Rail privatisation hasn’t worked. It’s time to reverse it

The good old days. Image: Getty.

Just who exactly supports the UK’s privatised railway industry? It’s certainly not passengers, taxpayers, railway employees or increasingly many politicians.

The state-owned British Rail was privatised over several years starting in 1995. Prime Minister Margaret Thatcher was politically astute enough to avoid privatising this industry. But her successor, John Major, had no such doubts – he was convinced privatisation would ensure “greater responsiveness to the customer, and a higher quality of service and better value for money”.

He couldn’t have been more wrong. It’s now time to call a halt on this misconceived and misguided experiment – it just isn’t working. It’s time to renationalise the whole industry.

The benefits of privatisation forecast by politicians never materialised. Fares are now much higher, infrastructure failures and train delays increasing, the train franchising system is floundering and passenger dissatisfaction is high.

British Rail, the former nationalised industry, was a fully vertically integrated industry. This meant that BR owned and was responsible for virtually every aspect of the railway business. One researcher found it to be “perhaps the most financially successful railway in Europe”. Government subsidy was only 15 per cent of revenue in 1994, making British Rail the least subsidised railway system in Europe at the time.

Privatisation saw the industry broken up into over 100 separate companies. This fragmentation has led to a complex contractual web of operational transactions between different industry players – with a profit mark up being extracted at every stage. Renationalisating the railways would put an end to the operational and structural absurdity of the industry – and be substantially less costly.

Dysfunctional franchise model

Passenger train operating companies are awarded on a franchised basis. Normally, the operators bid to pay the highest premium to the government to win the right to operate train services on specified routes. This is based on the revenue each bidding company considers they can extract from passengers after paying their premium.

Renationalisation would lead to abolition of the costly and dysfunctional method of awarding these franchises. It would abolish the convoluted gaming by operating companies, who frequently overbid on the most optimistic assumptions in order to win a franchise.

Take the example of the failing East Coast franchise. GNER and National Express have both already walked away from their East Coast commitments and Virgin East Coast is currently renegotiating its franchise. They can do this because the penalties for failing to deliver are too low.

What’s more, the whole costly and time-consuming refranchising process is repeated every seven or eight years. Renationalisation would bring a swift halt to this disruptive and costly process – and permit better long-term planning.

Fares through the roof

Certainly, the passenger hasn’t benefited by lower fares since privatisation. Only about 36 per cent of fare revenue is regulated by the government and, even then, fare increases are related to the higher retail price index (RPI) measure of inflation (and not the lower consumer price index). For unregulated fares, the train operators have not been slow to increase fare revenue well in excess of RPI. For example, across all operators, standard class unregulated fares have increased by nearly 30 per cent in real terms since privatisation.

Whenever the train operators have the freedom to raise fares they rarely fail to increase them to whatever the market can bear. The Trades Union Congress recently highlighted that British commuters are now “spending up to five times as much of their salary on season tickets” than their continental counterparts. A commuter season ticket in the UK costing £381 a month will cost the equivalent of £66 in France or £118 in Germany.

Neglected and costly infrastructure

Another key aspect of the privatised industry is the infrastructure company that owns the railway tracks, stations and signalling. The first infrastructure company, Railtrack plc, was a publicly listed company that had a short life. Within less than five years of floatation the came the fatal Hatfield rail crash, when an express train came off the track. An inquiry found that the disaster was directly related to Railtrack’s neglect of the infrastructure.

Railtrack’s successor, Network Rail, ultimately became a public sector body of the Department for Transport. But Network Rail has been hampered by Railtrack’s former neglect of its assets and higher costs resulting from the fragmented nature of the industry. Indeed, these issues meant that the McNulty report in 2011, commissioned by the then transport secretary, found the privatised rail industry had a high cost base and the costs per passenger-km would have to be reduced by 40 per cent to match railways in France, Netherlands, Sweden and Switzerland.


Misguided support

Even the taxpayer would benefit from renationalisation. Under privatisation, state subsidies have nearly doubled in real terms. Direct government support has also previously been given to private sector train operators if their revenues fall below expectations. More recent franchisees can now receive these corporate state welfare “top-up” payments where, for example, there is fall in GDP or a slowdown in the London jobs market. Conventional private sector companies carry these business risks themselves – not so for the train companies. Renationalisation could reduce subsidies and have major financial gains for the tax payer.

Industry players frequently justify the success of privatisation by pointing to the growth in passenger traffic (passenger journeys have grown from 800m in 1996-97 to 1,729m in 2016-17). But this growth is despite privatisation; not because of it. Economic studies suggest this is down to other factors, such as employment levels, growth in GDP, property prices, leisure travel and road congestion – but not to privatisation.

The ConversationOverall, railway privatisation has failed to achieve its original objectives. Fares and state subsidies remain high, passengers are failing to obtain better value for money and industry unit costs remain stubbornly high. No other country has fully adopted the UK model of railway privatisation. And for good reason – it hasn’t worked.

John Stittle, Senior Lecturer in Accounting, University of Essex.

This article was originally published on The Conversation. Read the original article.

 
 
 
 

Everybody hates the Midlands, and other lessons from YouGov’s latest spurious polling

Dorset, which people like, for some reason. Image: Getty.

Just because you’re paranoid, the old joke runs, doesn’t mean they’re not out to get you. By the same token: just because I’m an egomaniac, doesn’t mean that YouGov isn’t commissioning polls of upwards of 50,000 people aimed at me, personally.

Seriously, that particular pollster has form for this: almost exactly a year ago, it published the results of a poll about London’s tube network that I’m about 98 per cent certain* was inspired by an argument Stephen Bush and I had been having on Twitter, at least partly on the grounds that it was the sort of thing that muggins here would almost certainly write up. 

And, I did write it up – or, to put it another way, I fell for it. So when, 364 days later, the same pollster produces not one but two polls, ranking Britain’s cities and counties respectively, it’s hard to escape the suspicion that CityMetric and YouGuv are now locked in a co-dependent and potentially abusive relationship.

But never mind that now. What do the polls tell us?

Let’s start with the counties

Everybody loves the West Country

YouGov invited 42,000 people to tell it whether or not they liked England’s 47 ceremonial counties for some reason. The top five, which got good reviews from between 86 and 92 per cent of respondents, were, in order: Dorset, Devon, Cornwall, North Yorkshire and Somerset. That’s England’s four most south westerly counties. And North Yorkshire.

So: almost everyone likes the South West, though whether this is because they associate it with summer holidays or cider or what, the data doesn’t say. Perhaps, given the inclusion of North Yorkshire, people just like countryside. That would seem to be supported by the fact that...


Nobody really likes the metropolitan counties

Greater London was stitched together in 1965. Nine years later, more new counties were created to cover the metropolitan areas of Manchester, Liverpool (Merseyside), Birmingham (the West Midlands), Newcastle (Tyne&Wear), Leeds (West Yorkshire and Sheffield (South Yorkshire). Actually, there were also new counties covering Teesside (Cleveland) and Bristol/Bath (Avon), too, but those have since been scrapped, so let’s ignore them.

Not all of those seven counties still exist in any meaningful governmental sense – but they’re still there for ’ceremonial purposes’, whatever that means. And we now know, thanks to this poll, that – to the first approximation – nobody much likes any of them. The only one to make it into the top half of the ranking is West Yorkshire, which comes 12th (75 per cent approval); South Yorkshire (66 per cent) is next, at 27th. Both of those, it may be significant, have the name of a historic county in their name.

The ones without an ancient identity to fall back on are all clustered near the bottom. Tyne & Wear is 30th out of 47 (64 per cent), Greater London 38th (58 per cent), Merseyside 41st (55 per cent), Greater Manchester 42nd (53 per cent)... Not even half of people like the West Midlands (49 per cent, placing it 44th out of 47). Although it seems to suffer also from the fact that...

Everybody hates the Midlands

Honestly, look at that map:

 

Click to expand.

The three bottom rated counties, are all Midlands ones: Leicestershire, Northamptonshire and Bedfordshire – which, hilariously, with just 40 per cent approval, is a full seven points behind its nearest rival, the single biggest drop on the entire table.

What the hell did Bedfordshire ever do to you, England? Honestly, it makes Essex’s 50 per cent approval rate look pretty cheery.

While we’re talking about irrational differences:

There’s trouble brewing in Sussex

West Sussex ranks 21st, with a 71 per cent approval rating. But East Sussex is 29th, at just 65 per cent.

Honestly, what the fuck? Does the existence of Brighton piss people off that much?

Actually, we know it doesn’t because thanks to YouGov we have polling.

No, Brighton does not piss people off that much

Click to expand.

A respectable 18th out of 57, with a 74 per cent approval rating. I guess it could be dragged up by how much everyone loves Hove, but it doesn’t seem that likely.

London is surprisingly popular

Considering how much of the national debate on these things is dedicated to slagging off the capital – and who can blame people, really, given the state of British politics – I’m a bit surprised that London is not only in the top half but the top third. It ranks 22nd, with an approval rating of 73 per cent, higher than any other major city except Edinburgh.

But what people really want is somewhere pretty with a castle or cathedral

Honestly, look at the top 10:

City % who like the city Rank
York 92% 1
Bath 89% 2
Edinburgh 88% 3
Chester 83% 4
Durham 81% 5
Salisbury 80% 6
Truro 80% 7
Canterbury 79% 8
Wells 79% 9
Cambridge 78% 10

These people don’t want cities, they want Christmas cards.

No really, everyone hates the Midlands

Birmingham is the worst-rated big city, coming 47th with an approval rating of just 40 per cent. Leicester, Coventry and Wolverhampton fare even worse.

What did the Midlands ever do to you, Britain?

The least popular city is Bradford, which shows that people are awful

An approval rating of just 23 per cent. Given that Bradford is lovely, and has the best curries in Britain, I’m going to assume that

a) a lot of people haven’t been there, and

b) a lot of people have dodgy views on race relations.

Official city status is stupid

This isn’t something I learned from the polls exactly, but... Ripon? Ely? St David’s? Wells? These aren’t cities, they’re villages with ideas above their station.

By the same token, some places that very obviously should be cities are nowhere to be seen. Reading and Huddersfield are conspicuous by their absence. Middlesbrough and Teesside are nowhere to be seen.

I’ve ranted about this before – honestly, I don’t care if it’s how the queen likes it, it’s stupid. But what really bugs me is that YouGov haven’t even ranked all the official cities. Where’s Chelmsford, the county town of Essex, which attained the dignity of official city status in 2012? Or Perth, which managed at the same time? Or St Asaph, a Welsh village of 3,355 people? Did St Asaph mean nothing to you, YouGov?

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites.

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*A YouGov employee I met in a pub later confirmed this, and I make a point of always believing things that people tell me in pubs.