Labour eyes state control of the railways

Parts of the rail network could be taken back into public ownership by a Labour Government, Ed Miliband signalled today.

The Labour leader ruled out a “big bang” renationalisation, which could cost £10bn, but said: “We are looking at all the options on the railways.”

Some 19 of the 25 rail franchises are due to be renegotiated over the next five years. One option for Labour is to allow a state-owned company to bid for them against private operators or to hand some contracts to a state firm.

Labour believes a pledge to increase public ownership would be popular with voters. It could be combined with a promise to freeze fares or cut planned increases, as part of Mr Miliband's campaign on the “cost of living crisis.”

Sources insist the party is a long way from making a decision, which will included in its manifesto at next year's general election. “We are looking for innovative solutions that work, not ideological ones like renationalisation for its own sake,” one said.

Mr Miliband told the BBC's Andrew Marr Show: “We are not going to go back to old-style British Rail.” He said Labour would be “pragmatic” but added: “We have got to recognise that the system at the moment has flaws in it. Passengers are paying high fares in this country and we are paying big subsidies from the taxpayer.”

Labour believes the East Coast main line has operated successfully since it was nationalised in 2009 when a franchise run by National Express failed. A Labour pledge to renationalise rail could derail the Coalition Government's plans to sell off the East Coast contract in February next year.

The Department for Transport has extended nine franchises without opening them up to full competition following the shambles two years ago over the West Coast line. It remains with Virgin Trains, which mounted a successful legal challenge after losing out. This cost taxpayers about £55m and forced a major overhaul of the franchising process.

Mary Creagh, the shadow Transport Secretary, said it was wrong for passengers to pay the price for the Government's “incompetence”. She added: “The Government's West Coast franchising fiasco has led to franchise extensions which will add to rail companies' profits and cost taxpayers and passengers more.”

In a letter calling for gradual renationalisation, 30 Labour parliamentary candidates said private operators could charge high fares and “walk away with hundreds of millions of pounds a year, despite running monopoly services and benefiting from £4bn of public investment in the rail network every year.”

Mick Cash, acting general secretary of the RMT union, said: “It's about time Labour woke up to the fact that bringing the railways into public ownership is both popular and cost effective and would free up the money we need to invest in staffing and capacity to modernise the network.”

The Conservatives accused Mr Miliband of appeasing the unions. Bob Neill, a Tory MP, said: “Renationalising the railways is something that would put up the deficit and which the unions have been demanding for years. Once again Ed Miliband has shown is too weak to stand up for the people of Britain and face down his union paymasters.”