Tony Lodge: How Conservatives can improve the Railways Bill – in the national interest

Tony Lodge is a Research Fellow at the Centre for Policy Studies and author of Rail’s Last Chance – a four point plan to save the railways.

This time next year, the government’s Railways Bill will have cleared its parliamentary stages and become law. Today will see the Bill’s Second Reading in the Commons. It will bring most passenger trains under Whitehall control (in a new state-run body to be called Great British Railways (GBR)) for the first time since British Rail was abolished in the early 1990s.

The plans will largely satisfy Labour’s allies in the rail unions who have long campaigned for ministers and civil servants to micromanage and run trains again. GBR, when set up, will be the second largest public organisation in Britain after the NHS, employing around 100,000 people.

The majority of Britain’s major rail operators are already in public ownership. The nationalisation of Greater Anglia on 12 October represents the ninth major passenger service to be brought under state control, leaving seven to go before the government’s deadline of completing every one by 2027. (Several operators were already under public ownership by the time Labour were elected last year.)

So far, the omens are not good. Costs, delays and cancellations are rising, as are the subsidies for once well performing operators. Train cancellations surged by 50 per cent when the government nationalised the important South Western Railway (SWR) in May, delay minutes per 100 miles rose by 29 per cent between June and August, and the number of services arriving between 30 minutes and an hour late have more than doubled.

Rail’s latest annual financial statistics (2024/5) from the Office of Rail and Road (ORR) are concerning. Despite post-pandemic growth in passenger numbers, train operating costs have risen 16.5 per cent above fare income, compared with just 1.5 per cent pre-COVID. The Government continues to subsidise almost half of the rail sector’s costs, amounting to £11.9bn (up from £8.1bn before COVID).

The primary driver of this increase is lower fare income, particularly affecting London and the South East. Passenger journeys remain 12 per cent below pre-pandemic levels, and revenue is 15.6 per cent down compared with 2019 (excluding London’s Elizabeth Line, which opened in 2022).

The railways and the government face a fork in the track with two clear choices. Will the Bill seek to encourage and deliver a better performing railway, with private investment encouraged and value for money tickets? Or will it simply perpetuate a low growth, subsidy-dependent model that fails to appreciate where passenger growth exists and what customers want?

Conservatives will rightly scrutinise the Bill in their role as the official opposition and there are real opportunities to improve it through a measured and coherent approach with strong, evidence-based arguments. Given rail’s finances, some in the Treasury might hope ministers listen to those warning against policies that could smother better performance, efficiency, revenue and footfall.

Better train performance and network efficiency are key tests of the new Bill. In October, Sir Andrew Haines, the recently departed Chief Executive of Network Rail, said that “on performance, we have not been able to shift the dial. Projects have not gone as well as I would want them to.” Haines had been running the state-run infrastructure body for seven years and, between 2019 and 2024, spent £67.4bn on maintaining the railways.

On growth and delivering a railway more in line with what passengers want (and will pay for), will the Bill appreciate that a successful post-pandemic railway must better exploit the new strong revenue trends in weekend intercity travel and the high yield return which this growing leisure market can deliver? Rail subsidies can fall and revenue and footfall can rise if the Bill lays the groundwork to give passengers the trains, services and world-beating retail offer they want and are willing to pay for.

Today, far too many train services do not match demand.  Why are half-empty commuter trains still taking up valuable track space on Friday afternoons when these slots could be given to high-demand intercity trains, such as those linking London with the North and Scotland?

In June Lord Hendy, the rail minister, said that the dominant East Coast Main Line (ECML) intercity operator, LNER, which connects London with Scotland, was the “blueprint” for growth and putting passengers first.  He described LNER as a “trailblazer for innovation” and praised its year-on-year growth.

That was then. Of real concern now are the latest financials, which show LNER struggling to control its costs just five years after it turned a profit. Over a year costs are up by £120m (13 per cent) against a £70m revenue increase (9 per cent). Its subsidy is up 132 per cent, from £40m in 2023/4 to £93m now. The Treasury will rightly be concerned by this trend. What measures are in the Bill to keep a tight rein on costs and spend?

LNER had been performing well, especially due to the competition it faces from three unsubsidised intercity open-access operators. The East Coast Main Line model, which has seen this competition grow over 25 years, is indeed a blueprint which ministers should strengthen and encourage in the Bill.

Importantly, recent stats from the ORR for the April-June 2025 quarter show that all intercity operators on the ECML are growing well, against the same period in 2019; the route is currently seeing journey growth of 30 per cent compared to 2019. In comparison, the two dominant operators on the Great Western Main Line (Paddington to the West) and West Coast Main Line (Euston to the North) have seen 9 per cent and 10 per cent fewer journeys respectively than 2019.

Conservatives should push this evidence-based ECML case study hard.  Signs that ministers want to limit open access and dumb it down carry all the fingerprints of the rail unions, who dogmatically oppose their independent and innovative zeal. At the Transport Select Committee in May 2024, the RMT called open-access train services “parasites”, claiming they cherry pick passengers from good routes despite them paying track access fees and running competitive services at their own risk and without subsidy.

Conservatives must also argue against plans to defenestrate the independent Office of Rail and Road (ORR). This would mean GBR effectively regulating itself, deciding who can run trains where and when; the ORR presently does this, as well as monitoring costs and performance.

Management of the railways must be much less risk-averse and better adopt a demand-led model with a robust P&L. Where the private sector can help drive growth and investment, such as with open access, which has plans to spend hundreds of millions on new trains, then it must be embraced. (Rightly, Labour has just welcomed new competition on Channel Tunnel trains, which will mean new services, routes and better value fares.)

Though Conservatives are very unlikely to win any Commons votes on the Bill, they can still secure key positive concessions with robust, evidence-based arguments. The Treasury is watching rail closely, especially when bad plans will mean yet more subsidy and poor cost control.

By 2030 we will know if the GBR model is working. If it isn’t then it could well fall to Conservatives and others to address and remedy its failings. Not for the first time.