this.”

Commons leader Penny Mordaunt claimed Labour’s railway plan will not deliver any fare decreases and branded it “socialist ideology”. She claimed is would “actually require £10bn of additional funding“, adding that it “won’t also deliver any fare decrease or improved services”.

According to polling, Britons are broadly supportive of nationalising Britain’s railways – and have been for a number of years. YouGov tracking on the issue shows that a majority of people (59%) are in favour. Out of those, 37% strongly support it, while 32% say they tend to support it. Strong support has seen an uptick over the past two years.

In comparison, just 7% say that tend to oppose it, with 2% of people saying they are strongly in opposition of the policy.

Polling also shows that the policy could be a vote winner for Labour as it is popular with their voters. Data shows that while it has always been popular with Labour supporters, its popularity has grown further in recent years, with 54% of Labour voters strongly supporting the policy.

However, if the Conservatives hope to jump on nationalisation as a way to attack Labour, they may be neutered by data which also shows it is popular with their own voters. While support is less strong than with Labour voters, 30% of Tory voters say they strongly support nationalisation of the railways, with another 34% saying they tend to support it.

So is it a vote-winner? Well, former Labour leader Jeremy Corbyn committed to nationalising the railways in 2017 ahead of the general election, which ultimately saw Labour blocking the Conservatives winning a majority.

Corbyn once again committed to the policy ahead of the 2019 election, promising to enact it within the first five years of a Labour government. However, while it may have won support then – as well as now – Corbyn led Labour to historic losses in the election, suggesting that the issue of transport may not be near the top of the issues important to voters, such as immigration, the NHS and the economy.

In fact, data supports this. YouGov polling on all four issues shows transport far behind the list of priorities for voters, sitting at 3%. This compares to 51% for the economy, 46% for health and 37% for immigration.

Chris Hopkins, political research director at polling firm Savanta, told Yahoo News: “The public very much likes the idea of the railways being renationalised. Our wider research indicates widespread dissatisfaction with how the railways are currently operating, which will likely be playing into this.

“However, there is no guarantee that this is a vote winner. In isolation, the public like lots of (often contradictory) policy positions. As Jeremy Corbyn found out in 2019, even if you make very popular positions such as nationalising utilities a cornerstone of your campaign, there are lots of other reasons why the public might not vote for you.”