All aboard, comrades! Labour fires up rail renationalisation plan

Labour MP Andy Sawford's bill signals the party's ready to renationalise the railways. Sort of.

by Adam Gale
Last Updated: 21 Sep 2015

Everyone knows that, unless you live in a sinister totalitarian state (or Japan), your train will probably be too late, too crowded and too expensive. That doesn't stop us complaining about it, of course, which makes the railways a perennially hot political property.

It's no surprise, then, that Labour have stepped up their campaign to woo commuters by proposing a partial renationalisation of the rail network. Backbencher Andy Sawford, MP for  Corby and East Northamptonshire, will table a bill after Prime Ministers Questions today calling for public companies to be able to compete with private ones for railway contracts.

Sawford is no Trotskyite maverick operating beyond the remit of his party. Ed Miliband backed reform of the current system in July, pointing to East Coast's succesful operation since 2009 by the spectacularly unglamorously-named Directly Operated Railways, a public company that took over emergency operation of the franchise after National Express gave it up.  'Let's extend that idea and let the public sector challenge to take on new lines,' Milband said.   

Of course, Sawford's bill is very unlikely to succeed, with or without the Labour Party's blessing. But what would be the pros and cons of a partial renationalisation?

Pro - Better planning and co-ordination

If you want to run the railways, you need to be in it for the long haul. The network is a massive, ongoing investment that requires careful planning if it's to match long-term demand. Private companies holding seven-year rail franchises will clearly have less of an interest in providing the best overall results for the system as a whole in the long run, compared to a state monopoly.

That seems sound, but then franchise-holders aren't responsible for infrastructure investment, and the Sawford bill wouldn't amount to wholesale nationalisation anyway, so the difference it would make to planning and coordination would be marginal.

Pro - Lower fares and less waste

As the 30 Labour Parliamentary candidates calling for full nationalisation in a letter to the Observer in May said, private rail companies can charge high fares and 'walk away with hundreds of  millions of pounds every year, despite running monopoly services and benefiting from £4bn of public investment in the rail network every year'.

Would returning at least part of the network to public ownership for the first time since privatisation in 1993 result in lower fares, then? Probably not. Fares may be high and rising, but the increases don't just fall into the pockets of monocled, 19th Century railways tycoons. The network is old and creaking - it costs to keep it going. Besides, if fares stayed down, it would be due to political pressure on the publicly-owned companies, meaning they would need to slash real expenditure or take more state subsidies. Hardly an improvement.  

Con - The cost

Bidding for railway tenders isn't cheap. Each time the resurrected British Rail (or whatever it would be called) put in a bid, it would cost something like £7-10m, with no guarantee of winning, according to Baroness Kramer, Minister of State for Transport. 'It is certainly a high-risk industry and the margins, even for a succesful and profitable company, are quite fine,' she said.

Of course, she would say that, but nonetheless anyone thinking that operating the rail network would represent a good return on public investment would be mistaken. If the industry were especially profitable, it wouldn't need that £4bn subsidy, would it?

Con -The invisible hand

Free markets are, as Adam Smith taught us, guided by the 'invisible hand', magically allocating resources in the most efficient way possible. Nationalising, even in part, would surely result in less efficient allocation, wouldn't it?

In this case, no. It's invisible because it isn't there. There is no free market competition in the current franchise arrangement. Each line is operated as a monopoly (no one has ever taken a train to Birmingham just because they didn't like the toilets on the Newcastle line) and the 'competition' for franchises isn't market competition at all. It's companies convincing bureaucrats that they would be better at running a business they don't currently run than the company that actually does run it. Sounds a bit Bolshie, that.

Con - It's unfair

The hybrid system proposed by Sawford could disadvantage the private firms still bidding for rail franchises. The public companies would, after all, have the advantages of superior resources and insider knowledge from their fellow bureaucrats. In August, National Express chief executive Dean Finch said the state would be defining the terms of the franchises, bidding for them and deciding the winners. 'How,' he asked, 'can you guarantee to me that there is going to be a level playing field in all of that?'

While Finch's assessment of the state's involvement under the Labour's proposals would technically be true, the idea that this would somehow be unfair relies on the rather far-fetched assumption that government agencies actually talk to each other. Not everyone would be convinced by that.

Whether it would be better or worse than what's there now, it's clear that the Labour proposal would hardly provide a dramatic solution to any current rail woes. It would produce a system neither nationalised nor privatised, with few of the advantages of either. It won't pass this Parliament, of course, but it might win votes among disgruntled commuters next year.


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