Opinion: nationalising the railways is the only sensible option

With the current scramble by the new coalition to find savings and reduce the size of government, it is perhaps a strange time to be proposing that, in one area at least, the state should expand its remit, but the case for renationalising the railways has never been stronger.

I am certainly not a fan generally of nationalisation of anything, and still think that the coalition should flog the Tote, Channel 4, the Channel Tunnel Rail Link etc, but think that the British Railways must return to public ownership, not for reasons of ideology or sentiment, but simply because there is no better option.

It is already an established that the current subsidies and costs incurred by the government for the privatised railway network are greater than the subsidies paid to the old British Rail. And while I do believe that ‘competition’ does deliver benefits, there is no meaningful way in which competition can be delivered on passenger rail services in the UK, for reasons of safety which are obvious. The Franchise model is designed to induce efficiency and value for money, with a safety net for the government is the franchisees performed badly.

But this hasn’t worked, as we have seen fares rise, and companies treating their time holding the franchise as an excuse to engage in short term profiteering, and if things don’t go to plan, the franchise company simply go back to the government and have their burden relieved by the taxpayer.

While there are those in the Lib Dems who would argue that the market is always better and those who would argue that social justice should gain precedence, the issue of the railways does not actually fit into this debate for the simple reason that privatising the Railways does not deliver us from the heavy hand of state monopolies, it forsakes us to the deadweight of a private sector monopoly, and surely all in the party would agree that this is the worst possible ownership model, providing benefit to neither the government nor taxpayers.

Indeed its hard to see, from whichever side of the above debate you place yourself, where the British public is better off.

This article is not however, a plea for a return to the “good old days” of British Rail, which in itself have been infected with the sepia seeds of nostalgia. The old British Rail had the flaws associted with state owned companies, slow to change, bureaucratic and inefficient in the use of resources from the taxpayer.

But as new models of management and ownership have evolved these could change the way British Railways are run for the better.

The first thing to look at is the cost. With the actual Railway infrastructure already reverted into government hands, the costs of simply taking back the franchises as they expire would be low.

The Freight operations which were sold off in the 1990s should remain in private ownership, while a review should be conducted of the combined fixed assets of the new British Railways to see where revenue could be generated.

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35 Comments

  • Well it’s not just for the rich it’s for the unspontaneous. Sure you can get great fares though it requires planning. It’s basically a tax on spontaneity.

    There needs to be a flatter off peak fare structure – it can be cheaper to fly internally if you need to get somewhere very early at a distance rather than take the train.

  • George W. Potter 19th Jun '10 - 11:11am

    @Cllr Mark Wright

    I think that, as the writer says, the cost of renationalising them would be very low as all we have to do is wait for the franchises to expire and not sell them off again. Also as the writer effectively said, the running cots would be lower than at present as the taxpayer subsidy of the railways at the moment is higher than when they were managed by British Rail.

  • Andrew Suffield 19th Jun '10 - 12:06pm

    It was obvious from the start that privatising the railways was not going to work, and that “competition” was a shameless lie – the kind of “competition” we have been offered is that you can move to a different part of the country if you don’t like your rail company. The whole exercise was nothing more nor less than a donation of tax funds to private investors.

  • David, I think I remember having this conversation with you whilst you were in Cornwall and I agree… May have arisen off the back of a conversation about Thatcherism 😉

  • Tony Greaves 19th Jun '10 - 12:11pm

    The main underlying issue is the unit costs of running the British system. Whatever system of control exists that is the main issue that has to be investigated and tackled.

    As for comparisons, you need to compare like with like, The railways now are a very different system to that in the mid-1980s and the level of services is significantly higher.

    Tony Greaves

  • David Morton 19th Jun '10 - 12:45pm

    Huge narrative, branding and mythic implications for the coalition as well. It’s very early to judge but it does look like the communications strategy is to get our retaliation in early over the cuts. We are going to be hated anyway so we might as well make it fast and try and look strong doing it. That’s fine as far as it goes. However as both the concept of coalition and this coalition in particular are both brand new it runs the risk of a coms strategy being fixed as a Foundation Myth.

    If all the public know about Coalition is cuts, cuts, cuts from the beginning perceptions may not shift even when (or if ) things improve.

    Renationalsing the Railways is perfect to counter this.

    – its relatively cheap

    – its high profile

    – its bread and butter

    – it’s clause 4ish for the Tories because it references the worst excesses of the last Tory government. The Poll Tax on Wheels, the privatisation even Thatcher wouldn’t touch.

    Renationalising would fundamentally alter the feel of this governments “story”.

  • There are three elements to ‘renationalising the railways’ :

    The Track, Signalling and Stations – already back in public ownership so no problem.

    The Operation of (passenger) Trains – can be reclaimed as frnchises expire [problem alert – some long frnchises]

    The Rolling Stock – more of a problem, as they are owned by the ROSCOs (Rolling Stock Companies). In the medium term, however, the current long leasing arrangements could continue.

    Incidentally the way in which the ROSCOs were allowed to acquire BR’s rolling stock at absurdly low cost was possibly the biggest scandal of the whole privatisation process.

    But – in principle – renationalisation is possible.

  • There is of course an a in the word franchise!

  • Privatised rail companies have been good at is getting people to use the trains. Passengers and passenger miles are up dramatically compared with any previous period. We do need to acknowledge successes as well as failings. Cheap apex tickets are a very big part of that story. ATOCs billion passenger railway (see their website) – to which I contributed – has the story in more detail.

    It would be helpful, when thinking about how the railways should be run, were we to define as a society what we want the railways to achive. I think that is a precondition for successful policy making in any sphere.

  • Paul McKeown 19th Jun '10 - 5:39pm

    David,

    I agree: the railways has been the one single privatisation that has failed to produce value for either shareholders or customers. Renationalisation would be greeted with pretty much universal applause in the country at large. It’s not even as if it has actually saved the tax payer any money, as the subsidies are still very large. Whether it will be considered or not is an interesting question, as it runs contrary to the general mode of thinking within the current Conservative Party. Nevertheless, when all is said and done, the Conservatives claim to be pragmatic in operation and more interested in what works than in ideology. It would always be possible to privatise the railways again later if a way could be found in which to do this which didn’t leave the rail travelling public shortchanged. Personally I generally support private delivery of publicly funded services, but this is one that has been an abject failure.

  • Could Chris and Carina share First Class more cheaply with this policy?

  • toryboysnevergrowup 19th Jun '10 - 6:12pm

    Wake up and smell the coffee – you may be right but just try and convince your coalition partners!

  • Andrew Suffield 19th Jun '10 - 8:06pm

    Wake up and smell the coffee – you may be right but just try and convince your coalition partners!

    Last I checked, I wasn’t in a coalition with anybody, and I don’t think anybody here is. You appear to have this site confused with the government.

  • Tim Leunig comments that passenger numbers have grown since privatisation. True, but they also grew rapidly in the Eighties under British Rail. Passenger numbers grow when the economy is strong and, for most of the years since privatisation, the economy has been strong.

    From memory, I think the total cost of the railways is around five times more now (in real terms) than in the days of BR. True, some of that is due to more services, newer trains, higher pay, extra costs to make stations DDA-compliant and so forth, but I think a lot is due to the complex contractual matrix between track operators, franchisees and rolling stock owners, and of course the requirement for private sector companies to make a profit for shareholders!

  • John – without wishing to question your other points, the rise was faster and longer than in the 1980s – excluding demobilisation in 1946, recent passenger mileage is a peace time record. A lot of this is (much) better pricing strategies for off-peak long distance travel, which has priced people back onto the trains; it is not simply the booming economy.

  • david thorpe 20th Jun '10 - 11:07am

    Thanks for the feedback all.

    @Mark Wright, thanks for the comment how are things?

    @Dale, yeah whenever people think Im a little too right wing I throw in the railways thing!

    learned a lot from this thread?
    but what are roscos, who wons them?

    also in peoples opinion is there much capital which could be taken out of the railways by selling dissued land and buildings? or sale and leaseback on buildings.

    I dont expect the tories to go for it, but them Im not a tory, it could become a lib-dem policy to sperate us from them and shore up and votes we may have taken from labour

  • david thorpe 20th Jun '10 - 11:09am

    also I think the structure of the local bus network needs looking at, its very expensive and another monopoly/cartel arrangement

  • I agree with the sentiment, but can’t support the policy. Why? Simply the governmnet has too much else to do now. Would I have started from here no.

    One big problem with the privatised railways was the financing deals they started with and the amounts paid to the leasing companies (the Banks). Its only really now starting to unwind with better deals for the franchises.

    As a commuter on the most used (and most expensive) southern network from Brighton, I certainly think there has to be more pressure to deliver better value to regular travellers as well as the good off peak deals to fill the network in slack times. More partnership with the rail operators and better channeling of funds mght be the best route than throwing everything up in the air again.

    Hope Norman Baker can exert some influence!

  • david thorpe 20th Jun '10 - 11:24am

    yes the government has a major itineray to achieve, certainly this is not number one two or three on the list, but if the intention to do it is signalled now, and some of our mps who are not in cabinet are asked to form a committtee to achieve it, its doable. nothing can/need happen yet as we await the franchises to expire anyway

  • david thorpe 20th Jun '10 - 12:23pm

    I do wonder is the old british rail would ever have embraced the technology and tiocketing methods used by the franchise companies. the private operators do it for their benefit, but would BR have done that.

    I do agree, by the way, that its probably impossible within the confines of the current coalition, but it should be soemthing we go into the next GE committed to fighting for, the optics are good for t, and it would give us a number of years to firm out a plan timescakle etc.

  • With the actual Railway infrastructure already reverted into government hands, the costs of simply taking back the franchises as they expire would be low.

    In other words, it has already been renationalised. The government just contracts out some elements of its operation.

    And while I do believe that ‘competition’ does deliver benefits, there is no meaningful way in which competition can be delivered on passenger rail services in the UK

    Not sure about that: the East Coast and West Coast main lines can compete with each other, and rail can also be said to compete with buses, coaches, airlines and private motoring.

  • Jane Elwood 20th Jun '10 - 4:10pm

    “it could become a lib-dem policy to sperate us from them and shore up and votes we may have taken from labour”

    Who needs trains when everyone will be travelling by airborne piggies ?

    I’m not even sure what libdem policies are anymore. Kind of reminiscent of foreign policy under Blair. “whatever George tells us to do”

  • david thorpe –

    what are ROSCOs? Rolling Stock Companies; set up at privatisation to own, and then lease to the TOCs (Train Operating Companies), the stock of rolling stock built up by BR. The stock was undervalued and the initial purchasers sold on to institutions at vast profit.

    potential for taking out capital – land & buildings? The old BR Property Board did a lot of this, but I suspect most remaining property and land is either required operationally or of very limited value.

    would BR have embraced new technology? Probably. After all, who developed the High Speed Train/ Inter City 125. Developed in the 1970s (as a stop-gap!) and still in front-line service in 2010! BR was prominent in developing computer technology, communications, technical innovations etc etc

    ad :-

    You suggest the West Coast and East Coast can “compete”. Well, between London and Glasgow perhaps, but nowhere else!

    Jane Elwood :-

    yawn ….

  • David,

    Although I cannot be sure that BR would have taken on current ticketing model there is no REAL reason to believe otherwise. The rhetoric of Thatcherism was one whereby public ownership = inefficient, whereas in reality studies showed very little discernible difference (with some showing public sector to be MORE efficient)… Therefore although they may not have been pioneering (the private sector in this field is hardly a world leader!), I’m sure that good ideas would be readily imported…

    Just my tuppence

  • Good luck to you in arguing for this policy. I was at a meeting just prior to the election when I tackled Vince Cable about the absurdities of continuing with a privatised system based on franchised operations. His argument was that the TOCs will invest and everyone will benefit. In fact, the reality is that the TOCs invest PUBLIC funds in a way that is short term as well as being poor value for money. Basically the leadership of the party are still deeply in denial about the utter failure of privatisation.

    While I totally agree with the idea of taking the railways back into collective ownership of some kind, simply proposing British Rail MKII is not an option. We need to find a way of presenting it as the positive move it would certainly be.

    Tim Leunig’s oft quoted point about rising passenger numbers is pretty dubious. Not only were passenger numbers rising before privatisation, but they have risen in other countries like Switzerland where railways remain in state hands.

    We need to marshall the evidence on this one, presenting hard facts about how the current system soaks up subsidies and doesn’t deliver a true public transport system. We also need to look at how other countries manage their systems eg. the Swiss.

    Presentation is everything. Could we present this as an argument for “Swiss style railways”?

  • The East Coast line is operated by the Department of Transport. It took over this route when the National Express Group refused to offer any more support to it’s National Express East Coast subsidiary. It would be interesting to compare how the current (state) operator performs compared with the previous failed incumbent. If it is performing well (and I guess this is measured by the amount of premium paid or subsidy required) then the state operation should continue. In effect if the private sector can do better they can have the job, if not it remains with the state. However I expect this right wing Government, like Labour before them to adopt an idealogical rather than a pragmatic policy.

  • Just one more point, most of the ROSCO’s are owned by the Banks – who are also largely owned by us as well.

  • davidj thorpe 21st Jun '10 - 11:17pm

    @ dale.

    any business or eneterprise which exists in a marketplace which is not perfectly competiive will become inefficient, so yes there are plenty of very inefficient private sector organisations.
    the lib dems have long highlighted this by trying to end xcartels extra which foster this inefficiency in the private sector, but we should not be ashamhed of trying to end the inefficiencvy in the public sector either.
    I think the main short term differece is that while attacking lack of competitiveness in the private sector will beenfit the economy and society in emdium term and on a more macro level, the disposal of assets now by the giovernment()as long as they incraese not reduc comeptition as thatchers privatisations did) would have macro and micreconomic beenfits, the latter because they serve as a revenue generator.

  • davidj thorpe 22nd Jun '10 - 11:07pm

    @ dale

    the airline and phone industries are examples of where free markets work, with prices in both sectors< onece sectors dominated bya few large players and govt owned, have fallen by 90% without any real coreresponsing decline in service

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