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Rail privatisation has left Britain with the most expensive fares in Europe, older trains, overcrowding, and operating companies entirely reliant on public subsidies, according to a hard-hitting report.

The authors of the “Great Train Robbery” claim private train companies are heavily dependent on the public purse to enable them to run services, and re-invest little of their profits back into the railways.

The TUC said the research by the Centre for Research on Social-Cultural Change (CRESC) at the University of Manchester showed privatisation failed to deliver for rail users and taxpayers and had brought in little private sector investment.

According to the report, firms receiving the largest state subsidies spent, on average, over 90% of their profits on shareholder dividends.

Train companies made operating profits between 2007 and 2011 of £504m, most of which was paid to shareholders, said the report.

Meanwhile the average age of trains has risen from 16 years in 1996 to 18 years today. Just £1.9bn was spent on rolling stock between 2008 and 2012, compared to £3.2bn between 1989 and 1993.

The report added that more than 90% of new investment in recent years has been financed by Network Rail and came mainly from taxpayer funding or government-underwritten borrowing.

Long distance, day return and season tickets are all around twice the price of similar tickets in France, Germany, Italy and Spain, which have publicly-run rail systems, while average train fares in the UK increased at three times the rate of average wages between 2008 and 2012, said the TUC.

The report dismissed claims that privatisation had helped increase the number of people travelling on the railways, maintaining that passenger growth has mostly been down to rising economic output and changes in employment patterns rather than because of privatisation.

TUC general secretary Frances O’Grady said: “This study explodes the myth that rail firms are bringing added value to our railways. In reality they rely upon taxpayers to turn a profit, virtually all of which ends up in shareholders’ pockets, rather than being used to improve services.”

CRESC director Professor Karel Williams said: “The privately-owned train operating companies have hijacked the government’s rail reform agenda which is all about ’getting franchising back on track’.

“Our research shows how the franchising system allows them to distribute profits at low cost from public subsidy. It would make sense to abolish the train operating companies and it would cost the taxpayer nothing if it were done as the franchises expired.

“Train and track operation could then be integrated under a new not-for-profit company, National Rail, under cash constraints which enforced operating efficiency.”

Michael Roberts, chief executive of the Association of Train Operating Companies, said: “Britain’s railway has been transformed in the last 15 years, thanks to the public and private sectors working successfully together to deliver for passengers and taxpayers.

“By introducing competition between train companies to run services, government has ensured operators have played a crucial role in reversing the fortunes of the railway by motivating them to attract more passengers.

“Significant investment plus an industry focused on encouraging rail travel are generating record levels of revenue to pay for more trains, faster services and better stations.”

Professor Stuart Cole, a leading Welsh transport expert, said the level and quality of services was largely determined by the franchise agreements struck between Government and operators. He said a key lesson of privatisation was the necessity of having highly skilled experts negotiate the agreements.

He said that train operators often experienced losses or low or no profits and the franchises were not a “licence to print money”.

Looking ahead to future negotiations between the governments around the UK and private sector operators, he said: “If a contract for a franchise isn’t properly prepared on both sides, the better side will win. That’s the problem with franchising – you must have experts.”

Mick Whelan, general secretary of Aslef, the train drivers’ union, said: “Privatisation has proved to be a bad deal for taxpayers, for passengers, for employees and for the British railway industry.

“In the face of soaring fares, more overcrowded trains, much bigger taxpayer subsidies and rising dividends being shipped offshore by the privatised rail companies, we think it is time to bring Britain’s railways back into public ownership.”