The People's Railway!

 

I am always reminded of the McNulty report when this is mentioned. This report is a decade old now and was published in the New Labour years. Above too is the graph showing overall railway subsidies for the past few years. More recently the Government has seen them declined £1.9 billion for this year.

Both are instructive. McNulty concluded that the 30% increase in the cost of rail travel and expenses was due in a large part to excessive staff wages increases caused by unionisation. Of course, this is ignored by all those on the Left.

The graph then shows that now rail subsidies are in line with the long-term average after years of above average subsidy. During the years of above average subsidy passenger rail travel in the UK increased by 50% as the Government (Labour and Tory) cut roadbuilding and spent the money on the railways.

So really, railways are a victim of their own success. The massive Leftie surge to put them in public ownership will probably not make any difference to long term costs. If rail travel is to increase, then subsidies are needed as the costs are too high for private companies to wear when they are subject to price controls. The state will find the same issues when it tries to fund expansion; HS2, Crossrail etc are very, very expensive and the contractors available to deliver it are few and far between, meaning prices will always be high.

I don't really care whether the railways are vertically or horizontally  integrated or owned by the State (today they are effectively sub-contractors of the DfT, so hardly private anyway); but going on about railway re-nationalisation as if it is going to make any difference is just silly. Nothing major will change from the current set up.

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!

Another Scottish Brew: Dumferline Building Society

I am off to Edinburgh for the day later as it happens, so its seems fitting to have a Scottish theme for tonight's post.

Readers may or may not have seen some coverage of the collapse of Dunfermline Building Society. What is interesting is that the Chairman says the Government has been heavy handed in the 'takeover' of the organisation. Alistair Darling is being fingered for this.

His interview is quite interesting, he suggests that he only needed about £20 million in loans. Dunfermline is not full of toxic derivatives and sub-prime loans, more that the business suffered stress from the freezing of the credit markets. Not wishing to defend the Government, but Bank chairman are not currently a species who have much credibility and are bound to say for reasons of their own legal defence later that things were not that bad; Dumfermline have a sorry looking bunch of commercial loans to go with their Scottish mortgage book.

However, the thought that a Labour Government would move fast towards the option of nationalisation is also credible. Particularly in Scotland where there is more political support for wild Marxist activity. Let's see whether a buyer comes forward who either has strong Labour links or is perhaps already state-owned?

Apparently we will have the answer later on Monday....

Jonah Brown strikes down Lloyds Bank

LLoyd's banking Group has today announced that it has finally agreed a deal with the government for it to access the Asset insurance programme.

This deal was supposed to be agreed last week and the share price had ticked up in expectation of this to 75p. When no deal was forthcoming the share price nearly halved. As the week dragged on, the share dropped and dropped with only a small rally Friday.

Reports in the City suggest that Eric Daniel's was speaking at a charity event last Monday and was reduced to tears in a speech (clearly due to stress, not the text he was reading). So much pressure has he felt.

For this Lloyd's deal was cooked up last year by Victor Blank, the Chairman and Gordon Brown. In the end it has not achieved its aim of keeping HBOS off the Government balance sheet. Nor has it been good for LLoyd's whose shares have collapsed to RBS type levels.

As a result, the only honourable solution is for both Blank and Brown to resign. Eric Daniels', one of the few good bankers, should be allowed to try and turn the new nationalised LLoyd's around. If he wants too. I don't think the bookies are going to give long odds on either the Chairman or CEO of Lloyd's being in place in 2010.

RBS & LBG to the races

And so it was done. The Government has capitulated before the markets. RBS has been given another £13 billion to try and stave off full nationalisation (read bankruptcy), on quite generous terms. Darling is saying taxpayers will profit, just like Northern Rock, eh?

I can see the Government's view on wanting to keep a sliver of shares on the market, as this will let them know when to sell-out of their shareholding. Whisper it, but this is a big improvement on what has gone before. But really, RBS's end of term report today was actually worse than expected.

Massive losses, ABN acquisition not only written down but the remnants written off for sale. This is a corporate disaster worse than either Mannesman or GEC Marconi. Now that is going some.

Yet the share prices of the battered banks flew today (N.B. CU currently holds LLOY shares) and may well do tomorrow. I think the market wants good news and is not prepared to dig to view the long-term picture.

RBS, maybe LLOY, are zombiefied and we are following the Japanese plan for 10 years of economic stagnation at best. Now that the Government has put the debt of the banks on the national balance sheet, I can't see what is holding them back from full nationalisation...in the US it seems momentum is behind the push to sort out Citi and BOA.

I am still against full nationalisation in the UK; not on pure ideological grounds, on competence grounds. The government have already proved with Northern Wreck that they can blow money just as well or better than the Bank executives. Plus the other key economic test as well, If Vince Cable is all for it, it is bound to be wrong.

Another week of Banking to come...

As if plenty of people are not bored with banks already, after last Friday's Lloyds/HBOS announcement there is more to come this week. Paul Moore has more which might undermine Gordon Brown further, if that is possible and speculation like this, on RBS will continue.

The last couple of weeks was interesting as the short sellers cleared out of the UK banks and the share prices recovered somewhat. It will be interesting to see if they dive back in on the Lloyds/HBOS news of whether the risk of nationalisation keeps the stocks too toxic even for short-selling.

And then there is the bonus row, which surely can't last much more of the media cycle as it is getting very tedious now...

UK Charities nationalised

This has been happening for sometime now. However, the credit crunch has moved the agenda even further forward.

As people donate less to charity to look after themselves, the 'shortfalls' are causing problems. Charities are struggling for money and the Government has put another £42 million aside to help them with projects.


But how can the Government choose which of thousands of charities deserves help? Moreover, are the ones that need help not already proving they are not good at managing the money?


Personally, I resent being approached in the street by Chuggers who when questioned soon admit that their organisation is majority government funded. To my mind, they are bleeding heart tax collectors.


I am not anti-charity at all and I want people to give as much as they feel they can afford. But why should Government be donating my taxes to charity - why not let me decide where the money goes?


The answer to me is clear, 'Third Sector' money spent by the government goes to 'local initiatives' (see the BBC link). These are mainly in Labour areas and so much of this money is simple vote buying, dosed up with some hand-wringing morality.

2009: Brown's Bank nationalisations

Some intriguing snippets of news are leaking out that make for grim reading for shareholders of UK bank stocks. last week the dreadful HBOS announced it losses on corporate loans were in the extreme zone. As such, an analyst has pointed out that the joint HBOS/Lloyds bank will be heavily loss making and is likely to be nationalised next year.

The government too has been making plans, Robert Peston has blogged on some of the key long-term changes being made, in addition I see that the IMF are also suggesting that Government's get more radical in their approach to the credit crisis.

If the Government wants banks to lend more, it will have to give them more money as they are not going into risky business in this environment. More money means either printing it or borrowing from future tax payments. Either way it will mean the Banks too have to give more of their capital to the Government and the taxpayers 'suffer.'

2009; Nationalised Banking, I hope Labour are honest enough to put it in their election manifesto...

Brown gives banks a Red Card

Yes, in the end, he just had to play politics. The trumpeted bail out will be a disaster in the long-term for Labour. The manadarins at the weekend clearly got carried away with the tough talk.

RBS and HBOS are hobbled and effectively nationalised, what that means for shareholders we don't know yet in truth (shares crashing this morning...). Barclays and LLoyds have been strong armed despite protesting their innocence, at least Barclay's seems to have escaped the injection of direct Government funds.

Now RBS and HBOS are set to play to the Labour tune, more money for household lending etc. As we all know, once the Government starts interfering it cannot help itself. Beauracracy just feeds on itself.

Now Gordon is in his element, the banks have been humbled at the taxpayer expense. What is odd is that the Government seems keen to have, er, 'gold-plated' (appropriate for Brown) the demands to make sure both RBS and HBOS ended with over 50% Government shareholding.

I am all for the re-capitalisation of the banks, it was our only option. But the Government dithering caused huge share price falls and now the new issues are at such a level that the Government becomes the biggest shareholder and dictates policy. In fact, the step to full nationalisation is a tiny one from here...

This is 70's command economy time; Mr. Brown can seem strong and powerful. However, we all know where the 1970's command economy led to.

A better solution over the weekend would have been to work with industry to enable the comanies to survive in rude health rather than to get tough with taxpayers money. The Left don't think like that though, bullying comes to naturally to them.

End game approaching faster than the Government can cope with.

On just Sunday, which seems a lifetime ago, I wrote the world faced meltdown this week from a variety of factors. And Lo, it has come to pass.

Horrendous mismangement of the PR by banks and the Government has allowed a delicate situation to snowball into the worst banking crisis of our lifetimes in the UK.

RBS is now on the critical list. Either the Government 'does an HBOS/Northern Wreck' or we have a failed bank on our hands which will push the UK over a cliff and probably mangle our financial services business for ever.

I detest government intervention, but hold my nose when all our futures depend on it. Saving northern wreck was political, saving HBOS and RBS is not, a systemic failure would be more expensive than the bail-out.

I detest cack-handed government intervention even more, but that is where we are. There must be a huge day of reckoning to come for the Government and leading bankers when the actual crisis is over.

At least re-capitalisation is the right idea and the US have kick-started the commercial paper market. At the 11th hour I hope it is not all too late...

UPDATE: The deed will be done in the morning. Fingers crossed now. If this does not work the lights will be out soon.