I posted this video on YouTube this morning. It is a particularly current topic. Railways are an issue in which I have particular interest. I first read a textbook on the economics of the nationalised rail industry in 1975. I still have it somewhere. And I have never changed my opinion about the importance of state control of our railways. In that case Labour's plans appeal to me, but I have reservations. Watch on….
The transcript is:
Labour's plans for renationalising our railways make sense as far as they go, but they don't go far enough.
Let's talk about the basics of this. The basic fact is that railways should never have been privatised. As long ago as a century ago, in 1923, Winston Churchill and others realised that the idea that private companies could run railways was really rather bizarre because that imposed enormous cost and did not create competition, simply because there's rarely going to be more than one set of tracks between two places in the country. Sometimes, but rarely.
And so it made sense to bring companies under common control. Now in 1923, they backed off nationalisation and instead went for something called ‘the grouping'. There were four large companies in the UK. That didn't really work. Frankly, it didn't produce the benefits they wanted. So, in 1948 we got British Railways.
That worked until the era of the 1970s when a lack of finances, or what the Labour Party and the Tories of that period thought were a lack of finances, undermined the delivery of a combined new rail network, because of underinvestment in the main. And then we limped towards privatisation, which was meant to bring in vast amounts of new private capital to transform our railways.
Let me give you some numbers. In the last year, 2022-23 - that's the last one we've got data for - we know that the government subsidised the UK railway system by nearly £20 billion in a year. Now that was much higher than before Covid, but that's the total cost. The total amount of private capital that was brought in by the railway operating companies was just 4 percent of that total.
So let's not pretend we have an effective privatisation model of railways right now. We haven't. We've got a nationalised system of railways already, and we need that system because it will deliver efficiencies.
I bet you, if you travel regularly on railways like I do, you have suffered the problem of arriving in a station to see the connection that you were hoping to make disappearing because it's run by another train operating company than the one that you came in on and they are not required to coordinate with each other.
If we have an integrated railway, which is what I hope Labour will try to deliver, then such things shouldn't happen. The customer, and not the profits of the operating company, should come first. So, if Labour do that, we should get benefit.
And they will be able to fund benefit, because nationalised railways are cheaper to run.
Why? Because there's vastly less accounting to do. Nobody has to agree who's responsible for a train running late. It doesn't matter whether it's the operator, RailTrack, or somebody else. It's late, and the compensation is due. Hundreds of people have to work that out at present.
There's also no problem with ticketing. If I move from where I am in East Anglia to, say, Lancashire, I'll go through several railway operating companies to get the journey completed. They have to agree how they split the ticket. Now you can say there's a formula to do that, but setting the formula still takes time.
And the point is, all those costs will be saved. Everything should work better as a nationalised railway.
But one thing - and this is where Labour's plans don't go far enough - Labour needs to have its own train leasing company, because right now all the trains run on all the British railways are leased by three companies to the railway operating companies, and those leasing companies make a fortune.
They make around 25 percent of what they charge to the railway companies a year - probably a billion in profit. That's excessive, unnecessary, inappropriate, call it what you will. Labour has to invest in its own trains for the future.
The average train in the UK is 16 years old. We now need new investment. We need to maintain the ability to make trains in the UK. We need to do so persistently. Labour has to also fund it with government because that will be cheaper than the option of using private finance. We know that. Labour has to genuinely believe in nationalisation.
Its claim that it's not interested in dogma when it comes to this issue is ridiculous. It should be interested in economics and the economics of this demand a nationalised railway service.
Labour, stop prevaricating. Deliver what this country needs. And that is a nationalised railway service.
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Could you explain why we need a train leading company? It seems strange to me that a a company that owns the tracks and runs the trains, shouldn’t also have it’s own rolling stock. Surely rolling stock companies are the clearest exemplar of a rentier company.
They are
My confusion is over why Britain needs ‘its own train leasing company’ rather than its own trains. To whom (or what) would Britain’;s train leasing company lease the trains? To Britain’s railway service. Why is there a need for a lease between the 2?
There isn’t except for accounting….and export sales
The campaign group We Own It call train leasing the “gravy train”. This is from February:-
https://weownit.org.uk/blog/riding-rosco-gravy-train.
To railways, might I add the national grid for electricity as crucial infrastructure for renewed public ownership, especially if net zero is a target to be taken seriously.
Yes. Agreed.
Thanks for that, Nigel. One of my other passions is railways, and I’ve looked that up. It shows that most of the UK’s rolling stock is owned by US and Canadian companies, plus some French and German, who are the beneficiaries of vast profits mainly subsidised by the UK government. Their CEOs are on million pound salaries. There’s a petition to bring the whole thing into public ownership which I have signed.
It would be interesting to know the value of the land and buildings once owned by British Rail that have been sold off to private owners since 1979 and the subsequent privatisation.
The context being the 15% of UK land previously owned by the British people that has been secretively asset stripped into private hands since Thatcher.
It is a racing certainty that the ROSCOs will be over LINO like a rash – donations here, donations there. LINO will then fold and at least part of the privatisation done by Major-the-imbecile will remain. UK serfs are cannon fodder for big finance – which controls the two main “political” parties – which in trun are little better than puppets- their strings pulled by afoe said big finance.
Personally, I favour confiscation of all rolling stock & a gov that says “see you in court” – whilst at the same time sicking HMRC all over the ROSCOs & instructing HMRC to go
after their main managers etc personally. Turn up the heat on a class of company & managers that have gouged the Uk for more than 30 years. Ditto Capita, Serco and all the rest.
Now Labour have finally found some sense (though will probably underfund) how about doing the same with water, electricity and gas?.
Thomas G. Clark has an article on this subject
https://anotherangryvoice.substack.com/p/reasons-sceptical-labour-rail-renationalisation
Are there any other countries with successful railways, that are privatised as much as the UK? I can only think of the USA whose rail network is comically bad. Makes the UK’s look fantastic by comparison.
I can think of none
I’m likely optimistic here, but maybe Starmer is testing the water. If there is a positive reaction then he’ll promote full nationalisation. I doubt it, but it’s possible.
I’m afraid you’re hopelessly optimistic. This is focus group shit. Starmer has seen a headline (‘rail kind-of-nationalisation’) that will earn kudos with the gullible progressives who want to believe a left of centre Labour Party still exists, while not spooking the city-types who have such an influence on our democracy (‘kind-of-but-not-really-nationalisation’). Utterly cynical. In fact, they won’t go any further than the Conservatives already has (bring the costs back in house at the end of a franchise until there’s a commercially viable business that can be given away again). I’m sorry, but how anyone can have any hope in a Starmer government eludes me.
Thank you for the historical perspective, Richard. It provides essential context for the economic reality. We can only hope that a future Labour government will make the logical conclusions.
Proposals for railway nationalisation go back much further than the 1920s: it was provided for under the Railway Regulation Act of 1844 – introduced by W E Gladstone, President of the Board of Trade in Peel’s Tory government… and has been a subject of debate on and off ever since.
But far too often more in terms of political dogma than whether it would be a ‘good thing’ (whatever that might mean) for the country: a comment I have made is that the railways were privatised in the 1990s for the same reason that they were nationalised in the 1940s – because it was the dogma of the party in power. But the underlying railway problem remains: are the railways a public service to be run in the national interest, or a commercial undertaking to be run for private profit?