►►The British Virgin Islands where Virgin’s parent company has its registered office. Map: Wikipedia◀◀

Privatising Britain’s railways has resulted in higher fares, older trains and a much bigger bill for the taxpayer, with train operating companies diverting profits away from investment to shareholders, according to a new report by the centre for research on socio-cultural change at Manchester University.

Researchers called for the abolition of train operating companies, which were created by the 1993 railway privatisation.

They say the sell-off of state assets in the 1990s has brought little private sector investment and the most expensive fares in Europe.

The five biggest train operators received almost £3 billion in taxpayer support between 2007 and 2011 which allowed them to make operating profits of £504 million, over 90% of which was paid out in dividends to shareholders.

By contrast, the East Coast main line, which is currently state run, is reinvesting profits in the railway.

The report said the average age of trains has risen by two years since privatisation and carriage space has not increased to match the growth in passenger numbers.

Most new investment has been financed by Network Rail via taxpayer funding or government-underwritten borrowing. Private sector investment in new technology, such as the Pendolino tilting trains, has been underwritten by the state.

One of the authors of the report, Professor Karel Williams, said the research showed that the rail franchising system allows private firms to make easy profits from public subsidy.

He explained: “It would make sense to abolish the train operating companies and it would cost the taxpayer nothing if it were done as the franchises expire. Train and track operation could then be integrated under a new not-for-profit company.”

Frances O’Grady, general secretary of the Trades Union Congress which commissioned the report, said: ‘The study explodes the myth that rail firms are bringing added value to our railway. The Government must accept that the current model is broken.”

Shadow transport secretary Maria Eagle said: “Britain’s railways are not delivering value for money for farepayers and taxpayers and need reform. As a first step, ministers must abandon the costly and unnecessary privatisation of rail services on the East Coast.”

Mick Whelan, general secretary of train drivers union Aslef, said: “ Privatisation has left us with a fragmented and dysfunctional railway system that other countries view with disbelief.”

Author Owen Jones told train drivers: “Nationalisation of the railways is a popular option, even for Conservative voters. It is a popular policy.

“A publicly run railway system for the 21st century could have workers and passengers represented on the boards so we all have a say in how our railways are run.”

Owen was speaking at the Aslef conference in Edinburgh where Andy Botham of Derby said: “The privatised rail companies are pricing the travelling public out of travelling and sacking my colleagues on the station platform.”

Virgin Trains’ parent company has its registered office in the British Virgin Islands, a favourite location for tax avoiders. The British Virgin Islands has a population of 27,000 and no railways. Its capital is called Road Town! The islands are recognised as "a particularly successful hideaway, thanks to the exceptional secrecy on offer”, according to the Guardian.

More info: TUC news