The report, from the Catalyst think tank, reveals that train-operating companies' combined income has risen by 26 per cent since privatisation and that fares have risen by 24 per cent - well ahead of inflation.

The analysis of the TOCs' accounts by Manchester Business School Professor Jean Shaoul shows that profits have been boosted by record levels of subsidy - £1.8 billion in 2003-04 - as well as by cuts in staffing levels and a pay squeeze.

"This report shows that taxpayers, fare-payers and railway workers are being mugged by profiteering privateers whose sole aim is to maximise profits and payouts to shareholders," RMT general secretary Bob Crow said at the TUC Congress in Brighton

"Massive amounts of public money are going into the industry, but the private sector is leeching it out again as profits and handing their parent companies and shareholders massive dividends while services are still worse than in British Rail days.

"Today we heard a speech from Gordon Brown as prime minister in waiting. If he is serious about improving public services and delivering value for money he should announce his intention to stop the re-privatisation of South Eastern Trains and bring all the train operating companies back into the public sector.

"In public hands SET is delivering a better service for £1 million month less subsidy. That is a public-sector success story and should be the blueprint for bringing all the TOCs back in-house," Bob Crow said.

ends

Notes to editors: The Performance of the Privatised Train Operators, a study by Professor Jean Shaoul published today by Catalyst, will be launched at a fringe meeting after today's TUC Congress business (17:30) in the Skyline Restaurant at the Brighton Centre. Speakers will include Tony Benn, RMT general secretary Bob Crow, Aslef's Keith Norman, TSSA's Gerry Docherty and TUC deputy general secretary Francs O'Grady and Michael Meacher MP.

The report shows that, despite claims that subsidies were transitional and would be phased out after the privatisation of British Rail was complete, train operating companies remain wholly reliant upon government pay-outs which are expected to increase in the years ahead.

The combined total income of train operating companies, including both fare revenues and public subsidies, rose by 26 per cent from 1997 to 2003, from £4.8b to £5.8b.

Passenger fares rose by some 24 per cent over this period, faster than the rate of inflation. Although a "cap" was intended to keep fare rises below inflation, this only applies to some ticket types. Companies have compensated by pushing up the price of other journeys.

Labour costs have been cut by reducing staffing levels and allowing wages to fall behind average earnings. This is likely to have been a key factor explaining the poor performance record of the private operators, since British Rail's workforce was already the most productive of any rail service in Europe.

Subsidies allowed companies to pay dividends of £160m to their parent companies in 2003, an exceptional post-tax return on equity of 174 per cent.

Since privatisation at least £890m has been taken out of the industry in dividends paid to parent companies. Without public subsidies, the train operators would have made a loss every single year.
Professor Shaoul also warns that the new Railways Act, the government's latest attempt to bring rail spending under control, will simply "presage closures and fare hikes" unless the costly fragmentation and profiteering resulting from privatisation is addressed directly.

In September 2004 an overwhelming majority of constituency and union delegates at the Labour Party's annual conference voted to adopt a policy committing Labour to "resolving the fragmented structure of the industry by introducing an integrated, accountable and publicly owned railway", but this decision has yet to be reflected in government policy. The government is currently considering bids for the South Eastern franchise, which has been run in the public sector since Connex was removed in 2003 and has achieved notable performance improvements and cost savings in that period.

Jean Shaoul is Professor of Public Accountability in the Division of Accounting and Finance at Manchester Business School. She has authored numerous reports on the privatisation and regulation of public infrastructure industries as well as on NHS finances, the Private Finance Initiative, international regulatory reform, public expenditure and
corporate accountability.

Catalyst is an independent think tank of the left committed to promoting "practical policies for the redistribution of wealth, power and opportunity".

For more information please contact the Catalyst office on 020 7733 2111 or visit www.catalystforum.org.uk.