The grievances of rail users may be well grounded, but the Labour leader’s leap to renationalisation is not. It is a knee-jerk reaction

 

The world has moved on, but Jeremy Corbyn has not

 

Goodbye Lenin was a wonderfully endearing and funny film. Released in 2003, it tells the story of a staunch supporter of the old East German communist regime who falls into a coma and wakes up after the Berlin Wall, and her government, have fallen. But in order not to threaten her fragile recovery, her family has to pretend nothing has changed, an increasingly difficult task as east is swept away by west.

We have our own version of that film here in the UK, which perhaps might be called Hello Lenin. In our version, Jeremy Corbyn goes into deep freeze in about 1981 and when he wakes up to become leader of the Labour Party about 35 years later, we find that none of his views on anything have changed one iota. He has learnt nothing and forgotten nothing. Nuclear weapons, the EU, Israel: the world may have moved on, but he has not. His 1981 answers are the ones he puts forward for 2018.

Nowhere is this truer than on the railways where his mantra is renationalisation, and the answer apparently the recreation of a top-down, centrally-controlled railway. We might call it British Rail.

To be fair to the Labour leader, his enthusiasm for rail renationalisation is shared by a huge swathe, indeed a majority, of the British public. Most polls put the level of support at about 60%, an impressively high figure.

The grievances may be well grounded but the leap to renationalisation is not. It is a knee-jerk reaction that something must be done. This is something. Therefore this must be done.

If you dig into the data, you will find that the main driver is unhappiness with aspects of how the railways are today – fare levels, cancellations, late running. The grievances may be well grounded but the leap to renationalisation is not. It is a knee-jerk reaction that something must be done. This is something. Therefore this must be done.

It is an interesting feature of democracy that people can be quite particular about why they dislike or distrust incumbency, in a government, an individual, or a public service, but are then prepared to endorse an alternative about which they know not very much. It is why opposition parties spend a lot of their time knocking the ruling party, and trying to say as little as possible about their own plans and views. Often that approach is enough to win elections. The approach can also be starkly seen in the EU referendum. People clearly were unhappy with the EU but very few seemed to have worked out that the alternative to membership is going to be much worse.

So let’s establish a couple of facts.

1. The railways are already largely nationalised.

Network Rail is officially now a public body, after the reclassification effected by the National Audit Office in about 2013. It was renationalised under the coalition, though naturally you will never hear the Conservatives describe it in that way.

As for the train operating companies, their room for manoeuvre is limited. About half the fares are regulated, minimum service patterns are specified, centrally-produced safety rules apply, and train paths are allocated by the state. Companies like Southern cannot even issue a press statement without clearance from the Department for Transport.

Increasingly, rolling stock arrangements are decided by the Department for Transport rather than the rolling stock leasing companies, as had been envisaged at privatisation, and the recent trend towards short extensions to franchises, and even more so the tight contract approach applied to Southern, has returned a great deal of power to Horseferry Road.

In the Commons, Labour has laid into transport secretary Chris Grayling for his clumsy handling of rail issues, with a good deal of justification it must be said, but their answer to the problem – renationalisation – is incoherent. The truth is that on a practical level, there is not much left to renationalise. Or if they believe there is and it would make a huge difference, then they would end up handing a lot more power over to, er, Chris Grayling.

2. Most issues of concern to the public would not benefit from a change in structure.

A recent poll carried out for Sky News suggested that the main reason for supporting renationalisation was unhappiness about fare rises. These of course arise from a formula created and maintained not by the private train companies but by the government. It is unclear how handing even more power to the government would help.

Similarly, an earlier YouGov poll found that of those who supported renationalisation, 47% did so because “fares would go down”, 43% because “it would be more cost-effective overall”, and 21% because “trains would be more on time.”

Why would they be more on time? The main reason for lateness is the severely congested nature of the network. This, ironically, is because of the success of the railways which have doubled passenger numbers over the last 25 years or so. Ours is now the most intensively used railway anywhere in the world and it is something of a miracle that it runs as well as it does. With, for example, a train in every stretch of block signal from Haywards Heath to London in peak hours, it just takes one train to have problems to knock them all out of schedule.

The network could become less congested if fares were increased dramatically to discourage use, but that is obviously not a sensible public policy. But if fares are reduced dramatically, as people wish, then the consequence would be the opposite: to attract more people onto the railway, leading to more crowding on trains, more congestion on the line, and lower reliability.

The answer to this conundrum is a huge gear change in investment. The easy and cheaper options such as more and longer trains, have largely been exhausted already. What is needed now is the widespread introduction of digital signalling to allow more trains safely on the existing lines, and more capacity, through the redoubling of lines, and the reopening of others, like Lewes to Uckfield.

Now some of that could be secured through private sector investment from the train companies awarded a long franchise. This is, after all, how the connection out of Oxford to provide a new route to London was funded by Chiltern. Or planning gain from a major housebuilding project could in theory be used to pay for a reopening, such as was mooted for the derelict line west from Okehampton.

But ultimately, investment on this scale has to come from the taxpayer, and there is only so much money available. There is even less now, in fact, given the enormous cost of Brexit preparations and the diversion of £20bn to the NHS. Indeed, the chancellor has warned that taxes will have to rise just to pay for existing commitments.

The question for Jeremy Corbyn and his comrades, therefore, is whether the money that is available should be used to improve the railway as it is, or instead to buy back bits of the railway which the Department for Transport in effect largely controls anyway.

One suggestion put forward to bypass this is that existing franchises should simply be allowed to expire and then not be relet, thereby returning train operations to the state incrementally.

The problem is that the adoption of such a policy by government would effectively give notice to every TOC that their time was limited and non-renewable. Under such circumstances, if you were a TOC, why would you not simply stop nearly all investment immediately and maximise your return for shareholders for the time you have left? I do not doubt that the TOCs would continue responsibly to deliver a safe railway, but in terms of enhancements, whether it is extra carriages or repainted waiting rooms, why not simply cancel all that overnight?

Unregulated fares could be increased where it made short-term economic sense to do so. Train formations could be shorter with some carriages being returned to the rolling stock companies when agreements allow, thereby saving the TOCs money.

I would expect driver recruitment and training, an expensive business, to be wound down, with the likelihood of more cancellations as a result, as driver numbers become tighter.

And if the government then becomes shirty, well what can they do? Take the franchise away? They are doing that anyway.

It is simplistic and indeed simply wrong to believe the grumbles of the public would be solved by a change of ownership

Those who argue in favour of renationalisation might say that even if there is short-term pain, there would be long-term gain. But as I have set out above, it is simplistic and indeed simply wrong to believe the grumbles of the public would be solved by a change of ownership.

That is not to say that the state cannot run a railway line competently – it can, and indeed the history of the East Coast Main Line since privatisation shows it can. But it is not a miracle solution for the challenges of the railway.

Moreover, a state-run railway would undoubtedly run into the same problems that plagued British Rail over decades: unreasonably tight finances, controlled by the Treasury, limited long-term planning, and a tendency for DfT civil servants to become unhealthily involved in day-to-day operational matters, a trend already quite discernible.

There is one other driver for renationalisation, namely the feeling that any profits made should be returned to the British government rather than to a private company, especially one owned by some other European state railway.

Leaving aside the fact that profit margins for the TOCs are narrow, the straight economic question is whether a state-run line would generate more income for the Treasury than a privately-run one operating under a franchise arrangement. That is actually far from certain. There is on the contrary considerable evidence that companies can overbid and so have to innovate to push income up to cover the extra money they have committed to delivering to the government. The problem, if there is one, is overbidding rather than underbidding. That is why we have seen one private company after another fail on the East Coast franchise.

There are undoubtedly actions that can and should be taken to improve our railways, but that requires detailed and coherent consideration, not some simplistic slogan that offers a superficial solution but one which will leave the travelling public even more disenchanted than they are now.

 

About the author:

Norman Baker served as transport minister from May 2010 until October 2013. He was
Lib Dem MP for Lewes between 1997 and 2015
.

 

This article appears inside the latest issue of Passenger Transport.

 

 

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