Rail nationalisation – think it through

Network_Rail_imagesCA0ADM11I woke up yesterday morning to a news story that 30 or so candidates for the Labour Party in the UK are arguing for a partial nationalisation of the railways in line with Ed Miliband’s indication that a new Labour Government would seek not just to ‘run’ the country but to ‘change’ it. In order to avoid paying compensation to incumbent franchise owners, franchise contracts will simply not be re-let when existing contracts expire. The East Coast franchise, they argue, having been run by DOP (a public-sector company) for four-and-a-half years after it was abandoned by National Express after failing to meet targets, has been a ‘success’. There is a better way to run the railways, seemingly. And one that will see a reduction in ticket prices.

Let us just examine this in a shade more detail.

First, what is success? DOP delivered returns to the Treasury (£208.1m last year according a Guardian Newspaper report, 26 October 2013), but did not match the National Express contractDOP commitments; not least because they were flawed. Though customer satisfaction levels were, it seems, at a record high (2-3 percentage point higher than the Intercity averages).

Second, the railway is a capital intensive: infrastructure (already in the public sector as NetworkInterCity_imagesCAYLRJO7 Rail) and rolling stock (trains – all privately owned by Angel Trains; Porterbrook; Eversholt Rail Group and QW Rail Leasing).

The Franchises own virtually nothing over and above a few ticket machines. The costs, therefore, are largely fixed. They pay track access charges (to Network Rail) and rental charges (to one of three rolling stock leasing companies). The profit comes from a margin between fares, subsidy and operating efficiency.

Should the franchises be transferred to the public sector, those costs will not change significantly. Certainly not significantly enough to see a reduction in ticket prices.

BR_org_imagesCA569Y4RThird, under the present structure of the transport industry, who benefits from reduced ticket prices? The unfortunate reality is that the main beneficiaries are the relatively wealthy middle classes. The routes in the South East of England – in and out of London – attract the most attention for this reason. Also because the routes encompass some of the most sensitive electoral constituencies. And richest. The least wealthy areas, even in London, do not enjoy links with either the national rail network or the Underground. Actually, these areas are much more dependent on buses than trains. On that basis, it makes much more sense to nationalise the bus industry than the railway industry.

Now I am not arguing against nationalisation. It is clear in the years before privatisation, the railway industry was efficiently managed. Privatisation was at best a scorched-earth policy by the outgoing Major Government and, at worst, asset stripping by foreign and national ‘operators’. Any nationalisation programme will need to find a way to bring back all of the assets, including the rolling stock, back into public ownership.

125_Hull800px-43104_in_Hull_stationHowever, the issue is not about the ownership of the railways, rather transport policy more generally. What are the railways for and how do they link into the provision of mobility ‘rights’ for citizens, by whatever mode? And what is that worth in terms of transfer payments from the taxpayer to operators whether public or private? Let us not also forget the role of public transport in meeting environmental protection targets, such as CO2 emissions. It is cheaper, in many cases, to use private motor vehicles, particularly over longer distances.

Then there is the question of demographics. So much public money goes into servicing passengers in the South East of England because of the London effect. Government policy surely has to consider equalising wealth and opportunities across the country rather than concentrating it in the Capital which perverts demand for transport services.

In essence, then, a radical policy is not about the ownership of a few railway franchises. A radical policy requires new thinking about transport, its function, value and impact on other policy domains such as housing and economic development (beyond the capital).

Picture:

InterCity coach and 125 in Hull Paragon Station: Oxyman/Wikipedia

Nationalisation graphic, Bring back British Rail: http://www.bringbackbritishrail.org/news/page/2/

 

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