French rail reform: is SNCF on the brink of privatisation?

5 June 2018 (Last Updated February 6th, 2020 09:57)

The French railway sector is in upheaval over President Emmanuel Macron’s promise to reform the country’s state-owned railway SNCF, a daring move that in the past sparked fierce protests in France and forced previous governments to backtrack. This time around, however, Macron’s resolution seems unshakable, fuelling fears among unions over privatisation and loss of workers’ rights.

French rail reform: is SNCF on the brink of privatisation?
The proposed reform fits into Macron’s campaign promise to modernise the economy and aligns with his pro-business, pro-liberalisation agenda as a politician. Credit: Lorie Shaull on Flickr

Since March, French rail passengers had to contend with heavily disrupted services as nationwide strikes over Macron’s proposal to reform the Société nationale des chemins de fer français (SNCF) raged on.

SNCF is France’s national state-owned railway company, and operates the country’s entire national rail traffic, with 14,000 trains running daily. It employs more than 180,000 people in 120 countries around the globe.

The proposal for a far-reaching reform of the financially struggling state-owned company originates from the Spinetta report, commissioned in October last year by Transport Secretary Elisabeth Borne, which tasked former Air France chief executive Jean-Cyril Spinetta with assessing the current and future status of the French rail sector in the context of SNCF’s mounting debt.

The report, published in February, found the current network to be “unsatisfactory”, with a “seriously and fundamentally unbalanced” funding model and urged for a radical approach to improve the declining transport mode. SNCF’s debt racked up to €46bn in 2017and continues to grow at an annual rate of around €3bn.

The proposed reform fits into Macron’s campaign promise to modernise the economy and aligns with his pro-business, pro-liberalisation agenda as a politician. It also fits the wider context of the Fourth Railway Package, an overarching European mission to revitalise the rail sector and make it more competitive compared to other modes of transport, by addressing public monopolies and the lack of adequate competition in the industry.

The need to urgently address SNCF’s finances is the one thing that the government, the unions and the French public do agree on. However, Macron’s approach also includes hard-line labour reforms, which will drastically affect rail workers’ rights. In addition, the proposal to change SNCF’s legal corporate status from a state enterprise to a limited company has fuelled fears that it will mark the first step towards privatisation, despite the government’s reassurance that it will remain fully state-owned.

A besieged system in need for a reform

Under French law, SNCF is an établissement public industriel et commercial (EPIC), which “ties it unequivocally to the state”, as Spinetta observes. This version of the company was created during the latest reform, in 2014, when it became a unified public rail company, made up of SNCF EPIC, SNCF Mobilités EPIC and SNCF Réseau EPIC.

While the reform managed to restructure the way railways are governed and run (by creating an integrated industrial public group), what it didn’t manage to achieve is address its debt crises: SNCF Network’s debt is ballooning at a rate of around €3bn each year and urgent intervention is needed.

“It’s a big problem for SNCF that they are heavily in debt, because they are not financed properly by the French state,” says Øystein Aslaksen, chair of the International Transport Workers’ Federation‎ (ITF) railway section. “Usually the infrastructure is financed by state grants in almost every country, but SNCF have to do this themselves, which means that they are hopelessly in debt.

“Whatever you do, if you don’t do something with the balance sheet of SNCF there is no chance for this company to operate in a legal way, and there will be constant pressure on working conditions,” he says.

In addressing the cost issue, Spinetta points out that France is “unique in Europe” in allocating around 15% of its annual rail funding to routes that carry just 2% of passengers.

The recommendations come as part of a series of attempts to restructure the French rail sector and change the legal rights of railway employees, who are part of powerful and outspoken unions. The meddling of past governments in SNCF has led to some of the largest street protests and public transport strikes in French history, while union backlash managed to defeat similar plans by both Jacques Chirac and Nicolas Sarkozy along the way.

The report recognises this, noting that dialogue surrounding SNCF has been characterised “more by conflict than consensus”, and admits that change will definitely not come quickly.

Out in the streets, unions are putting up a fight

Arguably the most controversial part of the proposed reform is Macron’s intention to scrap former employment benefits for rail workers and arrange a new social contract with SNCF staff.

At present, some state rail workers are able to retire on a full pension up to 10 years before most other French workers. His reform will also change pension schemes and short-term employment contracts, which will affect nearly 200,000 employees, in particular train drivers.

Unsurprising, the workers are putting up a fight, with unions staging mass protests since March against what they feel is the government’s intention to fully privatise SNCF and create a new economic model for it.

Leading the strikes are the General Confederation of Labour (CGT), France’s far-left labour union and by far the most powerful, as well as the more reform-minded French Confédération Française Démocratique du Travail (CFDT). Their demands are fairly straightforward: for SNCF to be returned to a single integrated public company, the improvement of working conditions, and the maintenance of the employment status of railway workers.

“The unions demand to keep SNCF as this state-governed company, not to turn it into a private company, and they also want to keep their status as state employees because this means a lot in France for working conditions and pensions,” Aslaksen says. The ITF is fully backing the unions and is planning joint demonstrations in the near future.

Restructuring can be a slippery slope

Although the French Government insists that the reform will not lead to the privatisation of the railway, there is little trust on the unions’ part: “That’s what happens in all the places in the world. Because usually privatisation is not done in one step, [but it] is done in several steps.

“We’ve had some cases where privatisation was done in one step, like in the UK, New Zealand or Argentina. But usually in the Western European countries, this goes step by step. The experiences with privatised systems are different from country to country. When it comes to other countries, privatisation was sometimes a disaster.”

The unions were quick to point to the UK as an example of how privatisation can go awry. Since the railways were divided into about 100 separate organisations and privatised in 1994, public debate over whether that was a mistake or not has continued. On average, rail travel is 30% more expensive in Britain than in France.

One argument often paraded against privatisation is the allegation that it leads to decreased safety and more accidents.

However, Andrew Evans, Emeritus professor at the Faculty of Engineering, Department of Civil and Environmental Engineering at Imperial College London, has long maintained that there is no such correlation. “The conclusion from the analysis of the accident data is that there is no evidence for the hypothesis that railway safety, as measured by accidents, has become worse since privatisation,” he wrote in a 2007 report.

For the time being, it is difficult to say how the situation in France will pan out, although Macron does seem steadfast in his decision to restructure SNCF to its core. The ITF is currently planning a “big international manifestation” in Paris together with the French unions, to further put pressure on the French authorities.

“For the time being, it is very difficult because Macron is a hard-line liberal politician and I think he’s been very loud and clear on what he wants to achieve, very clear about [making] no compromises,” Aslaksen says. “I’m not very optimistic, but we will see.”