Longer delays, more often, will be the inevitable result of rail nationalisation

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5 days ago

What excitement. I travelled into central London today on a state-run train. It was just like old times. Growing up in the 1960s and 1970s the government owned and operated virtually everything, not just the railways which were nationalised in 1948. The telephones (BT), our power (CEGB), coal (NCB), steel, shipbuilding, water (various water boards), the buses, even flying (BA). Until 1972 you could go on a state-organised holiday with Thomas Cook.
Almost 30 years after the trains were privatised they are being returned to state ownership starting with South Western Railways (SWR). This process is being done in a piecemeal way: when a private operator's franchise expires it is nationalised and will become part of Great British Railways (GBR). SWR happened to be the first in line, not because it is especially bad. Indeed, my own experience is that it has been pretty good other than when the unions went on strike or the already renationalised Network Rail had messed up, which was hardly the fault of FirstGroup which ran the trains until Sunday.
Heidi Alexander, the Transport Secretary, took the first People's Train out of Waterloo and declared it to be a 'new dawn' when most of us old enough to remember British Rail see it as a step into the past. Of course nothing had changed. Indeed, the very first renationalised SWR service involved a rail replacement bus: the 05.36 from Woking to Waterloo had to terminate at Surbiton because of Bank Holiday weekend engineering works.
The trains bear the same livery and have the same staff. They will eventually be rebranded with a GBR logo though not for a few years. Ms Alexander said there would be a 'cultural reset' for the railway whatever that means. One thing we do know is that the Government will be responsible for ensuring investment in new rolling stock, fare policy and ensuring the trains run on time. The reason BR was privatised was because by the mid-1990s none of these could any longer be guaranteed when the Treasury had competing demands on revenues, not least from a rapidly expanding welfare state.
This is even more the case today, so where will the money come from? The politics are problematic as well. Ms Alexander says the re-nationalisation means 'moving away from 30 years of inefficiency, delayed services and failing passengers, and moving confidently into a new era...It really is a watershed moment.'
We shall see about that. When the carriages start to look run-down, the fares go up and trains are late because the drivers are on strike for ever bigger pay rises from a Labour Party they have helped to bankroll there will be only one body to blame: the Government.
She added: 'Of course, change isn't going to happen overnight. We've always been clear that public ownership isn't a silver bullet.' Indeed, not. In fact it is invariably a dead hand because nationalised industries have none of the market pressures faced by commercial operators.
But it must be conceded that the railways – and to an even greater extent the water industry which became a massive rip-off of taxpayers – do raise legitimate questions about the efficacy of privatisation. It is worth remembering how radical this was at the time. In a speech to the Tory Reform Group in 1985, the former prime minister Harold Macmillan, then 91 and with just a year to live, pronounced a characteristically patrician verdict upon the privatisation programme of the Thatcher government. It was, he said, like selling off 'the Georgian silver'.
His speech was widely ridiculed: here was an essentially Edwardian figure unfashionably wedded to the notion that the state could run industry and public utilities better than private companies. Yet 40 years on there is a resurgence of Macmillanesque hankering after a sepia-tinted world when the trains were run from Whitehall, electricity was provided by the Soviet-sounding Central Electricity Generating Board and water board chiefs were appointed by civil servants.
But it cannot be denied that the sale of the public utilities did not create the benign market conditions – or the mass share ownership – that had been envisaged. Privatising 'public good' industries upon which everyone relies and which are natural monopolies was always fraught with difficulty. Since the scope for competition was limited, regulators were needed to protect the interests of consumers and they have not done their jobs properly.
It was also hoped that moving these businesses into private hands would ease the pressure on the taxpayer; yet the subsidy to the railways is greater now than at the time of privatisation. On top of that, the UK state relinquished control of utilities only for foreign government-controlled companies like EDF to move in and take over.
But even though privatisation was not as propitious as had been hoped, that is not an argument for their return to state ownership, as the unions propose and many people unhappy with their performance would like to see.
This is not an ideological point but a pragmatic one: the old system was inefficient, costly and beset by institutionalised inertia. Since privatisation, there has been investment that would simply not have happened had the utilities remained in state hands – especially after the financial crash of 2008 when the biggest spending cuts were in capital projects.
The failure of privatised utilities to perform well does not mean they will do better in state hands. In fact, history suggests otherwise. Nonetheless, the benefits still need to spread beyond the boardrooms of a few multi-national cartels.
If privatisation of industry and utilities was the challenge 40 years ago, today it is the desocialisation of public services like health and education, with a move towards a social insurance scheme in the former and vouchers in the latter to provide greater choice. No political party is proposing such a radical approach and are just harking back to a world that has long gone.
If the answer to the failings of privatisation is re-nationalisation, then the wrong questions are being asked. After all, Macmillan's error was to imagine that the family had any silver left when, in reality, it had already been pawned several times over.
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