TRANSPORT: Rail re-privatisation is a matter of political belief

A Network Rail inspection train changing drivers at Newcastle before checking the track through Northumberland.
A Network Rail inspection train changing drivers at Newcastle before checking the track through Northumberland.

The burning topic on the railway at the moment is whether East Coast should be re-privatised or not.

It has been run since 2009 by Directly Operated Railways, the Government’s own ‘operator of last resort’ and is therefore state-owned. It has been returning excess profits to the Government, ie over and above what it has to pay, in increasing amounts. Last year, its over-payment was more than £2million.

John Wylde

John Wylde

In these circumstances, it is argued that it should be left well alone and not re-privatised, but the Government is determined to put it back in the private sector before the 2015 election, just in case there is another hung parliament with a political re-alignment which might decide not to do it.

This is all a matter of political belief. The Conservatives believe that it is good for industry to have the stimulus of private ownership to attract investment, and the better the rewards for the investors, the more they will invest. They argue that the best rewards come when they provide the services which the customers want, and the best deal for the customers is achieved by competition between the providers.

Labour, on the other hand, believe that is better for investment to be controlled by an overview of what is best for the consumers and that control will therefore secure the best result for them at the minimum cost. Decisions made on the basis of an overview of the needs prevent wasteful competition.

In practice, both of these theoretical arguments have proved to be flawed. In the case of nationalised industries in the last century, costs escalated and consumers did not always feel that the services provided were actually what they wanted, or were being provided at the most economical price.

In the case of private enterprise, the services were usually adjusted to produce the greatest short- term profit and again often left the consumers feeling unsatisfied and, in the case of the railways, they felt all too often that services were provided for the benefit of the management rather than the passengers.

In the case of the Liberal Democrats, they are currently in coalition with the Conservatives, so in general have to support their view, unless they are in a position to modify it according to their own principles, which lie somewhere between the two extremes, and their efforts to pull the others towards a central view lead to accusations that they have no strong policies of their own.

There is a pressure group whose object is to bring back British Rail. This is impractical, as the cost of buying out all the private franchises would be prohibitive, or if they were allowed to run their course with a view to not renewing them, the process would take so long that there would be several changes of government in the meantime, at least one of which would probably reverse the policy anyway.

The most worrying thing about the present situation is that Directly Operated Railways is not allowed to bid for the franchises as they come due for renewal, on the grounds that it would represent a conflict of interest.

Local authorities, however, have their in-house teams for activities such as road maintenance, which bid for contracts, and there is no objection to that, so it is difficult to understand the difference in principle.

A change here would seem to be the best way of achieving a compromise. If DOR were to be treated as any other bidder for franchises, the principle of competition would be maintained and the principle of public ownership would be restored for those franchises which were won by DOR.

All franchise-holders have to make a return to the Department for Transport, but the surplus profits from DOR also go to the Department rather than to private shareholders.

The train-operating companies run the services, but the infrastructure is provided and maintained by Network Rail, a not-for-profit company owned by the state, which charges the TOCs for the use of its tracks and stations. Its losses are under-written by the Government, so any developments such as electrification, new lines and new stations have to be politically approved.

For most of the 20th century, the railway companies and, after nationalisation in 1948, successive governments economised on some aspects of maintenance, especially when it became government policy in the 1960s to run the railways down and develop the motorways.

There were plenty of railway developments in the 20th century, but these were usually high-spots for particular purposes.

When we made it clear that we wanted to use our railways, and we were fortunate to have one or two really go-ahead managers who pushed things along, the political decision was made in the 1990s to privatise the trains in the hope that this would reduce the financial support which the Government was having to give British Rail.

By then, there was a huge backlog of necessary maintenance which it is going to take at least another decade to bring up to date, quite apart from desirable developments.

Fortunately, the last Labour government decided to push ahead with electrification and the construction of HS2, and even more fortunately the present coalition has continued the policy.

- John Wylde is the author of Integrated Transport – a Will-o’-the-wisp? (www.john-wylde.co.uk). This book, priced at £14.95, is available to Northumberland Gazette readers for £11.95 post paid and signed by the author. Order from the Gazette office or email northumberland.gazette@jpress.co.uk