Inspired by the downfall of the Nationalised banks, that old favourite of the lefties is back: Nationalising the trains! The strategy is the same: Wait until a train operator is on the brink of bankruptcy then swoop in.
To help the process along (after all, train operators might not go bankrupt on their own) the Government’s got a few tricks up it’s sleeve. Their key weapon is fuel duties, combined with Quango controlled pricing and scheduling. If the train operators can’t control their costs or prices, then to bankrupt a train operator all you need to do is make sure their costs are greater than their income and blam, ’save’ the rail line from those greedy Capitalist bastards.
Dream come true for the hard left though. Glad someone’s happy!
Joe Otten said...
1 Jul 09 at 9:35 am
The alternative was bailing them out which you would have condemned even louder.
Frankly, the scandal here is that there is a contract to pay for the franchise that will not be honoured. Far from the government nationalising the train company, the company is handing itself over rather than honour its debts.
Alix said...
1 Jul 09 at 10:17 am
As a free marketeering type, I’m not particularly keen on rail privatisation. Effectively, it’s a closed market, because unless you’re willing to risk frequent rail disasters, you can’t let two companies compete for the same passengers on the same line. Effectively, it’s the government handing a monopoly to a chosen lucky recipient, and in that respect is no better or worse than a state monopoly. It would be different, of course, if the train companies were not allowed to set or keep the fare box, but simply provided the service for a fee. On the more successful private contracts, I gather this is what happened.
Still doesn’t solve the high prices problem of course, because at the end of the day someone, either the state or the company, will set a fare price that is unaffected by competition.
John said...
1 Jul 09 at 10:31 am
Surely this has to be put in context with the cost of car travel. It’s not just different rail companies competing but different modes of transport competing.
The real scandal is that there is an `airlines style` ticketing service for long-haul journeys which are a tax on spontaneity. Manchester – London turn up before 9:30 say it’s over £200 return after 9:30 £66. If you book in advance it’s as little as a figure in the teens.
What is the incentive to ditch the car for a family when an interesting idea in the morning `let’s visit the castle` becomes a wallet-breaking exercise – who thinks `oh, in about 11 weeks time I’ll visit the castle`.
Charlotte Gore said...
1 Jul 09 at 10:32 am
I think one of the serious problems we have with rail infrastructure in the UK is that the train operators and the railways themselves are kept separate. We are permanently locked into low speed, mostly diesel stock because the only job of the operator is to administer the Government’s fixed schedules at mostly fixed prices.
There’s no way, for example, that someone could buy a specific line, upgrade it and run modern trains on it. It’s a cludge, a mess and the result is overpriced fares and slow trains.
There’s something seriously wrong with rail in this country and the only answer anyone has seems to be ‘renationalise the lot’ or ‘make them run as not for profits’ which frankly will do nothing to lower prices or improve service.
Stu said...
1 Jul 09 at 10:39 am
Actually, there would be a third option of buying back the franchise and re-selling it to another operator, although I suppose you wouldn’t get a very good price for a failing line.
The privatisation of the railways serves as a poster child of why free markets have difficulty firing up the imagination of the public. Failures stick in the memory rather better than the good examples (telephony and energy, for instance). There may be mitigating circumstances, unique factors and stupid decisions, but that doesn’t change the fact that privatisation has hardly managed to improve the railways at all, in terms of value for money or efficiency of service.
When the track record (no pun intended) of privatisation is that of the railways, it’s extremely tough to convincingly argue that hospitals or schools or public services would benefit from privatisation. Most people are risk-averse like that.
Charlotte Gore said...
1 Jul 09 at 10:44 am
It’s not really been privatised though, Stu. The day to day operations of running trains on particular lines have been delegated to private companies allowed to make a small profit if they can – but effectively the Government still controls how many trains run, where they run and how much it costs.
They’re privatised in name only, but that’s public transport in general – it’s simply not economically viable to provide some services but the decision’s been taken that taxpayers will just absorb the losses.
Joe Otten said...
1 Jul 09 at 10:44 am
Yes the privatisation model of separating the track, rolling stock, and operations into 3 companies was about as bananas as they come. Keep them together, and co-ordinated investment in better track and trains begins to make sense.
Even then the danger is that milking the captive market would be a better commercial prospect than investing and attracting new customers.
Alix said...
1 Jul 09 at 10:45 am
M’yes, and going by the announcements I’ve sat through on numerous Virgin trains, the separation of operators and track also allows operators to shift blame for delays and problems onto the track management, which removes another incentive to improve.
Re: tied-in stock, though – what did Virgin do on the West Coast mainline? Were the new pendolinos by agreement with the govt?
Charlotte Gore said...
1 Jul 09 at 10:50 am
I think that was something they did with Railtrack before it “went bust” and was continued by Network Rail.
Stu said...
1 Jul 09 at 11:00 am
Oh yes, *I* know it’s not really been privatised, But that’s rather like demonstrating a new product which breaks and crashes and causes all sorts of things to go wrong, and then saying it doesn’t usually do that, and there are mitigating circumstances. It’s technically true, but it doesn’t alter the perception.
The lines and carriers do enjoy blaming each other, though, don’t they.
Alix said...
1 Jul 09 at 11:01 am
“…but effectively the Government still controls how many trains run, where they run and how much it costs.”
This doesn’t matter. My point about competition was that it makes no difference whether the govt or the company does this bit – you still can’t have any two entities competing for the same passengers, it’s physically impossible. A private healthcare provider can compete by building another hospital, a telecomms company by (with great difficulty) erecting a new mast, but unless a bunch of train operators get together and decide to build themselves a whole new rail network alongside the existing one (tantamount to impossible with planning law the way it is), competition cannot function effectively in rail services. It doesn’t matter who runs it, it’s still a monopoly. Handing all decisions over to private companies about timetables, fares etc wouldn’t make any difference. (I’m also not sure the govt sets how much it costs. They might set ceilings? There are some weird anomalies out there if they do set fares).
Bishop Hill said...
1 Jul 09 at 12:43 pm
Am I missing something here. Why didn’t they just let them go bust and let the administrators pick up the pieces. I mean if NE paid so much money for the franchise, presumably someone else would want it?
Jake Motta said...
1 Jul 09 at 1:22 pm
Firstly I think the recent recession and its causes makes me feel pretty happy that the infrastructure is not privatised. The belief that private = better is misplaced, both private and public sector have a happy knack of cocking things up, but at least we can easily identify the idiots accountable in the Public sector.
Secondly the railways was never a good candidate for privatisation in the first place; due to the poor, outdated infrastructure that is an albatross around its neck. Thirdly, I’m not sure, but isn’t the Tube still essentially state owned and that seems to have improved beyond all measure in the last 10 years?
Martin said...
1 Jul 09 at 1:30 pm
“both private and public sector have a happy knack of cocking things up, but at least we can easily identify the idiots accountable in the Public sector.”
The difference is that when those in the private sector cock up, they lose their client base and profits.
When the public sector cocks up, you’re paying for it, like it or not.
David Davis said...
1 Jul 09 at 1:46 pm
The tragedy of railways is that they psychologically appeal to collectivists and “big-governmentists”, as toys. This is partly because they appear big, expensive and shiny and can be used to overwhelm local property-rights such as in Europe and China, and partly because of the Tyranno-European-Statist tradition of turning them into strategic weapons of war – this being one of the only two things that States are “good” at (the other being inflation.)
I believe the Prussian and French States nationalised “their” railways many decades before we did, although a faux-nationalisation, called the “Grouping”, took place here in 1922, about the same time as the firs firearms-control-legislation, and possibly for the same reasons.
In our present plight, it probably makes no difference to the depth of despond and destitution to which we are to sink, if one or more “Franchise Operators” (ha!) has its “property” “nationalised”.
The sadness comes from realisation that however hard we have tried, socialism has not gone away, and will not – at least not without some desperate measures. Hey, it’s just a railway-nationalisation, right? OK, simple – we know how to fix this stuff and put things right again, we’ve done it before. but the tragedy is that we have to __keep on__ doing it, time after time after time. It’s the stalinist buggers, what I call the GramscoFabiaNazis, who simply __won’t stop trying to do what they try to do__ …
In the end, we have to drain the swamp: we have to make it //so// hard to actually /be/ one of these awful, awful, destructive people, that eventually one century soon, people will give the meme up. I keep on suggesting a POR, or “Political Offenders’ Register”, but my comments on MSM articles on their own websites get moderated out.
The POR could be used to inflame local mobs of “Vigivoters”, or “Electoralantes” to daub “Socialite” or “Politicophile” on the homes of ex-socialist politicians and Quangocrats – all of whom would of course be forced to sign the POR, and register house moves with the Police: who, “lessons having been learned”, would have “a duty” to inform all local residents.
Voting Labour would, of course, become a sackable offence: innuendo, anonymous tip-offs and heresay would be admissible, which is all right as the UK now contains, thanks to 13 years of ZanuLieBorg misrule, an inexhaustible supply of people ready and eager to grass each other up. Of course we’d need to enlist the Red-Tops here in a campaign for something like “Griffin’s Law”, but I’m sure Rupert Murdoch would help us out.
Charlotte Gore said...
1 Jul 09 at 1:49 pm
People possibly miss the irony, David
David Davis said...
1 Jul 09 at 1:55 pm
I suggest this, as a starter-for-10:-
15 Roubles (about 30p right now) which could be taken as Tesco Clubcard points _or_ as a part-payment for a lottery ticket, for successful and anonymous betrayal of someone’s tendencies to believe in nationalisation or state-provision of something like health care or education, to his/her employer.
Or…
“Grass up a socialist and win a laptop”.
David Davis said...
1 Jul 09 at 1:56 pm
They’ll get it one day, Charlotte! I hope it wan’t be too late.
PS if my sentiments might upset people, please feel free to delete them or edit, I won’t be offended.
Joe Otten said...
1 Jul 09 at 2:00 pm
David is a spoof, right?
Anyway, as with the banks, this is nationalising a loss. The profits – the other franchises in the group – are staying private.
Charlotte Gore said...
1 Jul 09 at 2:03 pm
It’s pretty much up to individuals to decide what they want on public display
For what it’s worth I think Socialism will die out eventually – problem is people thinking what we have is something else, and that ’socialism’ is something else entirely. Not really able to understand what that might be though.
Jake Motta said...
1 Jul 09 at 2:53 pm
Of course socialism will die out, we’ll all become Marxists…
Seriously, all ideologies are doomed as none is a perfect fit for society and once implemented disenfranchise a meaningful minority… the only solution is ensure all resources that people want are infinite in supply terms then everyone will pretty much be happy… the end of history or at least politics (Thanks Mr Fukuyama)
Charlotte Gore said...
1 Jul 09 at 2:55 pm
Well I wouldn’t be happy with infinite everything.
Alix said...
1 Jul 09 at 5:48 pm
What is it we’re supposed to be upset by? Or is this another libertarian who thinks liberals = wet lefties?
It’s an intriguing idea, the end of resource shortages. It’s certainly true that politics thus far has evolved to deal with allocating resources, but the set of behaviours that we call politics would surely just evolve to be played around something else that was still in finite supply (viz, love?) Little girls at school play politics with each when no actual resources are at stake. Wouldn’t that just become the adult norm?
Joe Otten said...
1 Jul 09 at 7:17 pm
Iain M Banks culture series is a good exploration of the post-scarcity anarchist society.
Although it isn’t so anarchist when you scratch the surface, and that’s what makes it interesting.
Anton Howes said...
2 Jul 09 at 1:51 am
Hmmm
I was under the impression that the “nationalisation” was really more of a repossession of the franchise from a company unable to pay for it – indeed, a company that had the cheek to ask for a renegotiation of the contract! That hardly seems a bad thing for free-market types – although not an exact analogy, isn’t that just a bit like a bank repossessing a home when a debtor fails to pay?
From what I can tell, part of the problem is that government sets an extraordinarily high price for the franchise. Although the companies may otherwise be profitable, this high price tends to make them net loss-makers.
Having a butcher’s over at Tom Harris’ blog (and to my surprise I find that he used to be railways minister!), it seems that another problem arises over the use of capping. He seems to find it odd that the Conservatives would cap franchise payments (I suppose those are effectively ‘rents’), but not subsidies to the weaker, less profitable lines.
Although the capping, or at least the reduction of the franchise does actually sound like a good thing (the money apparently goes into a fund for upgrading the network, but I wonder if the profits of the companies would be better spent on their own internal investment), and would at least allow more of the companies to make a profit; the capping or at least the reduction of the subsidies also seems a good idea, forcing them to improve or else be weeded out as they start making an unsustainable loss. (Presumably then being “renationalised” or rather, repossessed, when they fail so that there’s no interruption in service)
Joe Otten said...
2 Jul 09 at 9:47 am
The government doesn’t set the price for the franchise – it is a competitive auction. If it did set a price, and it was too high, then nobody would take up the franchise.
There is a problem, perhaps related, that the franchise usually goes to the highest bidder, even if they offer a poorer service. Midland Mainline ran one of the best services, but lost their franchise to East Midlands Trains. So I suppose ‘capping the franchise’ may be a way to get companies to compete to offer the best service. But I am skeptical of how well we can hold a company to a service level commitment.
Anton Howes said...
2 Jul 09 at 10:34 am
Joe,
I agree.
I too am sceptical of the way they can even compete – except of course for the franchise itself, just as Alix pointed out.
Liberal Eye said...
2 Jul 09 at 5:02 pm
Simon Jenkins, who used to be a Board member of the old British Rail until 1990, has pointed out that at the time of privatization in 1994 BR’s subsidy from government was £267 million (down from £557m in 1990) and it was the most cost-efficient operator in Europe. Had it remained in the public sector the huge gowth in rail travel in the late 90s (which was not foreseen) would have made it profitable.
In fact, ten years after privatization the subsidy was five times greater in real terms and punctuality and public satisfaction were down.
Under BR the West Coast Main Line was profitable; after it was franchised to Branson’s Virgin Group it received a guaranteed subsidy of £400 million over two years.
A sorry tale indeed. But surely the lesson is that things can work perfectly well in the state sector and that devising all sorts of clever structures will not make competition magically happen when the structure of an industry (as in most if not all infrastructure businesses) militates against competition.