In seeking the best balance between public and private control for our railways, we must not allow a wrongheaded view of the latter, says John Nelson

Maria Eagle’s speech to the Labour Party Conference was a classic in the genre of speaking to the faithful. Chock full of one liners designed to get delegates pulses racing, two themes emerged that look like forming the platform on which Labour will fight the general election. “One Nation” and “the Cost of Living Crisis” are emerging as the thrusts that will distinguish Labour from its opponents in 2015. With the Tories seeking credit for an improving economy the big divide will be between a party claiming to back business as the route to recovery and another pointing to the effects on wider society where standards of living for the majority are reduced while excesses abound elsewhere. If this speech is any indication, railways companies fall into this category.

If this seems dispiriting to those unenthused by the twitterisation of the political discourse we nonetheless need to take it seriously because although the thoughts may appear random and superficial now, we can expect
Ms Eagle’s signposts to the future to be mapped out with greater clarity by her successor, Mary Creagh, over the next 18 months. With the psephological maths for 2015 favouring Labour we must hope that before too long the as yet crude policy statements take on a more cerebral form.

The underlying tone of hostility to the private sector implies more than a desire to return to a centrally controlled, integrated national rail system. Where BR exited in 1997, enter Network Rail (reformed version) 20 years later. Using the East Coast competition to illustrate her theme, Ms Eagle described “a costly and unnecessary privatisation. DOR is on course to have returned £800m to tax-payers and reinvests all of its profits to benefit passengers. Profits that, from 2015, will be shared with shareholders.” Since that’s how the private sector works, we must presume that profit to shareholders is seen as undesirable not only in this case but everywhere else too. Forget that the East Coast quoted profits take no account of accumulating long term pension liabilities; it looks very much as though Ms Eagle is advocating a “not for profit” approach to running the whole railway.

I have many times in recent years stated that the rail industry was never privatised. I won’t repeat my reasons for saying so here but it is a weakness in the case of those who would contest Ms Eagle’s views that we have got in this country a very expensive form of public control. The subtext of the McNulty Report was essentially that too. Lacking in effective integration between its various elements the unit costs of operation have not fallen as volumes have increased. To attack Labour on the grounds that it is anti private sector is a seriously misplaced argument especially with opinion polls showing support for renationalisation. Instead those who would disagree need to show how the present system can be made to work better. At the moment there is little evidence that the government knows how to do it.

In fact McNulty exemplified the inefficiency of the system by pointing to the relatively high level of fares that results. So Maria Eagle is not talking out of the back of her head when she makes the same point in a different way. It is true that without a more integrated interaction between infrastructure and train operations the present inefficiencies will continue and fares will rise. Because this is for many reasons undesirable, the real argument should be about how best to secure greater integration.

It therefore ill behoves those who disagree with Ms Eagle to defend the status quo. The status quo isn’t working and the West Coast debacle merely amplified the fact.

It is well known that I, in common with most railway people at the time, disagreed with the form of “privatisation” chosen back in 1992 when the Conservatives last won an election. What happened then was the emasculation of an integrated system that, following significant reforms, had the potential with less funding than the railways subsequently received to take advantage of the economic, environmental, demographic and social factors that have combined to deliver record traffic volumes. Many of the setbacks the industry has faced over recent years can be traced directly back to that period.

This is not to denigrate the significant efforts and successes that have been achieved in many parts of the industry. Neither is it to argue a case for nationalisation. Structural change of the type implied by Maria Eagle’s speech does not require the heavy handed intervention of the government, or major legislation. Back before the Railways Act in 1993 it was already apparent that substantial parts of the railway system needed to be opened up to private enterprise, to competition and to new ideas. The tragedy is that the method of restructuring selected then did not achieve this to anything like the degree that was necessary.

Neither is this the fault of the private sector train operators. Most of the cock-ups that have occurred have not been brought about by their actions but by the institutional players in the system – notably Railtrack, politicians and sadly the department itself. At no time in the 20 years have there been failures by the train operators as epic as those committed by the others. No, the train operators and bidders play to the rules. If the rules change they learn the new ones and get on with it. But as long as those rules effectively exclude them from a lead role it is hardly fair to blame them, as Ms Eagle appears to have done, for the ills of a system that is not of their creation.

Ed Miliband has been criticised over his headline-grabbing energy price freeze proposal for appearing anti business. In fact his is a more nuanced position. What he advocates is a pause whilst a more effective market for energy is created. This is undoubtedly also needed in rail. That said, it is to be hoped that his party’s attitude to the railways will be informed more by a desire to secure the best balance between public and private rather than by a wrongheaded view of the role of the latter; an approach that could be as counter-productive as many of the changes visited on the industry by the Conservatives. In the 1990s their changes were driven by prejudice. Don’t let it happen again.

 

This article (and many, many more) appears in the latest issue of Passenger Transport.

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