Labour to allow cooperatives and mutuals to run railway franchises

Labour will offer cooperatives and mutually-owned companies the chance to run Britain's rail services.

Senior figures in Labour's transport team will suggest in Glasgow on Monday that employees and passengers could take a far greater role in running the railways, including bidding for specific franchises such as ScotRail.

Mary Creagh, the shadow transport secretary, and James Kelly, the Scottish Labour party's transport spokesman, will also confirm the party's 2015 general election manifesto is to include giving public sector bidders the same rights as private operators to bid for franchises.

Before her visit to Glasgow, Creagh said: "Two decades on from rail privatisation, passengers across the UK are getting a raw deal from many of the rail operators. The first priority should be passengers, not profit. That's why we need a new deal for our railways, in Scotland and across the UK."

Labour's offer to extend rail ownership reform to co-ops and mutuals comes after trade unions and Labour MPs pressed for a full-scale renationalisation of each rail franchise when existing contracts expire.

Polling evidence suggests the principle of state-owned rail services is popular among voters following the success of the east coast mainline, which was taken back under state control after its private operator failed. But renationalisation was rejected at Labour's national policy forum earlier this month. Labour strategists fear wholesale renationalisation could backfire and reinforce criticism that it is anti-business. They also argue most passengers, particularly in south-east England, want lower fares and better services first.

Labour will propose "encouraging cooperative principles into the rail industry to make sure that passengers and employees are involved in transport delivery". Its policy forum paper said the party would champion "democratic renewal", including cooperative and mutual ownership.

Labour would test its plans for cooperative ownership of rail services in Scotland if they are able to give the Scottish parliament the legal powers to allow public ownership of the ScotRail franchise, one of the UK's most successful and popular, as part of a package of increased devolved powers for Holyrood.

That proposal hinges on pro-UK parties winning the Scottish independence referendum in 2015, and Labour winning the May 2015 general election. Labour leaders in London are still mulling over the details of legislation in the rest of the UK as part of its work on the party's 2015 manifesto.

The Scottish National party has meanwhile pledged a review of rail ownership if Scotland becomes independent, alongside an uncosted pledge to renationalise Royal Mail after a yes vote.

James Kelly, Scottish Labour's transport spokesman, said: "The SNP's white paper [on independence] says that after separation, we can consider new forms of ownership for our railways. But we don't need independence for that. We will devolve these powers to the Scottish parliament in Labour's first Queen's speech and open up our railways to public sector companies.

"We need our railways to be working for passengers. Under the SNP, more than half a billion pounds of public money funds the rail franchise. That's why we need public sector companies to be able to compete on a level playing field with the private sector."