Tuesday 9 December 2014

Is nationalising the Railways anti-capitalist?

Bet you did not expect to read that headline on this site!

However, I have been musing on a post on this subject for quite a while after discussing the state of the Railways with various industry leaders over the past few months. All are in broad agreement that the current position is poor, with Network rail unable to do much beyond maintenance and the long-term nature of the operators contracts and frankly bizarre bidding process not adding anything except guess work to the process.

The original 1993 nationalisation can definitely be said to have been botched. Stats about growth on the railways are fine - but with a booming economy and population for most of the last 20 years and next to no investment in road capacity, of course the Railways would benefit. Moreover, state run (in effect) businesses like Transport for London, have not seen a differentially poorer performance. In fact, it has matched or exceeded the Operator performance.

Of course, British Rail was a mess and its technology, whilst good, was never deployed on a scale necessary. The Operators, faced with some market forces, have indeed brought rolling stock up to scratch. But little else.

What is also noticeable, as with the Energy industry, is that the UK smashed its own national champion to pieces. Unlike say Deutsche Ban or SNCF, who thought vastly subsidised, run parts of our railways for us.

This in itself is no bad thing, but we did not smash British Airways into 20 small airlines when it was privatised, not did we break up British Telecom in the same way. Both of these businesses are strong and vibrant today, employing thousands of people and often leading in their markets - inspite of fierce competition.

The railway nationalisation did not achieve this for Britain's railways. The Opertors have not done well, as can be seen by them handing back the keys from time to time. Network rail is on its 3 incarnation and its suppliers like Balfour Beatty are all having a bad time of it financially. Customers still pay very high prices - who is happy? Only the Government who are able to cut subsidies more and more for the Railway industry. The subsidy is now back down to where it was for British Rail in real terms. HS2 will no doubt move this the other way again.

At such a point as we are now, Labour and UKIP are saying it would be better to re-nationalise the railways. I can't quite agree as the cost of doing this would outweigh the benefits. What would be better is to give a few companies some better scale in the sector and more control over the tracks, stations and rolling stock so that they can actually run lines as a full business. That way we might develop back our scale of companies that can compete internationally.

What is clear to me is that the sector today is in a state and the Government wants it all ways at the moment, reducing subsidy, demanding investment and pushing fare rises to consumers. So one way or another there will be change - just like the Energy industry which has a similar set of botched business models to contend with!


hovis said...

Is nationalising the railways anti capitalist*?

It may be anti capitalist, but it is not anti free market.

The system the railways operate under can at best be described as oligopoly, personally I'd say it's a false market.
As constituted, it is a dogs dinner, interested groups vying for position, suckling public money and screwing passengers, notoriously in the S.E. but no doubt everywhere. So not much different to nationalisation - but at least under nationalisation there may be at least a democratic safety valve** to stop the piss being taken.

* dependent on what you actually mean by capitalism
** dependent on structure.

dearieme said...

Why not experiment with the railways in one part of the country having the tracks controlled by one operating company, which will have a local monopoly of services? Then if that's a flop, think again.

Sebastian Weetabix said...

The railways are already nationalised in all but name. Might as well go the whole hog.

I would do it for rail, electricity and water. You might not like the old CEGB here at C@W, but by goodness, it worked. Run by the engineers, for the engineers, with reliable supplies!

Will a true Tory please stand up said...

The issue with all these break-ups was the instigation of privatisation/subsidy hybrid. The system chased profit and subsidy maximisation rather than depend on true customers for its core purpose. Why have rail lines in remote parts of NE England when the capacity is required in the South East.

If you are going to use a market model make sure it is one.

....and don't get me started on renewables.

Demetrius said...

It was botched in the 1840's legislation, in the 1923 Rationalisation, in the 1947 Nationalisation, in the 1960's and then in the 1980's and 90's. Now it is difficult to know where to begin. And you do not under any circumstances begin by building new high cost lines that will soak up all the subsidy funding and escalate losses.

Anonymous said...

The current setup isn't very capitalist - I still recall Virgin going crying to regulators because another firm had the gall to start a Manchester to London to service once a day.

There really needs to be proper competition on lines, with local government able to provide services too. Let the private sector run the profitable lines and the government pick up the slack where lines make social, if not business-economic, sense.

I wouldn't be too upset to see a temporary renationalisation - it would certainly shut up the renationalisation brigade when they realised it isn't going to lead to a golden age of rail - and the current system is terrible.

And some investment is needed - the Manchester to North East line is insanely busy, mainly as it's significantly faster than driving and there are plenty of commuters between Manchester, Leeds, York and Newcastle/Middlesbrough along with no small amount of tourists and students.

As for new stock, DfT seems to have bought most of it. As in the taxpayers.

Electro-Kevin said...

Is nationalising the railway anti-capitalist ?

It need not be.

Is a service vital if a civilisation is to remain civilised ? If the answer to that is yes then nationalisation need not be anti anything.

(I suppose I am a capitalist at heart. I don't believe in the Money Tree or that society owes me a living.)

Jer said...

Yes, privatisation was botched, mainly because the utter fuckwits responsible thought the competition to railways was other railways.

But... we haven't had a major crash recently. When I take the train my journey is invariably on a train, not a replacement bus.

Could be worse, and under British Rail, it was.

Electro-Kevin said...

Jer - Discipline and safety systems/regimes are much tighter than they were under BR.

dearieme said...

"Is a service vital if a civilisation is to remain civilised ? If the answer to that is yes ..." nothing whatever follows. Do you really want to go back to British Restaurants? Do you want to nationalise the universities? All the Art Galleries and Museums?

Where we live the water company had always been private. It gave sterling service.

Electro-Kevin said...

I can't ever remember in my life not having a good water supply.

But by 'eck the cost has gone up.

Budgie said...

Nobody has mentioned that the EU Directive 91/440 was largely to blame for the mess in the first place. And, yes, before the EU purists/apologists throw a tantrum, not totally to blame.

As usual we interpreted 91/440 in the worst way possible and then a bad deal was made worse by subsequent corporate/government politics.

Since we are 5 months from a general election and a new Labour/SNP government, nothing will be done by Cameron (how novel is that?). And Miliband will have too much else to think of - such as large debts and little generating capacity and mad Balls as his puppet master. Oh happy days!

Anonymous said...

o/t, CU - but are you still in EMED? Just wondered what on earth is going on (apart from a fall in the copper price)