Tuesday, 9 December 2014
Is nationalising the Railways anti-capitalist?
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!