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.

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.

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.

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)

Although it isn’t so anarchist when you scratch the surface, and that’s what makes it interesting.

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?

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)

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.

Anyway, as with the banks, this is nationalising a loss. The profits – the other franchises in the group – are staying private.