The Tories want to regulate rail fares.
Almost all rail companies are already state subsidised.
Rail rolling stock leasing is a tax arrangement for the finance industry.
The farce of rail privatisation continues when the state run East Coast route proved that state ownership works best.
And yet only the Greens are stating the obvious, which is that the answer to these state interventions in an industry that should never be in private hands is nationalisation.
I really think the time for rail nationalisation has come.
And that Labour should be saying so.
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In the meantime passengers can reduce their fares by split ticketing.We are finding average savings of 22% on 44% of searches. You can check for split savings on your route at Trainsplit.com
This is useful – but why should passengers have to work harder to get a better deal – why should they have to wade through websites etc., when the ticket offer should be at reasonable cost in the first place?
Indeed-one has to have access to arcane ‘fixes’ to manipulate the system (which is what the train companies do!)-it becomes a complex, time consuming , process of entering a labyrinth of ‘dodges’ – how many have the time to do this?
Not everyone uses the railway, and I subsidise it enough already. No more thank you. Only essential services should be state owned and the railway isn’t one of them. Where do you draw the line? buses? Air travel? Phone and broadband? You’ve taken one example and applied it to the whole industry, which in general had been quite successful. Network rail are state owned and they are a disaster.
All those were successfully state run in their time
Buses may well need to be
Consider what nearly happenden to EuroTunnel.
My understanding is that a certain Mrs Thatcher insisted that the channel tunnel project should be financed by private sector finance.
Now if my busy brain serves me correctly here, it was not so long ago that the whole project came under threat because the lenders were not happy with the loan repayments due to lower levels of traffic.
Reflecting on this, I must question whether or not modern banking (with its own rent-seeking shareholders commonly these days) is set up to deal with huge long-term civil engineering projects and investments like the channel tunnel.
As Christine Lagarde said (I paraphrase) – modern banking tends to serve itself, rather than actually being a service.
Might such projects always be better of being funded by the State? I tend to think so.
This was an attitude my grandpa used to have; I don’t use a service ‘directly’ so why should I subsidise it? However, once bus privatisation was introduced, replacing the subsidised, highly extensive bus system in South Yorkshire he soon realised why; a huge increase in cars taking to the roads, especially where routes had been cut which put excessive pressure on the slashed county highways budget. He was County Highways Engineer and that made his job much harder.
Unintended consequences.
Tories have an accounting mindset for everything – as Wilde said, they know the price of everything and the value of nothing.
Completely unfit to govern a complex, modern economy with their “household budget” mindset.
I seem to recall that the presently public owned Network rail inherited a disaster (and quite a few nasty accidents) from the privately owned version before it!
I also remember the privatised Network Rail did not even have an asset register at one point (bridges, tunnels, land etc.,) because it went around sacking loads of support staff for these functions in order to create a return for the new investors after privatisation. So loads of archives and stats essentially went out the window. The publically owned NR has had to start again from scratch. and have we not seen fewer accidents and fatalities recently? I think so.
For me, rail nationalisation passes the Grey scrutiny, the green scrutiny and the red.
Experts have stated that the tax subsidy to the privatised system has been greater than it was when it was nationalised. See bullet point 2 on page 14 of this report.
http://www.cresc.ac.uk/sites/default/files/GTR%20Report%20final%205%20June%202013.pdf
They also quote that Virgin and Stagecoach have since 1997 taken £500 million
out of the West Coast main line. This is pure rent seeking which allows the economic surplus cascade up to the few from the many.
In his book called Equality and the 1%, Danny Dorling described how the wealth of the Rentiers before 1918 had been taxed away by 1948, and this was the trickle down mechanism. Privatising the railways has sent our taxes back in the opposite direction, creating gross inequalities and feudal charges and taxes which transfer from the poor to the rich.
There is also the loss of democratic and “green” control of the railways. Complaints about overcrowding are ignored, and the better planning of cheaper railways could take people and cargo off of the roads.
The really crazy and galling fact is that a quarter of our railways are owned by European state owned railways, who are therefore subsidised by our increased fares and taxes.
http://www.theguardian.com/politics/2014/aug/22/sale-of-century-privatisation-scam
Right on sister Sandra – right on!
I understood that the problem is adhering to EU competition laws, and ultimately risking being sanctioned by the WTO tribunal. Of course, the EU-US trade deal TTIP, with its enhanced Investor State Dispute Settlement provisions, will have even more teeth to prevent re-nationalisation. Labour needs to step away from all trade deals containing ISDS or WTO tribunals which supercede UK sovereignty.
Agreed!!!
Sue,
I do not see how anyone can disagree with your cogent thoughts.
I feel we should look past the so-called ‘economic value’ of trains and ‘value’ them on their cultural and societal value. I enjoy riding trains. I know many people who enjoy riding them, this is crucial. Any crass attempt to place a ‘value’ on such significant assets to our society is, frankly, kidding themselves.
Given the critical success we have had, and Richard has led, on the non-don issue, is it too much to ask that another miracle happen and one of the parties (Ed Balls, please note) takes the bulls by the horn and offers up this, which I feel, would be a political masterstroke?
Is it too much to ask for a leader who makes the trains run on time?
Labour is part-and-parcel of the various investor partnerships going the rounds.
Since all the major [political] players have been “captured” by the 1%, we can not expect much from them.
Reclaiming the wealth the railways enabled to be created is the best way of funding them. Few railways ever made money by ticket sales. They are a national necessity – the great wealth enabler. The Bishops Castle railway in Shropshire ran for 70 years under the administrators, but still enabled wealth creation all along the line’s length. Without it the communities along the line would have largely died.
Anyone who knows about the quite extraordinary Bishops Castle Railway is an enthusiast
Me too…
In my view all privatisation does is to create another mouth to feed – the rent seeking investor who is a cuckoo in the nest and whose requirements (to make as much rent as possible) relegate the needs of the customer and the operation.
The money going to investors could be used to create better rolling stock and also to reduce fares and pay for infrastructure.
In terms of infrastructure, I would love to see the returns to investors paying for our railways to be-gauged to the Berne loading gauge instead – this would mean we could have larger, roomier rolling stock creating a better environment for passengers and also enabling more freight per train to be moved.
I would also like to see more long term electrification of lines as I suspect that the cost of diesel fuel has an effect on fares too.
When European friends visit us, they can’t believe how expensive our fares are – something also reflected in comments in well known travel books about travelling by train in the UK.
Since we are apparently paying more in subsidy now that we were just before BR was effectively privatised, I’d fully agree with re-nationalisation.
The tax payer needs to see that reducing the so called tax burden by hiving off public services does not always work in their benefit – the higher fares/costs surely reflect this and I think a commitment by Labour to deal with this would be welcome but they’d need to be clear how they would roll it out.
The myth that everything privately run is more efficient has to be dissolved. The extreme brainwashed right even think that public bodies farmed out to private organisations to run is more efficient. As if employees, stick out their chests and work better and harder for their shareholders – I read that in the Daily Mail once, no kidding. Then we get private organisations like Housing Trusts, who have charitable status, who are into every trick in the book to milk the public purse. They are all into economic rent seeking.
The private sector only works well in an unrigged, unmonopolised free market.
@PA
“Not everyone uses the railway, and I subsidise it enough already. No more thank you. Only essential services should be state owned and the railway isn’t one of them.”
Without rail the UK was fall into third world country. Railways are the enabler for wealth creation as is education. Educated people work and run society of which I, and all, gain, even though I receive nothing from the education system. It is the same with essential railways. Basic economics will tell you that. I use the Tube occasionally, but I know the whole rail network in the UK does benefit me indirectly.
The UK needs more rail, especially overlooked freight. For example, the new Liverpool container terminal with quadruple rail freight from the port. Birmingham, Leeds, Bristol, Cardiff, Edinburgh, etc, all new urban rail networks that interchange with regional and national rail. Liverpool’s underground needs to be fully complete after 40 years (one third was abandoned leaving 5 miles of tunnel and and miles of trackbed). The move from rail to road in the 1960s has been a disaster.
I’m not sure what your response has to do with my comment? I never said get rid of the railways, I just don’t think I should have to subsidise them anymore than I already do. Nearly all business are wealth creators, should they all be subsidised if they are uneconomical? Your point about not receiving anything from the education system is quite baffling, did you not go to school? Do your kids not?
@PA
I wrote:
“Railways are the enabler for wealth creation as is education. Educated people work and run society of which I, and all, gain, even though I receive nothing from the education system. It is the same with essential railways. Basic economics will tell you that.”
At the risk of being historical and as someone who worked on the railway in the 50’s and travelled extensively in Europe in the past the present situation is certainly too complex and with pricing strategies born more out of optimism than reality. Originally, railways were designed for extensive freight, parcels and mail distribution plus passengers. For the most part now it is passenger based and this changes the economics, notably resulting in the need for large subsidy to continued existence. There are hard choices here and old fashioned nationalisation is not the way to the future. The old four main companies also had weaknesses. Regionalisation has problems.The market is a false one. My thesis is for say seven or eight entities with close means of working together.
So the Tories are promising a freeze in rail fares??? This is utterly hilarious; when Labour were talking about electricity freezes, one Tory MP (Jesse Norman) referred to it as ‘Stalinistic’ (a version of Godwin’s law)- now, as there has been a minor tremor in the polls, price freezes are OK -as Richard often says, “you couldn’t make it up”!
Part of the railway network has been renationalised – see London Overground (“Ginger” line).
It works well, has very high customer satisfaction, and has revitalised communities along the way.
Speaking for London, the sooner the remaining metro rail services are fully brought under TfL control, the better.
This is a subject I have blogged on from time to time the following snippets may be interest.
In 1993 the rail network was privatised. We were told the same old lie, privatisation would improve services by allowing the rail companies to finance themselves from the markets. Shareholder pressure would drive up standards while at the same time reducing demands on the public purse.
“In its last year before privatisation, our railways required just £431m in public subsidy. By 2006, the figure had reached over £6bn. Economists at UBS found British fares are now the most expensive in the world.”.
Guardian 10 March 2012
We were told that the network had been underfunded and that it would take time to correct the situation. Obviously that means more than 21 years. Each year fares have gone up. Each year public subsidy has gone up. Each year the directors of the franchise companies award themselves a pay rise. “Bosses of the five main companies that run the nation’s railways have paid themselves average salaries of £1million.” Daily Mail 28 June 2012
In 2009 the first £1000 fare arrived (2nd class Newquay – Kyle of Lochalsh). “The fare was unearthed in a survey by rail expert Barry Doe, who said that the price of long-distance journeys had risen by up to three times the level of inflation since privatisation in the mid-1990s.” BBC News 3 November 2009
“On 17th October 2000, 4 people were killed and many more were injured when a train, travelling at over 100mph, came off the tracks. Immediately following the train crash, two companies were fined a record amount for breaches of health and safety standards. The engineering company, Balfour Beatty and the owners of the track, Network Rail (called Railtrack at the time) were fined £13.5m.
It came to light from figures issued under the Freedom of Information Act that both companies were given £20.9m to cover their legal defence costs by the government.
Essentially, the costs were transferred from two negligent, culpable, profitable companies to the taxpayer. Would anyone care to argue that this was fair, least of all to the families of the dead and injured who thus pay a contribution through tax to the companies responsible for their losses?
Under privatisation (1995 – Feb 2012) there were 51 train crashes, 3 a year on average. As a nationalised industry (1948 – 1994) there were 96 or 2 a year on average. One year after the final report into the causes of the Hatfield crash and the lessons learned was published, a badly maintained set of points derailed a train at Grayrigg, Cumbria, killing one and injuring 88.
The Tory creation, Railtrack, was a private company, created as a landowner/property development company, and considered the permanent way (rail) infrastructure as an inconvenience, to be kept in a steady/run down state.
The wealth of rail was in the surrounding land, the economic growth the rail tracks created. Railtrack leased to private train companies the right to use infrastructure which Railtrack owned – they owned lots of land – where the money was in renting or selling it off. The 19th century rail magnets knew that the money was not in the steel rails, but in the increased value of the land the rails created – hence Railtrack. A speculative parasitic company.
Railtrack was bound to fail. It was flawed. It was setup for the wrong reasons. It was to enrich the chosen few and put money into the governments coffers to prop up failed policies and satisfy flawed ideologies. It failed after six years. Its replacement Network Rail is a non-profit company.
The 19th century magnets would have hyped up investment bumph of the new wonder transport, as did the Tories with Railtrack. They would invest and get small investors along as the fall guys. The railway would be built and they would buy land adjacent to the railways before and under construction of the railway. After completion they would cash in, even if they never made money and drew out it never mattered, and leave the capital debt of railway construction to the small investors. Dividends were never paid.
They were then left with lucrative land they bought for pennies. They could charge high rents around the railways. That is how the legalised scam worked. That is what happened with the Bishops Castle Railway. The administrators ran it for 70 years. The landowners around the railway gained because of the economic growth the railway brought.
Thatcher said the railways and coal mines (most output went to power stations) were not making a profit. She did not have the intelligence to see that they were creating economic growth. The massive gap in the governments 18th century accounting system did not detect the money leaking away via a massive sluice, the LAND market, as landowners creamed it off.
Private monopoly Railtrack was bound to fail, as the private railways failed in the mid 20th century falling into the arms of the state. The taxpayers picked up the tab as the rail companies went off with thousands of acres of lucrative increased value land. It was a repeat of the 19th century rail rip-offs, but created and backed by the Tory government. Thousands of small investors lost a lot of money on the failure. Instead of the private rail magnets preying on the small investors, it was the government.
Some people misguidedly say we should privatise all railways, and all to do with them – so they can cream it off again, and yet again the taxpayer picks up the debts in the end. And they then blame public ownership as being useless and inefficient, when all the taxpayer did, or will do, is pick up the shambles – as usual. And the private sharks make off with the gains.
The difference between a highway robber and a free riders is that the free rider does not have to draw a gun to take what belongs to others.
Thus the transport sector is transformed into a sophisticated mechanism for redistribution of wages away from low-income taxpayers who fund infrastructure to asset rich people.
This is, essentially, the argument in Fred Harrison’s ‘Wheels of Fortune’. He sees the ‘free-riders” gains on land as a potential source of revenue for infrastructure funding via a Land Value Tax-although he is no friend of nationalisation and sees LVT as a replacement of income tax which I know Richard sees as unworkable put part of the picture.
A damning an indictment of the railway privatisation gravy train as I’ve ever heard anywhere – good work!
Another good article, Richard, except for the conclusion that “Labour should be saying so.”
If we rely on Labour to offer progressive policies then we’ll wait forever.
Simpler just to say to people “vote for what you believe in”.
Those, like yourself, who believe in investment in renewable energy can vote Green, Labour is still the party of austerity: lighter than Tory austerity but not by much.
“She did not have the intelligence to see that they were creating economic growth”
Yes, she did have the intelligence.
She would have been advised of that reality; even if she was as thick as a plank.
Thatcher loathed the unions. Any organised labour is an affront to conservatives anywhere. Now look at wages in this country. And we are almost back to queuing at the factory/mine/shipyard gates for a penny an hour and free tea.
I met someone from one of the private rail companies once. What a stupid neoliberal he was!
I would also insist on joint ownership of the railways by the State and the Unions as a cooperative. This would ensure democratic control.
We forget the importance of railways in providing and securing jobs.
Also, it would ensure the rail workers can freely strike whenever they wanted to — this is an important right.
The State is important and legitimate decision maker for society in all fields, but not when it comes to managing employees. It can be a bit of a rogue sometimes in doing this, that’s why we would need strong unions, with compulsory membership.
@Simon says:
“This is, essentially, the argument in Fred Harrison’s ‘Wheels of Fortune’. He sees the ‘free-riders” gains on land as a potential source of revenue for infrastructure funding via a Land Value Tax-although he is no friend of nationalisation and sees LVT as a replacement of income tax which I know Richard sees as unworkable put part of the picture.”
It is the argument of Harrison and many others. There are some organisations that work better as one and rail is one of them. Look at the mess private rail left behind with a plethora of large terminal stations in cities all built by private companies competing with each other. These large train shed stations cost a fortune to maintain, consuming large tracts of land. Liverpool got rid on one on the edge of the north of the city centre and one on the south. They built underground stations under them and linked them via a tunnel creating a north-south crossrail. Private companies would never have done that. I do not know Harrison’s views on nationalised industries like cars, etc. However essential services like gas, electricity, rail transport, etc, are best in public hands – LVT or no LVT – as experience as shown us.
LVT and other forms of economic rent reclaim, can replace income tax in the UK and drop corporation tax to boot. That has been calculated. The absence of income tax would promote enterprise for sure and drop HMG spending on welfare reducing the level of revenue HMG would need. Prof Nic Tideman in the USA did the calcualtion for the USA and LVT alone can eliminate income tax.
Income tax is a penalty on production. VAT on trade. The last things we should be taxing. Never lose sight that reclaiming economic rent is using commonly created wealth to pay for common services. How neat.