Transport Secretary Mark Harper has pledged to enhance the role of the private sector in Britain’s railways, which he described as “not fit for purpose” and “financially unsustainable”.
The Cabinet minister said he wants private companies to be involved “not just in running services but in maximising competition, innovation and revenue growth right across the industry”.
These are “benefits the private sector has delivered time and again”, Mr Harper told rail industry leaders as he delivered the annual George Bradshaw address in central London.
He said the private sector has been “rightly criticised for poor performance” but has “few levers to change it”.
Labour accused the Conservatives of presiding over “13 years of failure”.
Mr Harper, who began his role in October last year, was scathing of Britain’s railways.
He said: “The railways, quite frankly, aren’t fit for purpose.
“Currently mired in industrial action, routinely letting passengers and freight customers down, and historically unable to deliver major improvements at good value for the taxpayer.
“Britain is yearning for a modern railway that meets the needs of the moment.”
Mr Harper told the audience that the coronavirus pandemic “has made a bad problem worse”, with season ticket sales at just 28% of pre-virus levels.
He said: “The impact on the industry’s bottom line has been stark, with revenue around £125-175 million lower each month as costs keep rising year on year.
“Any other industry would have collapsed years ago.
“But the railways have only survived due to the public purse – the source of over 70% of income over the past two years, at a cost of £1,000 per household.
“I won’t mince my words: operating the railways is now financially unsustainable.”
Mr Harper announced plans to trial a system through which fares on some London North Eastern Railway (LNER) services will fluctuate depending on demand.
He said single leg pricing – where a single fare will always be half the cost of a return – will be rolled out across the LNER network, and pay-as-you-go ticketing will be extended in south-east England.
He also confirmed that Great British Railways – a new public sector body to oversee Britain’s railways – will be launched, and the location of its headquarters will be announced before Easter.
Mr Harper said his plan for “fundamental reform” is “in stark contrast to Labour’s ideological policy of nationalising the railways”.
Andy Bagnall, chief executive of industry body Rail Partners, described Mr Harper’s speech as “a needed push to reinvigorate rail reform, which is essential for passengers and freight customers as well as for the taxpayer and the wider economy”.
He added: “Radical change to the fares system is an idea whose time has come.
“Industry has been pushing for reform for many years so that rail fares reflect the changing ways people are travelling, accelerated by the pandemic.”
Labour’s shadow transport secretary Louise Haigh said: “Whichever ticket you buy, passengers are paying more for less under the Conservatives’ broken rail system.
“Thirteen years of failure has seen fares soar, more services than ever cancelled, while failing operators continue to be handed millions in taxpayers’ cash.
“The next Labour Government will put passengers back at the heart of our railways, and build the infrastructure fit for the century ahead, unlocking jobs and growth.”
Nigel Harris, managing editor of Rail magazine, said reforming ticketing is “the right thing to do”, while plans to reduce Government intervention in how services run are “a great idea”.
He added: “We’ve heard a lot about the outcomes (Mr Harper) wants before but we’ve never had such an encouraging blueprint for how you get there. I think this is really good.”
England’s regulated fares, which include season tickets on most commuter journeys, some off-peak return tickets on long-distance journeys and flexible tickets for travel around major cities, will increase by up to 5.9% from March 5.
Analysis of Office of Rail and Road data by the PA news agency found the equivalent of one in 13 services was cancelled during the four weeks to January 7, representing the worst reliability in records dating back to April 2014.
This covered a period when operators were badly affected by an overtime ban introduced as part of industrial action while severe weather also caused disruption.