First published in July 2015
How the system works
The railway system in the UK is a three-headed beast. The first head is the train operating companies, which have names that most of us are familiar with: Virgin Trains, Arriva, and Cross Country. These companies are the ones that we are looking at in this product guide.
The second head is Network Rail, a publicly owned company which owns most of the rail infrastructure including the track, the signalling, and the stations. After the railways were privatised in 1994 the infrastructure was at first sold to a private company called Railtrack, but Railtrack collapsed in 2002 after a series of fatal train crashes and it was taken back into public hands.
The third head is the companies who own the trains, which are called “rolling stock” companies. There are just three main ones, all of which are owned by financial institutions – banks and private equity firms.
The system works like this: the operating companies bid for franchises – the right to run a train service for a set period. They then lease the trains from the rolling stock companies, and pay Network Rail for the use of the fixed infrastructure.
It is worth bearing in mind that there are many aspects of the rail system that we are not rating in this guide as they are not under the control of the train operating companies. They include all of the issues connected with infrastructure, including many issues around capacity. The train operating companies only run the services.
The train operating companies sometimes act as independent companies, so on some issues we have rated them individually rather than just rating their parent companies. For example, Northern Rail is owned by Serco and Abellio, but it has its own environmental policies, separate from its parent companies policies.
Many of the train operating companies are eager to detail all of the things that they are doing to reduce carbon emissions, but some of them seem more sincere in this than others. We only awarded our best mark in Environmental reporting to FirstGroup, Stagecoach and National Express, as they are the only companies from whom we could obtain an audited report containing quantified future targets.
Nearly all of the train companies sell non-organic or free range meat on board, and thus they were marked down in the Animal Rights categories. And none of them had very rigorous supply chain policies in place, so they all received our worst rating in the supply chain category.
One of the oddest things about the UK “privatised” rail system is that it isn’t really very private at all: most of the passenger services are actually run by public sector companies from other countries.
Cross Country and the London Overground are wholly or part owned by Arriva, which is a subsidiary of Deutsche Bahn, the German national railway company, owned by the German state.
Deutsche Bahn is a huge company that runs passenger and logistics services in 130 countries. It describes itself as the second largest transport company in the world.
Deutsche Bahn is a member of the World Business Council for Sustainable Development, an international lobby group which campaigns for market-based, free trade policies.  Slightly ironically for a publicly owned company, it earned itself our worst mark for likely use of tax avoidance strategies, on the basis of three high-risk subsidiaries in tax havens.  Five of Deutsche Bahn’s directors received total pay equivalent to more than a million pounds in 2014, which is deemed excessive by Ethical Consumer. 
Southern Trains, London Midland and Southeastern Trains are owned by Govia, which is a collaboration between the UK company Go-Ahead and a company called Keolis which is majority-owned by SNCF, the French national railway.
SNCF is also a member of the World Business Council for Sustainable Development5 but scores relatively well on our table.
Greater Anglia and Abellio ScotRail are owned by Abellio, the international arm of the Dutch nationally-owned rail operator Nederlandse Spoorwegen.
Northern Rail and Merseyrail are both run as a joint venture between Abellio and Serco, a collaboration which drastically reduces their scores on the table.
Serco is a notorious company that specialises in outsourced government services. It is the leading private contractor to the government and runs so many public services that it can start to appear almost like a parallel government in itself. The services it runs include transport, immigration detention centres, health services, prisons, schools and weapons. Since 2000 it has managed the UK’s Atomic Weapons Establishment, manufacturing and maintaining the warheads for the UK’s nuclear weapons system.
We could fill the whole website with the scandals around Serco’s questionable business practices. Two of the highest profile recent cases have been over human rights abuses at Yarl’s Wood immigrant detention centre, including endemic racism and sexual abuse by staff; and the tagging scandal that broke in 2013, in which it transpired that Serco had overcharged the government tens of millions of pounds for tagging criminals who were really in prison or dead.
There have also been much reported scandals around Serco’s work in the health sector. The company withdrew from its contract for out-of-hours GP services in Cornwall in 2013 after leaving the county short of doctors, and an employee later revealed that the company had falsified 252 reports to the NHS. Clinicians said in internal emails that the company had an “inherent inability… to understand that you cannot cut corners and put cost saving above quality.” 
Serco is heavily involved with lobbying, and it boasts of how regularly it meets with government politicians and officials. We could not find any donations to UK political parties, but in the 2014 US election cycle the company gave $110,300 to the US Republicans and $44,950 to the Democrats. 
The company scores our worst rating for the likely use of tax avoidance, as it has high-risk subsidiaries in tax havens and was criticised by the Independent for possible tax avoidance in 2013. Serco’s CEO received £1,605,064 total remuneration in 2014. 
Virgin Trains East Coast is 10% owned by the Virgin Group. The other owner is Stagecoach.
Virgin headquarters itself in the British Virgin Islands. Although that has a certain pleasing resonance in terms of names, it might also have something to do with the British Virgin Islands being a tax haven. Virgin also has four high-risk subsidiaries based there, as well as two in Singapore and one in Switzerland. We thus awarded Virgin our worst rating for likely use of tax avoidance strategies.
Virgin is involved in a substantial amount of political lobbying. Between 2013 and 2015 it spent around $200,000 lobbying the US government.13 It had many meetings with UK Ministers in 2010 and 2011, including David Cameron, and relevant members of the government. 
First Great Western is owned by FirstGroup, a UK company listed on the London Stock Exchange. The company’s Chief Executive had an income of over a million pounds in 2013, which nearly doubled in 2014, to £1,986,000. 
Go op – the first co-operatively owned train company
Go op is a small company which aims to become the UK’s first co-operatively-owned train operator. It has an explicit social agenda, intending to improve access to public transport, and was intending to start running services between Yeovil and Birmingham in 2014, although they were delayed by the Co-operative Bank’s financial problems. They are a company to watch. 
Any train company that is serious about the environment has to help to enable people to cycle. And yet the bewildering complexity of the different bike policies of different train companies puts many people off trying to take their bikes on the train.
We rate their various bike policies below:
Northern Rail, Merseyrail, Abellio ScotRail, Virgin Trains East Coast, CrossCountry, First Transpennine Express, East Midland - All trains carry bikes. In some cases reservations are available and/or compulsory.
London Midland, First Great Western, Southern - Most trains carry bikes but there are restrictions on peak services in and out of London
South West Trains, Abellio Greater Anglia, London Overground - Some routes carry bikes but many do not, particularly on peak services. London Overground does not allow bikes on any peak-time trains.
Southeastern, C2C, Chiltern Railways - Bikes carried only at the discretion of the conductor or “subject to space”.
Information from National Rail Cycling by Train 2015 leaflet.
In some limited cases passengers can choose their train operator, but as this is a sector where consumers have minimal ability to choose companies on the basis of ethics, we are discussing campaign groups who are working on influencing what is happening on the railways. There are a myriad number of groups, working on various aspects of the rail system.
Infrastructure: Rail Future (railfuture.org.uk) campaigns for infrastructure improvements, including new lines and stations, and the electrification and improvement of old ones. They claim that “over the past 50 years we have played a major part in getting over 370 stations built or reopened, and over 500 miles of new route added to the network.”
Fares: Campaign for Better Transport mostly focuses on fares. They are currently running a big campaign for part-time season tickets and have a “fair fares” campaign, which focuses on general price issues. They have also campaigned for the opening of new lines.
Renationalisation: There are a lot of groups campaigning for renationalisation:
Lesser known ways to get cheap tickets
There are a few ways to get cheap train tickets that not everyone may have yet cottoned on to.
CrossCountry and C2C will let you buy advances online up to 15 minutes before travel (but not in person: at the desk you will be quoted a higher fare). For most of the others the time limit is the night before, either midnight or 6pm depending on the company.
There is a strange anomaly which means that trains from Cardiff or Newport to English cities are often much cheaper than similar trains from Bristol. You can book from these Welsh cities, but start your journey halfway through, in Bristol.18 For example, an anytime ticket from Bristol to Manchester costs £84.30, but an anytime ticket from Newport to Manchester only costs £64.40, and the train stops at Bristol.
You can often save money by splitting your journey into separate tickets. This is generally because the different parts of the journey are being priced by different train operating companies, and so the place to split the ticket is at the station where the train operators’ services meet. A man called Barry Doe makes maps that show where all the train operators operate.
It is particularly worth doing when only part of your journey is in peak time, as if you just buy one ticket, you will be charged the peak fare the whole way. An example is the route Derby to Manchester. At peak time a return ticket will cost you £56.60. But if you split your ticket in Tutbury and Hatton, you can get there and back, starting in peak time, for £29.60.
There are some regional and company-specific rail cards that are less well known than the national ones, and some special cheap fares offers that are not on booking websites. Money Saving Expert has details.
Why are the trains so expensive?
The general feeling in the UK is that train fares are too high. It is hard to compare fares in different countries because there are so many different types of fare on offer, but most analyses find that UK fares seem to be more expensive overall than those in other European countries.  So the big question is: why are the trains so expensive?
One place to look is the UK’s privatised system. Certainly, the UK’s system is unique. Throughout Europe, between 80% and 100% of passenger services are provided by the public sector. 
Operating company profits
In 2013 academics at Manchester University produced a report called ‘The Great Train Robbery’. The report analyses how our system works, and looks at the dividends that are siphoned off by the train operating companies.
The operating companies, it claims, invest very little. And they are able to officially make a profit only because they receive sneaky, additional subsidies through the publicly-owned Network Rail, which undercharges them for the use of the infrastructure and is now £30 billion in debt.
So is this the reason for high fares – companies robbing us by siphoning off wads of unearned cash? Things are not so simple. According to the Manchester academics, the operator’s profit, while unjustified, is not large enough to make a huge difference to fares. In this respect too, they say, today’s train robbery is like the one in 1963. The proceeds of both robberies are very attractive in terms of reward for effort. But they are, in both cases, fairly modest sums.
We spoke to Andrew Bowman, the lead author of the report, who told us:
“The train operators return on capital employed is absolutely enormous, because the train operators are putting very, very little investment into the franchises and taking very, very little risk. That is why we see it as unjustified. Yet their net profit margins are actually quite slim.”
The issue with privatised rail may not just be profits, however. A 2012 trade union report called ‘Rebuilding Rail’ attempted to also look at the legal, administrative and bureaucratic costs of the current fragmented privatised system. Their overall estimate was that renationalising rail could cut a minimum of 18% off all fares.
A couple of their money-saving ideas may be out-of-date now, but many remain. Examples of inefficiencies are over 300 people employed to attribute blame (and thus penalties) for delays between the various parties, and myriad inefficiencies due to the absence of a proper strategic overview for the railway as a whole. One example is that decisions on new train purchases have to be made in ignorance of whether the lines they are meant to run on may be electrified within their lifetime. 
Certainly, if fares are cheaper in other countries, it cannot be explained away on the basis that they receive more public money. France’s public rail subsidy between 1996 and 2010 was almost exactly the same amount as the UK’s. 
Furthermore, the example of the East Coast line has provided a powerful case for renationalisation. It was operated by the publicly-owned Directly Operated Railways from 2009 until early this year. As Andrew Bowman put it to us:
“What Directly Operated Railways has done is show that a publicly operated company can perform well, and it can perform well on a line where the two prior private sector operators ultimately failed. And it had performed well during a period of prolonged economic slump, while serving some of the most hard-hit parts of the country economically.”
Would renationalisation be enough?
It may be that while renationalisation would be a good idea, we should be cautious about thinking that it would be a magical solution to the problem of high fares. Andrew Bowman told us:
“The problem is, the railways are an extremely capital-intensive business that produce enormous diffuse benefits for society, but from which it’s very difficult to recover all the costs from fares. So I think that we’ve got to stop looking at the railways as a business, basically, and accept that this is a loss making system and it inevitably will be.”
‘The Great Train Robbery’ report points out that raising sufficient funds to run the railways through fares alone has been an intractable problem through both private and public ownership. Thus if we want to really lower fares, there may simply be no alternative to straight public subsidy.
Electric trains run off overhead wires or a special track, which means that the line itself needs to be electrified. Making decisions about electrification lies with Network Rail, not the train operating companies.
In the dream low-carbon future in which the electricity grid is entirely renewably powered, electric trains will have close to zero carbon emissions. Electrifying the train network is thus an essential part of a transformation to a low-carbon society. But even right now, with our current electricity generation mix, electric trains have carbon emissions 20-30% lower than diesel trains. They are also more reliable, over 35% cheaper to operate, faster and quieter. There is little that can be said against them. 
Only 40% of Britain’s rail network is electrified, which is low compared to the rest of Europe.  Part of the reason is historical, as some continental countries that had their railway infrastructure completely destroyed in World War II took the opportunity to rebuild their railways as modern, electric networks.
That didn’t happen in Britain as our railways weren’t destroyed to the same extent.  But another reason is the lack of political will in the UK – electrifying track is expensive.
There have been intentions to electrify the British network for decades, but they have been repeatedly thwarted. The privatisation and fragmentation of the 1990s meant that the railways were no longer coordinated properly at a national level, which was a disaster for electrification. Between 1991 and 2010 only nine miles of track were electrified. 
However, the good news is that since 2009, Westminster seems to at last be pushing ahead with electrification. It is now proceeding apace, and there are plans afoot to electrify large stretches of track over the coming decades.
2 World Business Council for Sustainable Development, 2015, www.wbcsd.org
3 Hoovers, 2015
4 Deutsche Bahn’s 2014 Integrated Report
5 World Business Council for Sustainable Development, 2015, www.wbcsd.org
7 The Guardian, 19th December 2013, Serco raises estimated hit from electronic tagging scandal www.theguardian.com/business/2013/dec/19/serco-electronic-tagging-scandal-overcharging
8 Corporate Watch, The next Serco scandal: overcharging the NHS, August 2014 , www.corporatewatch.org/guest-articles/corporate-watch/next-serco-scandal-overcharging-nhs
9 www.opensecrets.org, accessed May 2015
10 Hoovers, 2015
11 Serco Group PLC’s 2014 Annual Report
12 Hoovers, 2015
13 Open Secrets, www.opensecrets.org, accessed May 2015
14 Who’s Lobbying website www.whoslobbying.com
15 Hoovers, 2015 and Financial Times, 25 November 2013, http://s.coop/1wkt1
16 FirstGroup 2014 Annual Report
17 Information from National Rail Cycling by Train 2015 leaflet downloadable at: www.nationalrail.co.uk/css/CycleLeaflet2015.pdf
18 Rail Future, Finding the best price, www.railfuture.org.uk/Finding+the+best+price
19 Go op website, www.go-op.coop/ accessed 19/05/2015
20 Keystone Politics, 2013, The Monopoly Board Game, Henry George and the Land Value Tax
21 Bowman et al, 2013, The Great Train Robbery: Rail Privatisation and After
22 Bowman et al. Op Cit
23 Taylor and Sloman, 2012, Rebuilding Rail
24 Bowman et al. Op Cit
25 Dft, 2009, Britain’s Transport Infrastructure: Rail Electrification
26 Electrified rail network: the benefits, The Telegraph, 23 Jul 2009 www.telegraph.co.uk/news/uknews/road-and-rail-transport/5892821/Electrified-rail-network-the-benefits.html
27 Ian McNeil, An Encyclopaedia of the History of Technology, http://tinyurl.com/nof9cj8