Wendover’s Rail Privatization Verdict Misreads the Law—and the Money
Wendover Productions makes a compelling case against Britain's passenger-rail franchising system. Three successive private operators failed on the East Coast route, the government repeatedly took over, and the pandemic finally ended the traditional franchise model.
But the video turns a specific failure of government procurement and contractual design into a sweeping verdict on railway privatization. In doing so, it gets European law wrong, misrepresents the history of Railtrack, exaggerates the profits of Britain's publicly operated East Coast railway, and misreads the government's own subsidy figures.
These are not minor historical corrections. They change what was privatized, who was responsible, and what the financial evidence actually demonstrates.
1. The European Union did not require Britain to create this railway structure
At approximately 03:00, the video introduces European Directive 91/440 as the legal foundation for separating railway infrastructure from train operations.
It then makes a consequential claim: companies operating trains had to be legally separate entities from companies owning the tracks.
That is not what the directive required.
Article 6 required separate accounts for railway operations and infrastructure management. Article 6(2) explicitly allowed member states to satisfy the requirement through separate divisions within a single undertaking, or alternatively through a separate infrastructure entity.
In other words, legal and organizational separation was optional. Separate accounting was compulsory.
The video's explanation also exaggerates the access rights created by the directive. Article 10 provided access for international railway groupings and international combined freight services. It did not grant every private passenger operator a general right to run trains anywhere in Europe simply by paying for track access.
Council Directive 91/440/EEC, Articles 6 and 10.
Britain chose to go much further. Its government created a separate infrastructure company, divided passenger services into 25 franchises, and transferred operations to private businesses.
Those were British policy decisions, not compulsory consequences of European legislation.
This distinction matters. The video presents privatization as something the European Union effectively required Britain to implement. The actual directive left governments considerably more freedom over how to organize their railway systems.
2. Railtrack was not private in 1994—and its actual collapse deserves attention
The video states:
“On April 1st, 1994, Railtrack came into existence—a private company.”
This is factually wrong.
On April 1, 1994, Railtrack became a separate government-owned company. The House of Commons Library documented this explicitly in its April 1996 research paper on Railtrack's privatization.
The company was subsequently floated on the stock exchange on May 20, 1996. Its assets eventually passed to Network Rail after it entered railway administration in October 2001.
House of Commons Library, The Privatisation of Railtrack, 1996.
But the more important omission is what happened during Railtrack's actual private ownership.
On October 17, 2000, a train derailed at Hatfield after a broken rail caused by rolling contact fatigue. Four passengers died and 70 were injured.
The subsequent parliamentary investigation found serious failures in Railtrack's management of infrastructure maintenance contractors. It described the company's management of its maintenance contractor, Balfour Beatty, as “totally inadequate”.
The committee went further:
“the system of managing contractors ... has been shown to have utterly failed.”
Parliament also warned that the financial consequences of the accident and subsequent railway recovery programme would probably fall on the government and taxpayers.
House of Commons Environment, Transport and Regional Affairs Committee, Rail Investment, 2001.
Railtrack entered administration on October 7, 2001. Network Rail acquired its assets in 2002.
This is an important missing chapter. The video describes Railtrack as private two years before it actually became private, then largely skips the consequences of its real private ownership.
If the subject is the failure of British railway privatization, the collapse of its privately owned infrastructure company belongs near the centre of the story.
3. The East Coast's £1 billion was not £1 billion in profit
The video's strongest example of successful public operation is East Coast between November 2009 and March 2015.
It claims the government-operated railway generated more than £1 billion in profit, which went directly back to the Treasury.
That description is financially incorrect.
The distinction is visible in evidence submitted to Parliament by the train drivers' union ASLEF. It described the five-year public operation as returning more than £1 billion in premium payments, alongside several million pounds in profits.
Those are two different financial measures.
ASLEF written evidence to Parliament, 2018.
Directly Operated Railways' own 2013–14 financial results make the distinction particularly clear.
The company reported:
- £225.3 million operating profit before Department for Transport service payments and taxation.
- £8.4 million operating profit after those payments, before taxation.
Its operating expenditure included premium payments to the Department for Transport, as well as track access charges, rolling-stock leases, staffing and other operating costs.
Directly Operated Railways, 2013–14 financial results, September 9, 2014.
The government-operated business was genuinely profitable and returned substantial money to the Treasury. That is worth knowing.
But £1 billion in premiums and several million in profits cannot honestly be presented as £1 billion in profit.
The distinction is particularly important because the video uses this figure as one of its strongest financial arguments for public ownership.
4. The East Coast failures were not three identical examples of private-sector incompetence
The East Coast franchise experienced repeated failures, but the causes were not identical.
Great North Eastern Railway, owned by Sea Containers, lost its franchise amid financial problems at its parent company, alongside ambitious revenue forecasts that were not achieved.
National Express subsequently won the franchise with a commitment to pay the government £1.4 billion over seven and a half years.
The 2008–09 economic downturn undermined those revenue expectations. National Express also had more than £1 billion in debt associated with its wider expansion.
The Public Accounts Committee noted that other franchises also experienced financial difficulties during the recession, but East Coast was the only franchise that failed.
The National Audit Office found that the Department for Transport had included protections for taxpayers in the National Express contract and that terminating the agreement was the best way to protect the public interest.
National Audit Office, The InterCity East Coast Passenger Rail Franchise, 2010.
This is a more complicated story than simply private operators repeatedly overestimating passenger numbers.
The third failure, involving Stagecoach and Virgin, is even more revealing.
Virgin Trains East Coast was profitable as an operating business
The House of Commons Transport Committee investigated the termination of Virgin Trains East Coast in 2018.
Its findings complicate the video's portrayal.
The committee established that:
- Day-to-day operations were managed successfully.
- Passenger satisfaction reached 92%, compared with 86% across the remaining long-distance sector.
- Punctuality was weaker, at 81.5%, against a national average of 87.8%.
- The business generated approximately £260 million in operating profit in the financial year before termination.
- It had paid approximately £800 million in premium payments to the taxpayer.
- Its average contribution to the taxpayer was 20% higher per rail period than under the previous publicly operated East Coast business.
The actual problem was the franchise agreement.
Stagecoach and Virgin had forecast annual revenue growth of approximately 10%. Actual growth was around 3%.
The resulting operating surplus could not meet the escalating premium payments promised in the contract.
The committee also concluded that the Department for Transport had failed to learn the lessons of previous franchise failures and had allowed the operator to promise more than it could deliver.
House of Commons Transport Committee, Intercity East Coast Franchise, 2018.
This distinction matters enormously.
Virgin Trains East Coast was not necessarily an unsuccessful train operator. It was an operating business with substantial revenue, strong passenger satisfaction and a significant operating profit.
Its contractual financial commitments were unsustainable.
That is a failure of franchise procurement, revenue forecasting and risk allocation. The government deserves considerable criticism for accepting an unrealistic bid after earlier failures had already exposed the problem.
The video identifies overbidding as a weakness, but does not fully develop the distinction between an operator failing to run a railway and a government-designed contract making an otherwise profitable railway financially unviable.
Those are not the same failure.
5. The historical subsidy figures contradict the video's claim
Near the end, the video argues that railway privatization brought government subsidies to their highest level in history.
The Office of Rail and Road's own figures do not support that conclusion.
Its 2018–19 statistical release recorded total net government support of £7.1 billion.
But that figure included:
- £2.6 billion for HS2.
- £3.9 billion in direct support for Network Rail.
- £417 million in net payments to train operating companies.
These figures describe different types of public expenditure. Infrastructure grants and high-speed rail investment are not equivalent to subsidies paid to private passenger operators.
More importantly, the ORR's 2017–18 release identified the historical peak in government support as £7.7 billion in real terms in 2006–07.
That was higher than the £7.1 billion recorded in 2018–19.
The video has therefore turned a complicated financial measure into a much simpler claim that its cited statistics do not establish.
There is another qualification concerning fares.
The House of Commons Library reported that approximately 45% of National Rail fares were regulated by government in 2018. These were predominantly commuter fares, with prices determined through government-controlled formulas.
Average fares were indeed 20% higher in real terms in January 2018 than in January 1995.
But attributing the entire increase to private railway operators ignores the government's own role in setting fares.
House of Commons Library, Railways: Fares Statistics, 2018.
The video may be right that Britain has expensive rail travel. It does not establish that privatization alone produced those prices.
6. The video never properly tests the alternative
A convincing argument against privatization needs to establish more than the failures of the existing system.
It needs to examine whether a different ownership structure would actually perform better.
One important piece of evidence missing from the video is the 2011 Rail Value for Money Study, chaired by Sir Roy McNulty and commissioned by the Department for Transport and the Office of Rail Regulation.
The study found that Britain's railway had a substantial efficiency problem, estimating that industry costs were approximately 20–30% above what they should have been.
However, it did not conclude that returning the entire railway to public ownership would solve that problem.
Its analysis found that British train operating company costs were comparable to, or below, those of state-run operators elsewhere in Europe.
It identified fragmentation between railway organizations and extensive government involvement as important obstacles to efficiency. It also considered wholesale renationalization unlikely to produce an overall reduction in costs.
Realising the Potential of GB Rail, McNulty Review, May 19, 2011.
The international comparison is particularly revealing.
The study found that competitive tendering in the Netherlands, Sweden and Germany had produced efficiency improvements and cost reductions.
But those countries generally tendered subsidized regional services while retaining the majority of passenger operations with their established state railway companies.
Britain had chosen a much more extensive approach, franchising nearly all passenger services.
British franchised service unit costs increased by 17.1% between 1996–97 and 2005–06, after adjustments for service frequency and train length.
The lesson is not that private competition always fails. It is that the British model was designed differently, and its results cannot automatically be generalized to every form of railway privatization.
The video never adequately investigates that distinction.
Closing verdict
Wendover has identified a genuine failure: Britain's East Coast franchise system repeatedly rewarded financial promises that operators could not sustain. The Department for Transport bears substantial responsibility for allowing that pattern to continue.
But the video does not prove that private railway operation is inherently unworkable.
It misrepresents the European legislation, gets Railtrack's ownership history wrong, turns premium payments into profits, and uses government support figures without properly distinguishing infrastructure investment from operator subsidies.
Most importantly, it fails to establish whether the problem was private ownership itself or Britain's particular combination of fragmented infrastructure, government-controlled services, aggressive franchise bidding and poorly tested financial commitments.
There is a serious argument to be made against British railway privatization. The collapse of Railtrack alone provides substantial material for it. The East Coast franchise failures provide more.
But a serious argument deserves accurate accounting, correct legal history and a meaningful comparison with alternatives.
The strongest conclusion supported by the evidence is narrower: Britain designed a railway market whose franchise bidding system repeatedly rewarded unrealistic promises, while its fragmented institutional structure made efficiency difficult to achieve.
That is a consequential failure. It does not require exaggeration.
Wendover had enough evidence to make that case. It weakened its own argument by trying to make it prove more than the evidence could support.
References
- The UK's Failed Experiment in Rail Privatization — Wendover Productions, YouTube, March 9, 2021. Original video. The work examined in this critique; its central argument concerns the failure of British railway franchising.
- Council Directive 91/440/EEC — European Economic Community, July 29, 1991. EUR-Lex. Establishes the distinction between compulsory accounting separation and optional organizational separation.
- The Privatisation of Railtrack — House of Commons Library, April 26, 1996. Research paper. Establishes that Railtrack was government-owned in 1994 and scheduled for privatization in 1996.
- Rail Investment: Renewal, Maintenance and Development of the National Rail Network — House of Commons Environment, Transport and Regional Affairs Committee, 2001. Parliamentary report. Documents the Hatfield accident, Railtrack's maintenance failures and the likely financial consequences for taxpayers.
- Intercity East Coast Franchise — House of Commons Transport Committee, 2018. Parliamentary report. Provides the operational, financial and passenger-performance evidence concerning Virgin Trains East Coast.
- The InterCity East Coast Passenger Rail Franchise — National Audit Office, 2010. NAO report. Explains National Express's financial failure and the Department's decisions to protect taxpayers.
- Directly Operated Railways Publishes Financial Results for 2013/14 — Directly Operated Railways, September 9, 2014. Archived financial announcement. Distinguishes operating profits before and after Department for Transport service payments.
- Written Evidence on Rail Franchising in the UK — ASLEF, submitted to Parliament, 2018. Parliamentary submission. Explicitly distinguishes more than £1 billion in East Coast premium payments from several million pounds in profits.
- Rail Finance 2018–19 — Office of Rail and Road, November 14, 2019. Official statistical release. Separates government support for infrastructure, HS2 and passenger operators.
- Rail Finance 2017–18 — Office of Rail and Road, October 11, 2018. Official statistical release. Identifies the 2006–07 historical peak in real-term government support.
- Railways: Fares Statistics — House of Commons Library, November 30, 2018. Research briefing. Explains regulated fares, government pricing controls and changes in real fares.
- Realising the Potential of GB Rail — Sir Roy McNulty, Department for Transport and Office of Rail Regulation, May 19, 2011. Full report. Examines railway efficiency, international comparisons, fragmentation and the likely consequences of renationalization.
Clarify the opening thesisTighten the legal correctionReduce repeated conclusions