First published in the Financial Times

Train companies have been calling for many years for a new public body to join up track and train, announced last week in the form of a shadow Great British Railways. But legislation passed by MPs on Tuesday, which enables the new body to directly run all the trains in the place of private companies, is not a fast track to improving train services. Neither will it automatically attract more passengers or reduce the increased subsidy the railway is still receiving after the pandemic.

Without these two objectives being met, the role of rail in supporting and spreading economic growth across the UK — this government’s core mission — is undermined. If we look to our European neighbours, they are travelling in the opposite direction towards a model giving the best of both worlds: a joined-up system under public control but harnessing the commercial drive of train companies.

Since 2016, when the EU opened up the railways across the single market, public sector rail leaders in Spain, Italy, France and many other countries have seen the benefits of competition in rail — more services, newer trains, and swelling passenger numbers. Post-pandemic, railways across Europe increasingly use contracted operators, incentivised to lower costs and attract passengers but with public sector oversight. A report on tendering regional rail services in the Netherlands found reductions in annual subsidies of up to 50 per cent. In Germany, competition has reduced subsidies by up to a quarter.

In Britain, before franchising was swept away by the pandemic, operators paid billions of pounds into the Treasury. Companies had a small share in any profits. The vast majority of the additional revenue they generated was returned to the taxpayer — money that was used to invest in new technology and trains, or deliver services not otherwise financially viable.

Given the state of the nation’s finances, the Treasury is unlikely to give rail the additional funding it needs to improve punctuality or hold down fares. Great British Railways must find growth for itself. Our European neighbours recognise that a state monopoly doesn’t automatically deliver improvements.

Fans visiting Germany for the Euros this summer saw first-hand that the Deutsche Bahn state railway was not the model of legendary German efficiency. A British fan’s post on X lamenting an hours-long wait on a crowded platform drew this comment: “I see you have been “DeutscheBahn-ed.”

In Britain, the infrastructure manager, Network Rail — publicly owned since 2002 — is responsible for around 60 per cent of delay minutes rather than operators. Four in ten passenger train miles travelled in Britain are on trains already run directly by public operators: they face exactly the same reliability and industrial relations challenges as private operators. Of the seven worst performing operators for cancellations last year, four are public and three are private. The seven most punctual operators last year, including the new Elizabeth Line, were all private.

The government wants to save the fees currently paid to train companies but the sums of money released are far too small to make a meaningful difference to services — less than 1 per cent of the overall annual budget. And the public will lose what they get in return: the incentive to keep costs down and increase revenue to reduce subsidies. Our analysis at Rail Partners suggests that this could mean annual subsidies £1bn higher by the end of this parliament.

Public support for nationalisation is based on the hope of improved services. This will not come about by removing the only part of the system with a track record of driving growth and reducing subsidy for taxpayers so as to free up money to fund improvements. Great British Railways should learn from Europe: leave open the option to use train companies where it will better drive growth.