I received a comment on the blog last night which suggested I ignore an international expert and his comments on competition law because the case for rail nationalisation proved the point that we had to leave the EU. The expert in question is George Pretez QC, who wrote a Guardian opinion piece that I recommend reading, here. I happen to think he knows what he is talking about.
I also happen to think in terms of priorities for political parties - including Labour - rail nationalisation should come in at 153rd on the list of things to do (give or take a few). I guess I have to explain.
My firstquestion when someone puts an idea to me is pretty much always the same. It is ‘What difference will it make?'
The follow up is ‘How will you know?'
Next is ‘Given that resources are always scarce, is this the best thing to do?'
And unless the answer is unambiguous it is obvious to then ask ‘What achieves your goal more effectively?'
The last question includes the killer element - because it requires the specification of a goal.
If I was to specify a goal for Labour (and it's not my job to do so, but what the heck; one is needed for this argument to work) I'd say it should be ‘To improve the current and future prospects of all in the UK, but most especially those on median and lower incomes, whilst protecting all those who live be in the country from risk and the causes of fear'. An economic and social priority is set. Bias is created, quite deliberately. The generic duty of government is accepted in the prevention of risk. The freedom from fear requires a strong social safety net. Just about everything Labour should do is encompassed.
So, what difference will rail privatisation make in the context of this goal? And how would you know?
My answer is very little difference would be created because apart from, maybe, some small savings on fares the same trains would run on the same lines staffed by the same people for considerable time to come, as successive East Coast nationalisations prove. And any gain would largely go to the better off, because it is they who use trains by far the most.
So rail nationalisation does not fit the priority Labour should have. The scarce resources it would use is political capital in parliament, and capacity with markets, where fights over bond issues should be reserved exclusively for creating investment in new activity, such as the Green New Deal, rather than changing the ownership of existing activity for little gain.
Now don't get me wrong. The answer to my third question is that there are better things to do. Improve the skills of Railtrack. Stop contracting everything. Use capital for the state to build essential new trains. Use the National Investment Bank to do that and stop the rip off of the train leasing companies. Enforce contract terms in performance. Make refunds for late running mandatory, and require unclaimed repayments to fund fare reductions. Stop franchise extensions. Create more onerous terms in future so that franchises return to the state. Require investment now. Ensure better bus and low carbon local transport integration.
All this is possible. All these things can achieve real change. But changing ownership? No, that's just a distraction for now. Do it slowly and simply instead, because the state will become the preferred bidder (with LNER becoming the hub for such bids) and then a vastly more intelligent transformation that delivers real change without wasting political or financial capital can take place.
All of which answers my fourth question, entirely. There would be more trains if my plan was followed. And more jobs. And a transition to state control where lessons could be learned and errors avoided. Better, more integrated, lower carbon transport for all (because those on lower incomes are the people really suffering when it comes to public transport right now) would be created. And no one would have to waste time fighting anyone else: the best operator, which is always going to be the state, would emerge.
And all this is possible within current state aid rules.
So is rail nationalisation a reason to leave the EU? The answer is very obviously that it is not.
I wish some constructive thinking was embraced by those shouting such things in the left.
And I wish the left would work out its priorities and then work to achieve them in the best way possible.
I want radical reform. Nationalising our railways may well happen. It may well be necessary. But making it a goal is wrong. The goal is Improving the lives of those on lower and median incomes. In that case the priority is to deliver change for them. And to deliver sustainability. I have suggested how to do that without wasting political capital much better expended on funding a National Investment Bank.
Why can't the left do the real job it has to get on with and leave the posturing aside?
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Thank you. You’ve said very well something that really needed to be said. And broadly similar arguments could be made in relation to electricity, gas, water and waste water. But will Labour’s high command (and their legions of fans) pay any heed? Sadly, I fear not.
I agree re all them as well….
Excellent definition of what the left’s ‘mission’ should be, and clear thinking of how to achieve it in this instance. Unfortunately it seems some in the Labour hierarchy think the posturing will attract voters, and is more important than the mission.
I’m afraid that you are right.
If you do not do as you are suggesting – basically re-engineering the macro economy first as route one to change, then route two (changes in the micro economy) are less secure.
As it is, the renationalisation policy is just window dressing. Some may advocate it as a ‘quick win’ but my experience of the ‘quick win’ culture in local government is that all it does is take over resources from other areas so that they are denied the initial input required to make them work.
Oh dear. I’m sad. I really am. I so want Labour to be…well….’Good’.
I hate to see supposedly progressive politics denuded of courage and imagination. Although I just wonder if the political class in this country actually has the intellectual and technocratic tools to manage the nation anymore.
What a great write up and methodical approach. You’ve clearly put some good thought into the issue.
I’m not sure it has a catchy sound bite though.
The trouble is that if you don’t change primary legislation, you allow the next government to undo everything you just did with the same wave of executive fiat. If you change primary legislation, the next government can still undo it, but it is far harder and time-consuming to do so than just restart an activity that was stopped. In addition, your government has to still comply with the previous primary legislation or it will be subject to judicial review.
So rail nationalisation really comes in several parts (if we are not to actually just seize the companies, paying compensation, as was done by the Atlee government):
* Hold franchise competitions as they come up for renewal, setting (as you say) terms that no rational competitor would actually agree to, then awarding the franchise to the back-stop operator
* Throw out any current franchise holders that aren’t meeting their commitments (I would suggest Govia Thameslink Railway and Arriva Rail North for starters)
* Reduce direct subsidy to Network Rail (Railtrack was dissolved in 2002) to force it to increase track access charges, which will be passed onto the Train Operating Companies, but cap fare increases to stop them passing this on to the customers, thereby making the other franchises unprofitable and causing the operators to hand them back
* Pass a new Railways Act getting rid of the franchising scheme but setting it up in some way that the Treasury cannot arbitrarily decide to change the funding levels from year to year, which was the problem under BR, and particularly ensuring that funds not spent one year, due to project delays, do get automatically rolled forward to the next year. Perhaps mandating that some minimum percentage of the value of the asset base must be spent on maintenance and renewals, with a formula for investment in capacity increase.
The EU will probably kick up a fuss about this, because the separation of railways into track and train operator is mandated as part of the Fourth Railway Package of Directives. Indeed other Member State railway companies are actually operating many of our franchises directly or as part of consortia: Arriva is a subsidiary of Deutsche Bahn, Govia is 24.5% owned by SNCF (France) via their 70% share of Keolis, Abellio is a subsidiary of Nederlandse Spoorwegen (Dutch Railways), Trenitalia (Italy) owns c2c. Opinion is divided on whether nationalisation is compatible with the Fourth Railway Package: see http://theconversation.com/fact-check-do-new-eu-rules-make-it-impossible-to-renationalise-railways-61180 for some views.
I would be interested to know if it is genuinely the case that these operators make either no profit or only a minimal one, or if there is some Base Erosion/Profit Shifting going on to make it look as though they are less profitable than they really are. Normally BEPS is used to reduce corporate tax payments, which attract higher rates in much of Europe than here, but it could be politically useful to look less profitable.
As far as being a subsidy for the rich, we need to widen access to the rail network to get people out of cars, to reduce congestion and carbon emissions. That means improving capacity and reliability on existing lines, and opening new ones (or re-opening old ones that have closed) so that people can get more easily to where they need to go. At the moment, if you reduced fares – at peak times – you would simply make overcrowding worse. Many services no longer offer First Class at peak times or even at any time, to eke out a little more space.
RM ” the best operator, which is always going to be the state, would emerge.”
Is that true? If so how do you know? At least in regards to railways and the operation of them.
I believe it is
Why is it true over much of the world?
Why is it true in the UK ( we just aren’t the state in question)?
Why is it true on the East Coast
“I also happen to think in terms of priorities for political parties – including Labour – rail nationalisation should come in at 153rd on the list of things to do (give or take a few).” You may well be right. How many voters though will a) understand that or b) be even capable of understanding that? Labour have to appeal to voters, not thinkers, to win elections. When Labour talk the nonsense they do, remember they’re aiming to convince the many, not the few.
Bill – I think that you make a salient point given the level of discourse in the real world.
All I would add however is that as you delve into Labour’s ‘plans’ the much needed macro detail still remains to my eyes rather orthodox and conservative with a small ‘c’.
If Labour want to do more they also need to get the more aware voter on side. As a ‘more aware voter’ they have so failed to do this for me. If/when I vote Labour, I need to feel more than it is by ‘faith’ alone.
I want action. I want planning. I want detail. I want these things because I want change. Real change is not possible without these pre-conditions. That is why I feel that they are just ‘window dressing’.
I agree that the messages to the electorate might have to be simpler – but this is no excuse for not joining things up (macro & micro) behind the scenes.
Nationalisation and efficiency are two different things, although not necessarily unrelated. (And of course the cry of the right is that nationalisation means inefficiency) I agree that an efficient, inclusive, comfortable, accessible-to-all service that reached all parts of the country, that took cars and lorries off the roads and out of cities and towns is the most pressing need. However, State ownership or control is essential to prevent government money being captured by private interests, as has happed with many of the privatisations of once publicly owned assets, often with the profits flowing out of the country. It would also be easier to ensure that workers and passengers were prioritised rather than chief executives and the neoliberal god of “shareholder value.”
Another possibility is a high-speed coach service using motorways and convenient interchange-hubs: https://www.alanstorkey.com/a-national-integrated-coach-system-for-10-20-billion-in-five-years/ They could even be powered by hydrogen – if we had politicians who could think beyond the next day.
Regulation will get there more effectively
Nationalisation hands the money over in a one off, irreversible payment
Do remember it comes at a price
MNy method reduces that as well
Nationalisation hands the money over in a one off, irreversible payment
I though that the current policy was to wait until each of the contracts expired and then take those parts of the system into public ownership, which would involve no payment?
That’s not nationaisation….
I am a little confused?
I thought that the rail infrastructure was still publicly owned and controlled by https://en.wikipedia.org/wiki/Network_Rail and that the services provided on the network were provided by a number of different companies which bid for franchises as and when they become available.
I thought that the only nationalisation of the railways which could currently occur would be to replace these franchisee companies with a publicly owned rail service provider.
Please enlighten me – what do you mean by nationalisation.
I presume call for nationalisation means buying back the franchises
It cannot mean anything else
Labour’s 2017 general election manifesto promised to bring back private railway companies into public ownership as current franchises expire.
from https://www.independent.co.uk/news/uk/politics/nationalise-railways-labour-john-mcdonnell-renationalise-public-transport-a8549921.html
Please can you provide some evidence that Labour Party policy has changed substantially since then. I can only find
“Shadow chancellor John McDonnell said he is investigating which franchise contracts have break clauses. Where these exist, either party can end the franchise at that point without penalty, and the contract no longer runs to its full term.”
in https://www.railnews.co.uk/news/2018/09/24-labour-widens-railway-nationalisation-door.html
However, again this comes at zero cost.
I was answering a comment – often heard now – that we must nationalise railways
I did not say I was commenting on the 2017 manifesto
Richard, despite all the hype to the contrary and the general failure of many of the so-called elites to admit it and many of the general public to understand the causes, Capitalism remains mired in deep crisis. Can it be reformed, or should it be replaced?
Let’s try and shed some light on why such questions as rail nationalisation and Brexit cause so much confusion and why IMO this confusion is the consequence of our collective failure to address how Capitalism should be confronted.
To avoid confusion, we need to emphasis that Capitalism has very little to do with State versus Private. Capitalist enterprises can be either State or Private. Private enterprises do not have to be Capitalist, they can also be Worker Self Directed Enterprises – Worker Co-Ops.
In Capitalism shares are supreme, that is its unique feature. If you have one share you have one vote. If you have ten shares you have 10 votes. If you have 10,000,000 you have ten million votes. If you have one hundred million shares you have one hundred million votes. Only rich people can own shares in quantities of 10m and 100m.
Shareholders elect the boards of directors (BOD’s). The BOD’s make all the important decisions of the company. What to produce, where to produce, what technology to employ and what to do with the profits. In Capitalism it is the Capitalists that decide who gets the wealth and income that all of society helps produce.
In Capitalism the people who do all the work, Labour, have no say in the decision-making process, the Capitalists the ones who make all the important decisions don’t do any of the work.
In Capitalism the name of the game is to get as much of the surplus into the hands of Capital and therefor out of the hands of Labour as possible. This they accomplish by awarding the bulk of the profits to the tiny group of shareholders who elected them as directors and to themselves as huge incomes. To labour they give as little as necessary. Surprise, surprise as dear Cilla would say, this may provide a clue as to why under Capitalism we increasingly unfair wealth distribution.
I may be too harsh in my comments on shares. If any reader can advance a case, why shares should have votes I am open to persuasion. However, this is not the same argument that entrepreneurs should not be fairly awarded for their efforts and enterprise, – of course they should. But why should shares that can’t even think, couldn’t in a month of Sundays put together a business proposal or plan have a vote?
To come back to the question of Rail re-nationalisation and all the other services and utilities that are in desperate need of rescue, how can this be done? If as you say the focus of Labour should be ‘To improve the current and future prospects of all in the UK, but most especially those on median and lower incomes”, then we need IMO to remove control of economic resources away from shares.
The only right that shares have is to elect the BOD’s. That is the only power that gives them any value. Remove that power and the market value of any share drops to zero.
Capitalism only exists because of the belief that shares should have votes, in other words that only rich people should decide how the economic cake should be divided. Once that belief is replaced by the belief that society’s resources belong to all the community in fair distribution, then Capitalism as a system collapses.
The leave Br-exit vote was a vote for meaningful control by an electorate that felt increasingly marginalized and neglected by a dysfunctional economic system, control means besides political control economic control. Without economic control we have nothing. Br-exit was a cry of despair.
We don’t need to spend a fortune, we can acquire all we want for next to zero cost. We do not have to repeat the mistakes at the ending of slavery when we compensated the slave-owners, but gave the slaves nothing, or as we did in the misguided rescue of the banks whilst imposing financial gang rape on the middle and lower classes, a rape that continues to this day. We just must decide that people are more important than shares, not to do so is to worship money. If we worship money no secure reform is possible
German railways are also in a poor state, after similar attempts to get private sector leverage. I don’t favour nationalisation as policy. Early CEOs of US private utilities used to cite European nationalised ones as “competition” in the sense of the public demanding they be nationalised if they did not produce a better service. Very few railways have been built or run at profit for long. Accepting all Richard’s points for the present and near term, I incline toward ideas of more radical door to door public transport policy based on IT and better logistics.
Perhaps we need to take a broader view of what profit actually is. Does it have to be immediate, in that every bus or train journey makes or will eventually make a financial profit for the carrier? Or should it be state subsidised, not difficult when the state creates its own money, and profit be regarded as the national ease with which one might travel from A to B, whether it be a businessman tying up deals or the commuter getting to work or the shopper being able to easily and cheaply (free?) able to reach the shops, or sightseers, or those visiting relatives or friends? Just as production is arguably more than just what comes out of factory gates, profit too can be measured in various ways. It doesn’t always have to be measured in money. Proportionate state spending put towards and therefore backed by Quality of Life seems an entirely reasonable suggestion, especially when we remember that the books really don’t need to balance at all. Time we stopped thinking like bankers and started thinking like human beings.
https://weownit.org.uk/privatisation
Sorry but I disagree with you, as a northern working class labour voter. Hitachi are building trains right next to the east coast mainline, but these are not going to be used on that line. The first ones are to be used in Scotland. The next ones being built are HS2 ones – again not being used here.
Nationalisation might bring a bit of pride to the area that had thousands of applications for 700 jobs.
I have to admit I cannot see your logic, at all
You’d rather trains were not built in the north east?
No, I’d rather they were built in the north and used in the north, on the East Coast mainline, the one I use when I can afford it. I think that’s what I said, that they were being built right next to the east coast mainline but not going to be used on it.
I’d rather we didn’t still have Pacer trains, but you’d like them as they are two Leyland buses cobbled together in the 80s.I don’t understand why you think labour can’t afford it when you are always saying that government prints money.
Labour’s idea is to take back the franchises as they come available. That should not entail paying anybody for shares. From what I read, most of the profit that shareholders get comes straight from government susidies. That can’t be right.
What is wrong with a railway run for the benefit of the public rather than shareholders?
https://weownit.us6.list-manage.com/track/click?u=ef1f3f5b8067610251b19fb6c&id=4c1164ed1c&e=9b816f1393
But surely you want trains made in the north east used all over the world?
And any gain would largely go to the better off, because it is they who use trains by far the most.
Please read https://www.theguardian.com/commentisfree/2019/jan/04/cheap-rail-fares-benefit-rich-muddled-thinking-fairness-error
The argument is not a good one
As I noted, improving bus transport is the way to achieve better equality
The thinking in that argument is all must have access to the same thing
Why not making sure it is getting people what they most need and use first?
When I was a kid I used buses all the time. My dad was a bus driver. Unfortunately, I used to be sick on buses so I couldn’t go far, just to town, or to secondary school. My dad used to be very embarrassed.
The Labour party also want to improve buses, by allowing councils to run them, something which has been prevented by Grayling. Most of the buses in his constituency are run by French and German groups.
https://weownit.org.uk/public-ownership/buses
I am a regular bus user – admittedly, mainly in London, bot not only so
Transport for London? Gets 3x more spent on it than the North. Even the A1 hasn’t been completely dualled yet. I used to quite regularly be stuck behind buses going to visit my mother in law.
North has missed out on £63bn over 10 years due to chronic underfunding, thinktank says.IPPR.
How do you get to London, train or car?
Train
I agree with your point re the injustice of the investment