Leading article: Private greed and public incompetence

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It was an American cartoonist in the 1920s who coined the phrase: "What a way to run a railroad." It is an expression which has, sadly, never gone out of fashion, as yesterday's report of the House of Commons Public Accounts Committee shows. It predicts a future of fare rises, overcrowding, under-staffing and poor maintenance.

There is a structural problem at the heart of the British rail industry. Privatisation by a Conservative government in 1993 was supposed to inject competition and lower costs. But railway lines are natural monopolies. Privatised franchises have been unwilling or unable to drive down the industry's inherently high costs. The privatisation was mis-structured and has produced a system which is over-complicated, cumbersome and lacks proper independent scrutiny. Rail regulators have failed for more than a decade to get a grip on the industry's efficiency.

At present there is no incentive for the rail industry to supply extra capacity without additional public subsidy. So the privatised companies prioritise executive pay and bonuses and large dividends for shareholders. Passengers see little for the constantly increased fares. Now the Government is expected to lift the cap on fares that was put in place during privatisation, when it was agreed fares could rise only by 1 per cent more than the rate of inflation. They are expected to rise by 3 per cent over the cost of living from 2012. That could mean annual rises of £1,000-plus for many commuters. Unions say this will in effect be "ring-fencing the extortionate profits" of private rail companies. And on top of that substantial increases in overcrowding are predicted.

All of this is extraordinarily short-sighted. Rail is the greenest form of transport. Pricing people back into their cars makes no sense for a government committed to reducing carbon emissions. Franchises need to be rewritten so that, in future, operators are required to improve the system, not milk it for profits. The fare cap should not be lifted. And government policy on rail subsidy needs to be rethought from an environmental perspective.

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