Should Britain’s Railways Be Nationalised?

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By Roland Bensted

The UK’s privatised railways are less efficient, and a bigger drain on public resources than the former British Rail. Nationalisation should be considered. 

Yet mainstream politicians of all parties have been unwilling to make a clear case for nationalised ownership. This was exemplified recently by the Office of Rail Regulation’s (ORR) April 2013 report, GB Rail Industry Financial Information 2011-12. According to the ORR report, the state-run East Coast rail franchise was the least reliant of all British rail franchises on government money. 

According to a Financial Times article, this placed the East Coast franchise as “the most efficiently run rail franchise in terms of its reliance on taxpayer funding”. Yet, just weeks before the ORR report was published the Transport Secretary proposed re-privatising the apparently well- performing East Coast.

Many passengers will need little reminder of the railways’ current shortcomings. Those who contend on an almost daily basis with the consequences of signal failures, broken down trains, dangerously overcrowded carriages, and the frustration of padded timetables will be all too aware of these problems.

It was not supposed to be like this. The privatisation of British Rail in 1996 under John Major’s Conservative government was meant to herald all the great things that the ideology of privatisation holds will follow: greater efficiency, punctual trains, lower fares and greater satisfaction for rail users. Clearly these have not materialised. In fact, the campaign group Transport for Quality of Life found in 2012 that twice as much public money in real terms (i.e. adjusted for inflation) was spent on the railways in recent years compared to the final years of the nationalised British Rail, in spite of real terms increases in passenger fares during the same period.

The key issue is that railways should be run as a public good for the benefit of the economy and society rather than a private commodity. Democratic societies accept the need for a balanced economy; one that features a mixture of private and public ownership. They accept that the market mechanism will interact with state provision. The debate within democracies focuses on how this balance best should be struck. Clearly, privatisation has been beneficial for many British industries such as telecoms. But railways are not among those that have benefited.

The railways in Britain are natural monopolies. They do not lend themselves to market competition and thus cannot operate properly according to the market mechanism. Put another way, railway companies in Britain have never been able to make profits without significant state subsidies. The only reason private companies bid for rail franchises in Britain is because they are guaranteed minimum revenues by the government in order that they can make profits and thus pay dividends to their shareholders. So taxpayer and farepayer money since 1996 has been used to subsidise shareholders and bosses of private corporations running poorly- performing regional monopolies that are shielded by the state from making losses. In 2010 the late British historian Tony Judt - a railway enthusiast - described this arrangement as “the worst sort of mixed economy”. The Guardian’s Seumas Milne echoed this sentiment in August 2012, describing the railways as "a gigantic scam for siphoning off public money”.

The favourable nature of many rail contracts means that private companies can break the contract early if the going gets tough knowing full well that the state will have to step in and pick up the pieces. This is precisely what happened with the East Coast franchise after National Express walked out in 2009.

Given the poor state of our contemporary railways there is a danger of overlooking some of the defects of the nationalised British Rail, of overstating the past romance of the railways in spite of their historical contribution to the economy as well as the collective imagination.

So while it may be true - as Tony Judt stated in another of his final works - that “the coming of the railways facilitated the emergence of what we have come to know as public life: public transport, public places, public access, public buildings and so on”, it is also true that trains were often late, cancelled and overcrowded under British Rail.

Underinvestment was certainly a problem. Another problem was the failure to articulate the need for railways as a public good. The decline of the railways truly set in with the Richard Beeching reports of 1963 and 1965. In these, Dr Beeching, Chairman of the British Railways Board from 1961-65 cast the railways in purely utilitarian terms reminiscent of Charles Dickens’ fictional Thomas Gradgrind. He recommended the closure of thousands of miles of track and thousands of railway stations with the stated intention to make the railways profitable. Many of his recommendations were adopted; closures abounded, jobs were lost and many rural areas were left without access to public transport. But the railways never did become profitable: even on this score Beeching failed.

But the damage Beeching did was more profound. In 2008 the journalist, broadcaster and railway enthusiast Ian Hislop stated that the Beeching era “marked the end of our romance with the train, the end of public transport and the rise of the car”.

With the rot having already set in, British Rail stood little chance in the face of 18 years of Conservative government under Prime Ministers Margaret Thatcher (1979-90) and John Major (1990-97).

Yet although passengers will continue to face the daily frustrations of rail travel described above, not to mention average fare rises of 6.2 per cent in January 2013, all is not lost.

The assumption that private provision is always best has been a powerful one these past 30 years, but it is increasingly being challenged, including in unexpected quarters. In an August 2012 interview Conservative Defence Secretary Philip Hammond, in response to the G4S Olympics debacle, conceded that the ethos of private sector project management is often incommensurate with the provision of public goods. As for the Labour Party, Shadow Transport Secretary Maria Eagle in 2012 welcomed the publication of Transport for Quality of Life’s Rebuilding Rail report.

However, it would certainly require bold leadership to advocate renationalisation of the railways amid continuing challenges in public finances. But much of the public would be receptive to the idea. And let us not forget that public finances were in a far worse state in 1948 - the year that a Labour government introduced the National Health Service.

 

10 May 2013