The first King’s Speech of the new UK Labour Government set out plans for two rail reform Bills.
The first, the Passenger Rail Services (Public Ownership) Bill (‘the Public Ownership Bill’), will renationalise passenger rail in Great Britain. The second will implement wider reform.
This article looks at how rail currently operates in Wales, what’s planned, and whether proposals will address long-standing Welsh Government calls for reform.
The Welsh Government’s role in rail
Subject to minor exceptions rail is not devolved. However, the Welsh Government has certain executive powers. In particular:
- Powers to invest in rail infrastructure – though this remains a UK Government responsibility delivered through Network Rail, and Wales doesn’t receive a block grant allocation. The Core Valleys Lines are the exception, where ownership transferred to the Welsh Government in 2020 facilitating the South Wales Metro project.
- Powers to procure and manage Wales and Borders Franchise services.
The Welsh Government / Transport for Wales (TfW) have limited input into the three UK Government procured franchises operating in Wales (Avanti West Coast, CrossCountry and Great Westen Railway).
Unlike the situation in Scotland, the Welsh Government and TfW have no formal role in relation to either the infrastructure manager (Network Rail) or the regulator (the Office of Rail and Road), although they work closely with both.
The pandemic has driven new approaches to rail services
The law requires most rail services in Great Britain to be procured through franchises. As originally conceived, private sector franchise operators carried the revenue risk (retaining ticket revenue) and received a subsidy from, or paid a premium to, the public sector franchising authority.
However, the significant reduction in passenger numbers during the Covid pandemic saw Welsh, Scottish and English franchises move to emergency contracts in 2020. Government took the revenue risk, paying operators a management fee to deliver specified services.
This approach has continued in England. Emergency contracts have largely been replaced by National Rail Contracts and the government continues to pay a fee and carry the revenue risk.
Rail legislation currently provides for an Operator of Last Resort (OLR) to operate services where franchise agreements end outside the normal franchising process. This was originally intended to provide continuity pending re-tender.
KeolisAmey, appointed to run Wales and Borders Services in 2018, began receiving emergency funding in March 2020. However, in autumn 2020 the Welsh Government announced TfW would operate services directly under OLR arrangements – effectively nationalising services as TfW Rail Ltd.
Nationalising passenger rail and wider rail reform
The Public Ownership Bill, introduced to the House of Commons on 18 July, seeks to nationalise franchised passenger railway services when existing private sector contracts come to an end.
It would prevent the Secretary of State extending existing franchises, or entering into new ones, except in specific circumstances. It would also prohibit Welsh and Scottish Ministers from entering into new franchise agreements.
Instead, passenger rail services would be secured by direct award to public sector companies. Rolling stock would continue to be leased from private sector Rolling Stock Operating Companies (RoSCos).
The King’s Speech also set out plans for a second Bill and more comprehensive rail reform, including:
- vertical integration of track and train;
- creation of Great British Railways (GBR), a “directing mind” responsible for network management and delivery of passenger services;
- a new passenger watchdog;
- ticketing reform;
- a statutory duty to promote rail freight; and
- a continued role for open access operators.
Many of these wider priorities aren’t new. The May 2021 Williams-Shapps Plan for Rail, setting out the former Conservative UK Government’s plans, is largely reflected in the Labour Government’s proposed approach (though passenger services would have remained privatised under management fee contracts similar to those currently operating in England).
Keith Williams, who led the previous Government’s rail review, welcomed Labour’s manifesto plans as delivering the “substance” of his recommendations.
However, limited progress was made. A GBR Transition Team was established, but plans for a Transport Bill were shelved in 2022. Instead a draft Rail Reform Bill was published in February 2024.
The timing of the second Bill is unclear, but on 3 September the Secretary of State for Transport issued a written statement announcing the establishment of GBR in shadow form.
What does reform mean for Welsh Government policy?
The Public Ownership Bill is significant for Wales, despite TfW Rail already being publicly operated.
In England and Wales (though not Scotland) legislation currently prevents “public sector operators” from being franchisees. So although TfW services were expected to stay nationalised for a few years, without this Bill they would ultimately revert to the private sector.
In July, the Cabinet Secretary for Transport and North Wales, Ken Skates MS, welcomed the Public Ownership Bill as allowing TfW “to maximise the benefits of integrating rail with other forms of public transport”.
Calls from Wales for wider reform have been voiced for some time. In 2016 a Senedd Committee noted limited Welsh Government input into rail planning and delivery processes. While specifics of what wider reform means for Wales are limited, in August the Cabinet Secretary hailed a “bright future” for Welsh rail following a meeting with UK rail minister Lord Hendy.
While the Welsh and UK governments have been working together for some time on an agreed pipeline of rail enhancement projects, no announcements have been forthcoming.
The Cabinet Secretary’s 24 September statement on rail referred to the “huge opportunity” associated with future reform – specifically a Wales and Borders unit of GBR (“GBR Cymru”). He welcomed being able to “have a say” on the enhancements delivered in Wales with “discussions about GBR Cymru having a dedicated enhancements fund” underway.
However, this still appears some distance from full devolution of executive powers for rail planning following the Scottish model.
Future funding allocations for rail are unclear. It has long been argued that Wales doesn’t receive its “fair share” via Network Rail. Additionally, classification of HS2 as an England and Wales project, meaning Wales doesn’t receive a Barnett Consequential, has been hugely contentious.
It’s been suggested Wales is owed billions from HS2. And in June the then Cabinet Secretary for Finance, Constitution & Cabinet Office, Rebecca Evans MS, wrote to Members suggesting £350m is owed for work on the project up to 2024-25.
In September, the Cabinet Secretary for Finance and Welsh Language, Mark Drakeford MS, wrote to the Chancellor of the Exchequer emphasising the need for “a fair approach to the application of Barnett in relation to rail funding”. But the First Minister, Eluned Morgan MS, has since sought to “manage expectations” on the UK Government’s 30 October budget suggesting any resolution won’t be quick.
On 24 September The Cabinet Secretary for Transport and North Wales said “full devolution of rail infrastructure, along with fair funding, remains our ambition, but we do recognise that this is a process”.
However, if this ambition is not achieved during the most significant rail reform process in Great Britain for a generation it’s unclear when the opportunity might arise again.
Article by Andrew Minnis, Senedd Research, Welsh Parliament
