Saturday, 29 January 2011

Want a reason for re-nationalising British railways? Try 23 billion...

There is this old yarn about an encounter between Churchill and Attlee in the House of Commons latrines, after the war.  As the recently elected Labour Prime Minister entered, Churchill moved to the far end of the room.  "My dear old Winston," groused Attlee, "I had hoped that although we are opponents again in the House, we might still be friendly outside it."

"Now, now, Clement," replied Churchill, "I have no quibble with you, my good man; it is only that in my experience, when you set eyes on something that is very big and functions well, you are wont to nationalise it."

Irrespective of its proportions, Churchill had good reason to fear for his gentleman's sausage.  Targets big, small, functional and dysfunctional, were nationalised between 1946 and 1951, including the Bank of England, the coal, steel, electricity and gas industries, and, of course, the railways.  On Churchill's return to Downing Street his privy parts had been spared, yet one-ffith of the UK economy was in public ownership.

The majority of this was reversed by an equally ideological privatisation spree in the 1980s and 1990s.  Only the Old Lady managed to escape the Iron Lady.

In most cases, privatisation has been a Good Thing.  It has resulted in improved performance, greater efficiency and more accountability.  Competition has driven down prices for consumers and enforced more disciplined and accountable management.  Profit making has attracted further capital investment.

Not for the railways.  Rail companies talk a lot about improved statistics but passengers have to live with perceptibly declining standards, massive fare increases, under investment and unacceptable overcrowding.  First Great Western might claim that they have been on time nearly nine times out of ten in the past year but I would offer my Twitter feed as a more reliable indicator of their (un-)punctuality (WARNING: adult language).

Regular readers know how I feel about our historically important railways.  Like John Redwood wrote on his online diary yesterday, "I like railways."

Okay.  He didn't say that.  He said, "I like trees."  Yet the sentiment is sort of the same, for he was discussing the merits of private sector trees versus public sector trees.

I am quite sure that John Redwood would say that he does like railways too, yet as with trees, he likes them to be private sector, not public sector.  Outwardly, all Conservative politicians would agree.  Inwardly, some are not so sure.  Inwardly, several would tell you that the railways were a privatisation too far.  Inwardly, some want them back.

The Times (£) reports that the £23 billion of Network Rail debt is to be brought back on to the Government's books "to secure greater leverage over the private company."  This is a bold and decisive act for a Government whose principle objective is to reduce the nation's enormous debts.

The potential for a re-nationalisation of Network Rail is being played down but not discounted.  The initial aim of making the railways more accountable and transparent is a good one, considering the taxpayer already subsidises the company to the tune of £4 billion per year.

Even if Network Rail was bought by the Government, the nonsense of separate ownership of tracks and trains would still exist (except for the recently nationalised East Coast franchise).  It would still be a step closer to the wholesale dependency of the industry on the state, unless major franchise reforms take place, such as lengthening contracts.

There are a litany of reasons why privatisation has not worked for the railways.  Fragmentation has created inefficiencies rather than efficiencies and costs have not come down.  These inefficiencies in a strategic industry such as the railways have prompted ever higher state subsidies, to the extent that the taxpayer now spends more on railways in real terms than when they owned them fully.  Competition (and driving up of standards) cannot exist in railways like it can in utilities such as gas.

These and other reasons might be widely known and ever more widely ignored but in taking on Network Rail's financial liabilities, the Government has given twenty-three billion reasons why a return to public ownership cannot be ignored for much longer.

It would be an economically and philosophically retrograde step - an admission of failure.  It would also be a very dear transaction for the taxpayer.  Although I am more of a supporter of nationalised railways than most, I acknowledge that this would be a Bad Thing.  Yet as the state takes on more and more responsibility for their proper functioning, soon it will seem like the only pragmatic thing to do.

1 comment:

  1. The problem with your argument Nick is that Network Rail is a nationalised company – it has been since it was incorporated by any sane interpretation of ‘nationalisation’. Describing it as a ‘private company’ was always a fiction designed only to keep its debts off the national books and try and stop the Government having to pay out too much to Railtrack shareholders.

    I have worked with British Rail, Railtrack, and Network Rail and although Railtrack was dysfunctional it was still by far the best of the three at delivering economic improvments to its network!

    Separating the infrastructure from operations was probably an error, but this is a long way from saying that the railways we have now are worse than we had before privatisation – by any measure they are infinitely superior. The fact that Labour renationalised the infrastructure and then spent a fortune (as it did on other parts of the public sector) not achieving much other than providing Ian Coucher with an estate in Scotland is not an argument that the railways should remain in the public sector, or that the relatively small part of the industry that is in the private sector should not remain so.