Why not... nationalise the railways?

 
First Great Western train

A look at eye-catching policy ideas that are often talked about but never seem to feature in UK general election campaigns.

The background

Britain's railways were nationalised by Labour in 1948 and returned to private hands by John Major's Conservative government in 1993.

Labour was initially committed to renationalisation but the policy was dropped when Tony Blair came to power in 1997. Track, signalling and stations were taken out of private hands, and put into a not-for-profit company, Network Rail, after the collapse of Railtrack in 2002.

Labour has yet to reveal its transport policies for the next general election, but they are not thought likely to feature rail nationalisation.

Green Party MP Caroline Lucas has launched a private members' bill to allow the train companies to "fall back" into public ownership, which is supported by a number of Labour backbenchers and Plaid Cymru MPs.

The train companies insist the debate about nationalisation is solely driven by the unions.

Ian Taylor: The case for nationalisation

In 1993, Britain's railway was broken into pieces and handed, mostly as local monopolies, to profit-taking companies.

The cost of the railway to the taxpayer has subsequently more than doubled in real terms, a rise out of all proportion to the 33% increase in train services over the same period.

The cost rises stem from wastage as shareholder dividend pay-outs, other inefficient private sector financing and inefficiencies created by fragmentation of the railway.

Ian Taylor
  • Ian Taylor, co-founder of Transport for Quality of Life think tank
  • Formerly manager of environmental consultancy services for the Centre for Alternative Technology
  • Has also worked for Greenpeace and Oxfam
  • Transport for Quality of Life's clients include the Department of Transport, local authorities and the rail unions

The wastage amounts to over £1bn per year, enough to cut fares by 20% if the railway were reunified as a public company.

Instead, fare increases on the privatised railway threaten to turn it into a "rich-man's toy", as this government's first Secretary of State for Transport put it.

Unbeknown to most passengers, one portion of our railway, the East Coast mainline, is still run by a publicly-owned company, Directly Operated Railways, which picked up the pieces after its two private sector predecessors walked off the job.

Recent calculations by the Office of Rail Regulation revealed how the public money that helps maintain the rail tracks or directly supports rail services splits between the train companies and showed that DOR receives less subsidy than any other rail franchise operator. DOR's success is a glaring embarrassment for the Government, who now intend to privatise it post-haste, even though that will increase costs to the taxpayer.

Most other rail franchises in the UK are, ironically, also run by companies that are wholly or partly publicly owned, but by other countries. Deutsche Bahn is foremost - they even run the Royal Train - and the German Government have said "We're skimming profit from the entire Deutsche Bahn...it is invested in the rail network here in Germany". So, if you are reading this on an overcrowded train with a ticket that made a painful hole in your wallet, take heart from your generous contribution to improvement of Germany's fine publicly-owned railway.

Ben Southwood: The case against nationalisation

The UK's railway network was built privately and competitively and by some way its most successful years were the private eras between 1830 and 1922 and 1994 to the present.

Returning it to centralised state control would be a step backwards and a mistake.

Instead we should end the practice of franchising, which creates private monopolies, and allow real competition and diversity.

Ben Southwell
  • Ben Southwood is a researcher at the Adam Smith Institute
  • Previously economics correspondent for City AM newspaper
  • He has a degree in Philosophy, Politics and Economics from Oxford University
  • The Adam Smith Institute is an independent free market think tank known for its work on privatisation and tax reform

Our system began with the first steam train in 1825, and despite costly government licenses, investors built the bulk of today's network (about 6,000 of approx 11,000 miles) in just three or so years, between 1844 and 1846.

Journeys rose to from about 500 million a year in the 1870s to 1.5 billion just before the First World War. After the war, David Lloyd George judged that rail firms profits were too low due to too much competition, and decided to merge nearly all the UK's railway firms into just four firms, practically monopolies.

Between 1923 and 1947 the so-called Big Four government-supported firms ran the roost and journeys fell to about 1.2 billion by the onset of the Second World War.

After the war, these and others were consolidated further into British Rail. Under British Rail, there were steadily fewer and fewer journeys per year—from around 1 billion in 1948 to only 750 million by 1995, just before the onset of the franchising system.

Now there are deep flaws with franchising, and undoubtedly it has been lucky, coinciding with higher congestion, fuel prices, and a renewed rise in London as the UK's economic centre. But the sharpness of the change since 1995 is undeniable.

Since then journeys have spiked dramatically, rising every year to close on the 1.5 billion not seen for almost a century.

The solution to our current problems is not more state bungling, it is a return to diversity, competition and open markets.

 

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  • rate this
    -1

    Comment number 462.

    "390.Anthalus
    ts very simple
    Nationalised cost consumers= cost of effecient run system
    Privatised cost to consumers= cost of effecient run system + Profit

    Private can NEVER be of value to the consumer.."

    You forgot:
    Nationalised cost taxpayers= cost of ineffecient run system with overpaid staff.

    Many nationalised industries were massively inefficient and dominated by militant unions.

  • rate this
    +2

    Comment number 461.

    Both arguments are poorly presented. The pro focuses only on costs. An additional focus on passenger needs/demands would help people understand the core problem to be addressed. The anti just makes sweeping statements without any grounding to the present organisational/passenger problems at hand.

  • rate this
    +1

    Comment number 460.

    453. The problem is that the government tends to own enterprises when they are struggling, with difficult markets or historical problems etc. Then (royal mail is a good example) when they hit a better climate for their business (increased parcel trade from online retail), the government starts planning to sell off and put all that lovely profit into private hands.

  • rate this
    0

    Comment number 459.

    Public provision is good for some applications and private for others. The principal of private is that profit is taken as a reward for risk. Royal Mail is a no brainer. The private sector is best placed to take risk its future. Rail is more difficult. Its much more strategic and more a natural monopoly. So public provided its run for customers which is the hard part with any natural monopoly.

  • rate this
    +76

    Comment number 458.

    Governments do not do well running large public services - however, nor do franchises.

    We need a system like Germany where a not for profit private company runs the railway. It's the only way to get the efficiency and non red tape that comes with a civil service run system, and avoid the profit orientated world of private sector. Pick the best of both worlds like other countries have done.

  • rate this
    +1

    Comment number 457.

    It is a complete nonsense.

    Majority of UK economy is in the service sector. UKs transport problems are fundamentally due to negligent economic policy whereby commerce, people & housing are in the wrong places, hence increasing need to travel.
    Most people would prefer not to commute 1 or 2 or more hours a day. The lives, resources & money this alone wastes is incomprehensible.

  • rate this
    +1

    Comment number 456.

    TomOD 442 - East Coast is successful now in different circumstances from when National Express gave it up. It doesn't have to pay the level of premiums that the private owners were committeed to. Evidence suggests that itspassenger numbers may no longer be rising. Just because it'w working well now does not show that state ownership will work better in every other case.

  • rate this
    +3

    Comment number 455.

    Lets see - dogma drives politics, greed drives the train services, and we're all told to tighten our belts until our pips squeak ... forget the West Coast line alleged corruption fiasco, ignore MPs expenses (few jailed, even fewer resigned or even had integrity to own up) ... I say DON'T privatize the railways - privatize the Houses of Parliament + run them as Not-for-personal-profit organization

  • rate this
    0

    Comment number 454.

    It's not "the" case for and "the" case against.

    It's only *A* case for and *A *case against.

    So this article cannot, and does not begin to settle the matter.

    It's not really about what would make the trains run better or cheaper anyway. It's about the democratic will of the people, in an area where they can reasonably claim adequate competence

  • rate this
    +6

    Comment number 453.

    Since the east coast line was taken into public ownership it has become profitable and is very efficient.
    The idea that train companies compete like high street shops for our business is wrong. What happens is that train companies compete for franchises and get to run it for a few years without competition. Anybody has commuted regularly knows that customer is not the priority for the company.

  • rate this
    +5

    Comment number 452.

    427.Owlsoflaughter
    "I never use the train...ever....why should I pay ?"

    A good question. You are in fact paying now because the Government subsidises the private companies to the tune of £4 billion a year, prior to privatisation it was about £1.5 billion.

    Nationalisation would mean a lower cost to the public because any profits would be retained by us and not shipped abroad as they are now.

  • rate this
    -6

    Comment number 451.

    @442. Tom OD

    Sorry Tom, I think you're confusing me with someone who gives a toss ?

    Scrap the railways...antiquated and inefficient...buy a car.

  • rate this
    +4

    Comment number 450.

    The case for renationalisation of the rail service is quite clear. Consider the facts and how they would be applied if the rail service was government run. The cost to the taxpayer has doubled in real terms. There is over £1 billion wasted on funding yet fares continue to rise. To privatise it based on these terms would be a no brainer. The same should apply for the case for re-nationalisation.

  • rate this
    +4

    Comment number 449.

    Railways, gas, electric and water should never be privatley owned, these are all essentials for life in UK. They can still be run and make profits for the state that allows all of us to benefit

  • rate this
    +7

    Comment number 448.

    Ben Soutwood makes NO case against re-nationalisation.

    Rail journeys fell after the second world war through a combination of increased air and road use. Car ownership skyrocketed after WW2, as did package holidays.

    The mistake people make is assuming that a re-nationalised service would have all the flaws of the old British Rail. DOR is a success and costs the taxpayer less than private lines

  • rate this
    +2

    Comment number 447.

    Whilst I think that the entire system should come under central control and public money I think they should put people in charge who know what they are doing rather than follow the whims of the (largely uninformed) public opinion.

    Also there should be a much higher investment in public transport/infrastructure than there is currently and I'll be quite happy to pay more tax for it!

  • rate this
    -2

    Comment number 446.

    On such questions, why not look to democracy?"

    Real democracy: agreed upon enduring equality of material representativeness, understood to require secure income-share equality for all, no need to rush any reorganisations, all to enjoy working in conscience for the good of all, whether as directors of collective capital or just porters of own labour, foreigners bought-out over years on fair terms

  • rate this
    +6

    Comment number 445.

    It should be noted that the nationalised railway system failed due conservative Government interference. It would not allow the railways to fairly compete against road transport. The then minister of transport Alfred Marples, was involved with road construction and financially gained from it. He eventually fled the country for tax fraud plus profiteering from tenants of slums.

  • rate this
    +2

    Comment number 444.

    413.allgoodusernamestaken

    True - but wouldn't it be nice to travel to work on an empty train ? Especially if you live around London !
    You'll probably find in a few years, that some of these bus companies who are not making profit will drop out leaving a few core companies to compete for business. It always takes some time to get the balance right...

  • rate this
    +5

    Comment number 443.

    One of the reasons that passenger numbers fell between the 40s and the 90s was because a huge chunk of the network was closed as a result of the Beeching report.

 

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