Vir Cantium

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Privatisation? What Privatisation?

The East Coast rail service is to return to public ownership. Is it a sign that rail privatisation hasn’t worked?

So asks the BBC’s “Have Your Say”, following the news that National Express have handed back / been stripped of (delete according to political bias) the franchise to run one of their rail routes.

I wonder if anyone asked if the losses being sustained by Royal Mail are a sign that nationalisation hadn’t worked? (Of course, in a way, they have, but then the timid plans to correct this situation have effectively now been shelved.)

Yet that rather misses the main point. The question assumes that the railways have been privatised. No they haven’t. The railways haven’t been truly private since the First World War, when the government, following a temporary wartime nationalisation, forced grouping on the private railway companies shortly afterwards in 1923. What happened in the 1990’s was the introduction of compulsory competitive tendering – yet on arguably far more restricted terms than the CCT that has (for example) delivered more efficient refuse collections.

What the National Express episode shows is that a franchise was let by the government on restrictive terms set by the government, to a private company who found after a while that the government was unwilling to remove some of those restrictions, and so have given it back.

Even so, many might welcome the return of some railways to state ownership (‘cos British Rail worked so well, didn’t it?)

How short memories are. Since the mid-19th century the history of railways in the UK – the birthplace of the train – are punctuated by government interventions which usually only made things worse. We start in 1844, when the Railway Act forced railways to offer cheap tickets to passengers (a measure which today would not doubt be spun as “tackling transport poverty”) which would have been either subsidised by the more viable freight and higher class passenger business, or reduced the funds available for investment – either way surely harming the viability of many lines, which then provided the excuse for grouping and ultimately full nationalisation.

Then there was Beeching – who was, to be fair, on the right track (sorry) – whose attempt to mimic the outcomes of a free market was inevitably very hit-and-miss. Then we had “privatisation” which, again, tried to stimulate free market behaviour, but in such a heavily controlled environment that we may have been better off not doing it at all. It is a case of either privatise fully and properly, or don’t bother.

Had National Express had ownership of the track and had the government not been presiding over a system that allows a franchisee to walk away from the contact (thus diluting the profit maximisation/loss elimination incentive on which the success of privatisation relies), then perhaps NE would have had not only to get on with the job, but would have been in an much stronger position to do so.


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