Why the system of rail privatisation in the UK has been a disaster | British Politics and Policy at LSE
Why? Because these infrastructure privatization schemes in Britain and the US are set up as gigantic ripoffs of the public sector and taxpayers that enrich private investors. All the significant risks are borne by the taxpayers, while the investors get the profits and can walk away any time they want.
"Some of the problems of the privatised rail system are well known. Perhaps best known is the systematic gaming of the train operating franchise system. Franchisees – as in the catastrophic case of the East Coast Line – can walk away from the franchise without serious penalties when the ludicrously unreal projections that won the contract in the first place turned out to be fantasies. Less known, and systematically documented in the CRESC report, is the extent to which the train operators have been able to manipulate the licensing system so that they effectively pay dividends to shareholders from direct public subsidy; between 1997 and 2012 on the West Coast Mainline, Virgin Trains paid out a total of £500 million in dividends and received a direct subsidy of £2.5 billion. Worse still, the report highlights the large, hidden and indirect subsidies to train operating companies which have completely wrecked the balance sheet of the quasi-public Network Rail company that provides infrastructure."