The East Coast main line was privatised, again, yesterday.
After five years in public ownership, in which it was one of only two train franchises to make a positive contribution to the UK Exchequer, paying a total of £1 billion to the Treasury during that period, it was let to Virgin and Stagecoach.
I am aware that these two companies are meant to pay a significant sum for the privilege of operating this route.
I'm also aware that they will, supposedly, invest considerable sum in new trains during this period but let's be candid: this is a charade because the trains will be leased and the net beneficiaries will be the financial services industry.
The reality is, as the vast majority of the UK public who want rail renationalisation realise, that these goals could be better, more cheaply, and effectively achieved under state ownership where the cost of capital is almost negligible and where, therefore, improvements could be had at much lower cost than anything the private sector can deliver, which saving could then be passed straight on in lower fares.
That though was not what the government wants. The government wants dogma. This privatisation is failed dogma in action. Lets hope that this is the last time we see this: the time for rail renationalisation has arrived.
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Agree 100%. I am still puzzled as to why the Tories (and Labour) have stuck with a policy that has so transparently failed. In this case, ideology/dogma seems inadequate as an explanation – this is almost like self-abuse (junkie) you know it is very bad/does not work – you keep on doing it. Normal people when presented with clear evidence that something they are doing does not work – change their actions.
I guess it comes down to this “it is difficult to get a man to understand something if his salary depends on him not understanding it”. Go where the money flows?
I’d love to see the numbers for this.
It’s good to see someone standing up and saying that things were done well in my day. It’s the people’s railway and it’s wrong that it should be operated for profit.
I’ve never understood the basic premise of privatisation and how it offers taxpayers better value for money.
All privatisation does is create another mouth to feed in the accounts – a really big mouth – the return for the shareholder. So income that is generated not only has to pay wages, running costs and investment costs but the shareholder also who is external to the business (yes I know they stump up their cash). To me though, the shareholder is like the cuckoo in the nest.
This surely diverts money away from wages, investment etc. Not only that, but the shareholders will also expect competitive returns (pensions funds will want to maintain the value of their funds in front of inflation – their primary function). So, they may also seek to gain a larger share of income too – meaning less wages, less investment = less of a service.
The railways are victims of some dodgy economic thinking.
I think that the continuing privatisation/rent seeking mode of financing the railways is the result of the Right making a big deal out of government debt – even if that debt is taken on cheaply and is made for long term investment reasons. I mean look at the PSBR – really just a means of making everyone overly concerned about government debt or the way in which our State debt has been compared to that of Greece during the 2008 crisis.
If you look at what happened to the Eurotunnel project where Thatcher refused any state funding and then how it nearly came to and end because the private financial sector could not really bare the burden under pressure from investors, you see that there is still really a role for State borrowing in support of infrastructure.
And really – the taxpayer has actually forked out more to fund shareholder value, rather than creating an operating surplus which can be ploughed back into the operation as service enhancements.
So we live in times where state debt is bad but private debt is OK.
I think that the burgeoning revolt over ticket prices might turn into something more substantial. But as long as the taxpayer can be manipulated by neo-lib, market fundamentalists, nothing will really change. We will continue to be taken for a ride – no pun intended.
I suspect because the line was breaking even (or making a profit) as a nationalise entity it was a living embarrassment to the ideology.
If TTIP gets passed nothing will get nationalised, or stay nationalised [NHS]
http://www.politics.co.uk/comment-analysis/2014/02/24/comment-the-eu-us-treaty-which-enforces-privatisation
Why is it called Virgin when Virgin only owns 10% of it?
Because Virgin can then charge a lot for the brand….
Railways are a natural monopoly and be only realistically ran as a monopoly. It cannot operate properly broken up into little pieces.
The tories hate nationalisation because profit flows back to the state, rather than their rich mate’s pockets?
How many more times are we going to see those who took on privatised utilities simply throw the keys back to the government when they have finished squeezing the profits out of them?
What is bizarre is that this was realised a century ago
Indeed, so much so that William Gladstone seriously considered nationalising the railway system in the 19th century.
Look at the Customer Complaints data from OfRail – the state-owned company had so many complaints that some people would say that the franchise should have been taken away and returned to the DfT. One year it had 25% of all customer complaints across the whole network. I thought that you disliked companies making profits by charging high prices and providing a poor service to their customers.
The last time I travelled on the nationalised East Coast Main Line the train was so late that I should have missed the connection despite having planned a half-hour safety margin. The only reason I did not was that the connection had been delayed – by another late East Coast Main Line train blocking the track in front of it!
Respectfully that is small minded nonsense that shows a remarkable ignorance of the problems of operating railways
To call me “small-minded” is disrespectful as well as inaccurate.
There are a number of problems in operating railways but the East Coast Main Line does not have a monopoly of any of these and when the complaints per passenger about ticketing and handling complaints for East Coast Main Line exceed total complaints for c2c then there is so blatant a problem that you cannot ignore it. Those two categories are independent of anything that can be caused by weather, Network Rasil or anything else outside the control of the company.
Have you weighted by passenger numbers?
And the fact they were not allowed to invest in systems as they were to be sold?
Just checking
“Have you weighted by passenger numbers?”
It is worse if you do it by passenger numbers.
“And the fact they were not allowed to invest in systems as they were to be sold?” What fact? No fact. This relates to a Labour government decision.
Also if it was true it would be irrelevant to the manual decisin not to honour genuine complaints, like denying that my son’s train was nearly two hours late so he missed the connection. How is lying a cosequence of failing to invest in systems?
It may well be that people were complaining to East Coast because they thought that a nationalised rail operator would be more likely to respond to complaints, whereas with the private operators they simply didn’t bother. Many’s the time I’ve thought about contacting (e.g.) Abellio Greater Anglia, but then thought: why bother? They don’t care anyway. Perhaps a self-fulfilling prophecy I know… 🙂
Howard Reed: what world do you live in?
The realists – not political apologists for Soviet Russia or TEA Party America – recognise that one of the essential purposes of government is to ensure justice between subjects so the regulator makes sure that there is a response to complaints to private companies; for nationalised operators, this doesn’t apply. Hence the decades of complaints about “acid rain” from CEGB power stations and installation of a SO2 absorption plant on Drax as soon as National Power was privatised.
After 20 years I am still waiting for a reply to my complaint to British Rail wherein I pointed out that my fastest joirney home that week was when I had taken a tube to the nearest tube station to home and run the remaining 17/18 miles. All the train journeys – supposed to be less than 1 hour – had taken longer. And I am not Mo Farah (coming in the top one-third of a marathon was deemed an achievement).
No – you just lack experience of nationalised railways.
Except as the comments here show, you are quite simply wrong
So you’re now heading for the time wasting delete button
That should say “more than twenty years”
“It may well be that people were complaining to East Coast because they thought that a nationalised rail operator would be more likely to respond to complaints, whereas with the private operators they simply didn’t bother.”
I have to say that is one of the more creative apologies for the defence of nationalised industry that I have seen! I am sure it also has absolutely no basis in fact either.
I think, based on my experience, it has much merit, except amongst the prejudiced
Perhaps the difference is that when we complained to East Coast about the failure of heating in our carriage, we received two free tickets. When I made a similar complaint to Gatwick Express, I got a reply saying the staff could not adjust the heating. When I wrote back that this was not the point, I heard nothing further. Why complain if you know you are simply wasting your time?
Quite so
I am really confused by the various comments here (and by your post tbh).
If the publicly run railway is returning tax to the treasury how is this a good thing? Surely then the government is acting as shareholder and passengers’ fares are higher to pay that shareholder. Surely the government is then, as Mark Crown says, just an extra mouth to feed. Why isn’t this money reinvested instead in developing railways in the North? You suggested that investment a couple of months back Richard and I remember saying Amen to that.
It should be
That’s the proper use
That’s why surpluses are useful
Since the government had to spend money to buy the railway (at a knock-down price from its original owners) and subsequently to maintain and (occasionally) upgrade facilities, it has to pay interest on the debt it took on. So the state-owned operator needs to pay some profit to the Treasury to cover that debt interest payment in order for the state to break-even.
“Since the government had to spend money to buy the railway (at a knock-down price from its original owners)”
Being as the last owners of the network simply upped sticks and threw the keys back to the government, I should hope so. In my opinion, no compensation, if indeed any was actually given, should have been given after taking back under effective state ownership.
Stevo!
The original owners id not “up sticks” Attlee nationalised the railways and paid the shareholders in 3% Transport Stock which yielded less than inflation so was worth far less than its nominal value. Hence my reference to “a knock-down price”.
I was not entering a political debate when I said that the Nationalised Railways needed to make a profit to service that debt, just poiinting out that the inadequate interest on that debt needed to be paid even if the real capital value of the gilt-edged stock was shrinking year by year.
FYI When National Express wished to surrender the franchise they offerred to pay £100m to be relieved of their obligations: the (Labour) Transport Minister refused point-blank to renegotiate and so NX paid £70-odd million instead
“FYI When National Express wished to surrender the franchise they offerred to pay £100m to be relieved of their obligations: the (Labour) Transport Minister refused point-blank to renegotiate and so NX paid £70-odd million instead”
“Relieved of their obligations” is one way of putting it. The other, more realistic way of putting it, is when they couldn’t make as much profit, they upped sticks and threw the keys back to the government.
Incidentally, we are going back to Atlee now, are we?
Now why do you think a government that was effectively potless after world war II felt it necessary to nationalise the railways? As well as the coalmines and other things besides?
Go on…have a think.
“Now why do you think a government that was effectively potless after world war II felt it necessary to nationalise the railways?”
Because it was its declared policy to take control of the “commanding heights of the economy” The famous Clause 4.
Prior to nationalisation, coal, steel railways and road transport buses and lorries) were viewed as the commanding heights of the economy. They aren’t any more.
Now wehy don’t *you* think why Tony Blair got rid of Clause 4?
I am sure you were trying to say something with that comment
I have no idea what
Would the government invest in the railways, if they were still under state ownership and had to compete for public funds against schools and hospitals?
Why not?
People are queueing up to lend them money to do so
And the debt can be specifically rail packaged too.
Why not?
Oh, sure, people are happy to lend money to the government. The question is, whether the governmnet is happy to increase public sector borrowing to invest in the railways. What was the experience of investment under public ownership, the last time around? Were the railways better or worse in the 1970s and 1980s or in the 1990s and 2000s? Or just as brilliant/rubbish under both?
Perhaps we would just be better off just asking SNCF or DB to run them.
So state railways work then?
Is that your argument?
And all we need is a change of government to achieve the same here?
I rest my case
No, my point was to ask for data about whether the UK railways were better or worse under nationalisation than they are currently. On the whole, I tend to think that they are somewhat better now, and that is because the private franchise holders have invested when previous governments did not.
The fact is that we do not live in France or Germany, with massive public investment in the railways, and I see little prospect that any flavour of UK government will make the level of investment that governments do elsewhere, or indeed that the private operators do now. What was the experience under the last few Labour governmnets?
Andrew
Your belief that change is not possible (“We’re all damned”) is really bizarre
Some of us do not share it
Richard
Sorry to Labour the point here Richard, but thay seems to contradict Mark Crown’s point. Are you expressly saying that the rail.network SHOULD run a surplus? That will only cause rail passengers’ fares to rise. If thee is to be no public subsidy for the user’s then what exactly is the point of nationalisation? In what way is it.being run for the public?
Nationalisation should cross subsidise
Some parts of any rail system can generate apparent surpluses: I see no reason why they should not to support parts that cannot
East Coast was always more likely to make a profit than the Central Wales line. Redistribution is part of the logic of nationalisation and ending franchises
Absolutely correct as far as I am concerned.
Revisionist opinions on the Dr Beeching era say that the lines he closed were closed because they were treated as stand alone lines when in fact the through journeys onto the main lines and were not counted. In other words, many of these lines fed into the main system. Keeping them open may have contributed to traffic as a whole. Cutting them off reduced income.
Isolating the lines from their contribution to the whole system meant many were consigned to history (although there was some duplication). There are numerous large towns in this country without a railway service today.
In the private sector, so called ‘loss leaders’ are maintained because they bring income into other sectors of the business. I used to work in retailing and we used to sell petrol at a loss because we more than made up for it when the customer went into the main store to buy their groceries.
Apparently only the private sector are allowed to do this; its called ‘being inefficient’ in the public sector. Yeah right…………………
That Beeching story is not apocryphal: as a student of railway history I would say is is definitely true
I’m not quite sure where running a surplus means that one has to charge higher fares?
In the housing sector for example, at one time housing associations would use their surpluses to keep rents lower than they would be.
The housing company where I work uses surpluses towards some of the housing development we are doing – it helps cut the amount of borrowing we do for development. Or it can go into retaining posts for particular management functions.
If we had shareholders/rent seekers – they would get that surplus plus other savings we would have to make if they would be demanding and threatening to invest elsewhere such as the cutting of services or jobs – helping the migration of yet more money into the top 5% of the population no doubt.
Again you have me a bit confused here. If East Coast runs a surplus and this should be used to cross – subsidise, then these private operators would appear to be a good thing surely. Haven’t they after all undertaken to pay MORE to the Treasury than the nationalised service has. Your original post refers to this.
But most are not paying net back – in fact just two have of late
And there is no guarantee that is returned to railways
Two things: there is no absolute guarantee of anything in life, but we don’t base policy on the assumption that our business partners are lying. That just seems to be, well, dogma on your part. So the Treasury stands to make more from the private operators and it would be nice if you could respond rather than dodge.
Second: Does Howard Reed have any evidence that this is the reason for more complaints for East Coast ir is this
In my experience most people would be wise to assume their business partners are lying and put appropriate controls in place to minimise the risk
The Treasury cannot make more from private partners: their costs of capital are vastly higher
There’s a saying “Trust is the mother of deceit”. Probably the most grim and miserable proverb of all time but it does contain some truth….
Sorry, or is this just his prejudice speaking?
According to Christian Wolmar (On the Wrong Line) a number of Tory MPs admitted to him that the deciding reason they pressed ahead with the increasingly difficult tasking of privatisation in the 1990s was to smash the rail unions. Virtually all privatisations of service industries result in attacks on the wages and working conditions of employees.
Were the railways really better in the 1970s than they are now? Or is this dewy-eyed nostalgia?
I personally remember BR as being terrible.
That does not mean it could not be extremely good
And it frequently was…………
The High Speed Train (HST) was one of the fastest trains in Europe when it was introduced in the late 1970’s. The Mark 3 coach it pulled/pushed along was one of the most advanced and safe designs in the world. I remember being on a Paddington to Reading train in the early 80’s and remember an American tourist going abosolutely and enthusiastically nuts about the fact that she had just been in a train that had hit 125mph on the mainline. These HSTs are still doing sterling work and are stll much more comfortable than the ‘cigar boxes on wheels’ that pass for their replacement under privatisation.
And then there was the electric Advanced Passsenger Train (APT) which was ahead of its time and cruelly undermined by the railway hating press in support of a railway hating Government. This is why we now have foreign built tilting trains on our network rather than British built ones. Because Thatcher and her cohorts stopped believing in labour and favoured finance instead. Oh, and the motor car too!
Not all was rosy though I agree. The Beeching era left the faulty accounting in place especially on the remaining branch lines. For example, Matlock used to get around 4 trains a day in the old BR days if it was lucky; now it’s service (which forwards to Nottingham) is really good and that has been achieved more recently.
Railway management was not without innovation either. When the Settle & Carlisle line was due to be closed, local regional management actually worked against the policy and increased its marketing to appeal to ramblers etc. This essentially saved the line because usership went up. But also, it’s strategic importance as diversionary route for when the West Coast Mainline needed to be closed for maintainance was stupidly ignored when it was still a direct route to the North!
And what about the Merrymaker excursions – remember them? Even Nottingham had its own excursion train timetable. My family used to go Edinburgh every year for the princely sum of £10 so that we can could do our Christmas shopping on Princes Street. One excursion took us all the way to the Kyle of Localsh for £20! And those trains in all cases were absolutely choc a bloc – full.
The railways were purposefully underinvested in for years from the late 1970’s and were also subject to some unfair policies. For example, whereas road haulage and coastwise shipping could decide what they wanted to carry and also set a fair price for this, the railways were made to be the ‘carrier of last resort’ and had to carry certain loads at a set price that they could not alter and do so at a loss.
I wa scommuting from Sussex to London when privatisation was done to us. Whilst BR could be absolutely diabolical, I felt things were getting better. Until privatisation. Don’t forget the level of technology was so much lower then that now. Any inprovements since then are probably down to imporving technology and I am not convinced by the way that rail companies do any serious R & D themseves.
East Coast was one of the few lines that returned a profit to the government. It apparently had amongst the best customer satisfaction too.
As any income made comes mostly straight back to the government, rather than into shareholder pockets, there should always be plenty money for investment into the system.
BR wasn’t perfect, but it seems that, as usual, it was much underfunded. It was pretty efficient despite this, though.
Besides, how can the shambles of the private service be thought in any way good?
Ideology over common sense, I’m afraid.
“It apparently had amongst the best customer satisfaction too.” You are sadly mistaken.
Since renationalisation it has had one of the *worst* customer satisfaction ratings.
explanation has already been offered
You also ignore private operators failed
Certain sources seem to believe differently regarding customer satisfaction, however, there does seem to be differing opinion.
The most important point, though, is that DOR that ran East Coast was one of the better run and provided better returns than most of the private concerns.
I can’t see the government being so determined to flog it back off if it was poorly run.
Private operators have given us amongst the worst run, most dilapidated and most expensive railway service in Europe.
This is undeniable. Only dyed-in-the-wool “privatisation is wonderful” idealogues would suggest otherwise.
Stevo!
You are perfectly entitled to have an opinion.
However I was quoting *facts*. See Table 14.9 of the Office of theRail Regiulator which details passenger complaints by TOC.
And facts may not be as they appear to be for reasons already noted here, which you persistently ignore
Also, we have the ridiculous situation where a British nationalised railway could compete for the business but a foreign operator could.
Deutsch Bahn is a German nationalised network that is making profit from the North East Metro system.
Madness!!