BBC Nationalisation/Privatisation Article

[jon0844]

Great ticket modification there. Can't even tell where changes were made!

I can't deny that DOR has done well, but it's a route that has always done well. Even National Express didn't do a massively bad job, besides offer to pay too much to be able to run it.

And when I heard about EC being somewhat disinterested in doing certain things, like actively seek to protect revenue, it just sets the alarm bells ringing that the same policy might spread to the tougher routes. A return to an open station policy, or reducing revenue inspectors because it doesn't really matter if revenue is lost when the taxpayer picks up the tab anyway.

What's more - another Intercity route that has done pretty well is Virgin Trains. So that surely shows that a private operator can also do well, when given a pretty easy service to run.

 

[trainosaurus]

Great ticket modification there. Can't even tell where changes were made!

I can't deny that DOR has done well, but it's a route that has always done well. Even National Express didn't do a massively bad job, besides offer to pay too much to be able to run it.

And when I heard about EC being somewhat disinterested in doing certain things, like actively seek to protect revenue, it just sets the alarm bells ringing that the same policy might spread to the tougher routes. A return to an open station policy, or reducing revenue inspectors because it doesn't really matter if revenue is lost when the taxpayer picks up the tab anyway.

What's more - another Intercity route that has done pretty well is Virgin Trains. So that surely shows that a private operator can also do well, when given a pretty easy service to run.

Surely the point is more about the financial side of things than the way services are run? I don't have any major gripes with the way services are run at the moment, but I do have a massive problem with the way shareholders at each TOC receive huge profits as a result of huge subsidies from taxpayers, and at the same time fares are increasing at an alarming rate.

If the profits went back to the government we could see reduced fares and/or reduced subsidies and/or improved services.

 

[LNW-GW Joint]

Well why not make it that the only ROSCO is...HM Government?
DOR could be used for that function?
Same with the RSP...make it so DOR run it similar to a PTE?

DOR is a small railway operations consultancy.
A ROSCO is essentially a bank. They paid HMG £2bn for the trains, and bought more since, and expect a return on their investment.
The government doesn't want to be either a bank or the proud owner of a complicated portfolio of rolling stock.

RSP (if you mean the ticketing system) is just a fiendishly complicated retail distribution system.
Why would the government want to run that?
They already set the rules (regulated fares, railcards etc) and let ATOC and various databases do the hard work.

 

[ainsworth74]

I don't have any major gripes with the way services are run at the moment, but I do have a massive problem with the way shareholders at each TOC receive huge profits as a result of huge subsidies from taxpayers, and at the same time fares are increasing at an alarming rate.

If the profits went back to the government we could see reduced fares and/or reduced subsidies and/or improved services.

What 3% profit out of the pound? Forgive me but it's hardly massive. Northern Rail's revenue or turnover is measured in the hundreds of millions, it's profit for share holders is £30m... You can argue it's £30m too much but I wouldn't say it's massive or huge.

Also remember the reason that fares are increasing is in part because we're moving from taxpayer/fare payer 75:25 split in funding to a 50:50 split. If you're going to get there then prices are going to have to go up.

Improved services? So IEP, Crossrail, Electric Spine, Northern Hub, North-West Triangle electrification and so on aren't improvements? Let alone Kings Cross or VHF on the WCML or Eureka on the ECML (though Eureka isn't perfect). Lets not forget that something like 4,000 more service run per day now than did twenty years ago.

Did BR ever manage to lower fares when it made money?

There is definitely a need better integration and a wholesale change in the structure of the industry but I'm yet to be convinced that resurrecting BR is the way to fix the problems.

But forgetting all of that I doubt any government will re-nationalise simply because they've got the industry right where they want it. If things go wrong they can blame the train companies, when things go well they take the credit for themselves. All whilst being able to control in minute detail what goes on.

 

[YorkshireBear]

But forgetting all of that I doubt any government will re-nationalise simply because they've got the industry right where they want it. If things go wrong they can blame the train companies, when things go well they take the credit for themselves. All whilst being able to control in minute detail what goes on.

To be fair, it is quite clever....... They have done a good job of it.

 

[Tetchytyke]

Indeed.

My view is that most of the problems facing the privatised industry relate to DfT incompetence, and that is something that isn't going to change by resurrecting BR. I don't think they would want to either. The TOCs have been handy whipping boys for many years, especially First, who get all the abuse for DfT screw ups with FGW and Thameslink.

The main issue, IMHO, remains cap-and-collar, where the taxpayer will foot the bill if a TOC gets their sums wrong and loses money and where a TOC can hand the keys back without any sort of financial penalty. That's essentially privatising profit and nationalising risk, as National Express so eloquently proved.

Funny you mention Virgin Trains. Their owner is doing exceptionally well from the franchise. Shame that the taxpayer isn't.

 

[jon0844]

If the profits went back to the government we could see reduced fares and/or reduced subsidies and/or improved services.

Has anyone worked out how much money would go back if every TOC that makes a profit gave it back to the Government? And how it would equate to a fare cut, when my belief is that Network Rail gobbles up most of the money?

And what about the profit that is spent on things to benefit the railway in future years? Surely not all of it is syphoned off?

 

[Aldaniti]

In the context of the privatised railway, the focus on net profit is quite misleading. The true (and often shameful) costs of privatisation also require an examination of turnover and gross profit. Once you do so, you'll see why there are always several operators queuing to have a dip every time a franchise is re-let.

 

[NSEFAN]

Has anyone worked out how much money would go back if every TOC that makes a profit gave it back to the Government? And how it would equate to a fare cut, when my belief is that Network Rail gobbles up most of the money?

And what about the profit that is spent on things to benefit the railway in future years? Surely not all of it is syphoned off?

Isn't Network Rail currently building up a rather large debt by doing lots of upgrades at once? Would all the profit made by the TOCs combined come anywhere close to paying it off? I doubt it.

 

[anme]

What I find is missing in articles such as this is some discussion about what the role of the state should be, and how privatisation/nationalisation fits in with it. They concentrate on their opinions about what would be better for the railways (in this instance, but it could equally well apply to utilities, banks, Post office), but never ask the questions about whether the state should actually be involved in running enterprises, and why.

I find this the most absurd argument of all - don't worry about what works, just make sure it fits with my ideology. I once had a discussion with a member of the Conservative party over whether a particular state owned body should be privatised. I asked him whether it would make the services of this body (and industry) worse. He replied that of course it would, but the government should not be involved in that sector anyway. This is simply idiocy, maybe even madness. There are far too many examples of this kind of thinking from both left and right.

What I find missing from both sides in the debate about the ownership of the railways is any practical ideas about how to improve things. I suspect anyone who looks at the current franchising system would agree that it is broken (even our friend from the Adam Smith institute), but what are the alternatives? How can we actually improve the situation?

 

[pablo]

Journies? Rule the roost? :roll: and what is pre-booking?

 

[Oswyntail]

I find this the most absurd argument of all - don't worry about what works, just make sure it fits with my ideology. .... This is simply idiocy, maybe even madness. ...

I am not sure why you quoted my earlier post, but you do illustrate my point very well. Terms like "idiocy" and "madness" do not offer rational argument for or against state intervention, and I still notice a profound absence of such arguments.

 

[yorksrob]

What I find is missing in articles such as this is some discussion about what the role of the state should be, and how privatisation/nationalisation fits in with it. They concentrate on their opinions about what would be better for the railways (in this instance, but it could equally well apply to utilities, banks, Post office), but never ask the questions about whether the state should actually be involved in running enterprises, and why.

It's interesting that you finish your question with the phrase "whether the state should actually be involved in running enterprises and why"

Couldn't one equally ask the question "whether the state shouldn't be involved in running enterprises and why not", particularly for natural monopolies where arguably transparency of governance and accountability are of more value than a pretence of competition.

Unfortunately the private sector tends to come with a cloak of "commercial sensitivity" which is less of an issue with enterprises that enjoy true competition, but can be more problematic where this doesn't exist.

 

[Oswyntail]

It's interesting that you finish your question with the phrase "whether the state should actually be involved in running enterprises and why".....

Sorry - I assumed that my question implied yours. But there still remains the fundamental question of what the purpose of the "state" actually is. Is it there to provide aspects of civilised life? Is it there to provide the environment within which the essentials of civilised life can flourish? Is it there as a safety net, for when those essentials do not flourish? If the latter, for how long should it intervene?

 

[yorksrob]

Sorry - I assumed that my question implied yours. But there still remains the fundamental question of what the purpose of the "state" actually is. Is it there to provide aspects of civilised life? Is it there to provide the environment within which the essentials of civilised life can flourish? Is it there as a safety net, for when those essentials do not flourish? If the latter, for how long should it intervene?

Truthfully - I don't think there is an answer to that. That's not to say that I don't know - rather, I don't think that there ought to be an answer to that question. To suggest that there should be, implies an ideological rather than a pragmatic viewpoint.

Instead, I think things should be judged on their merits. The post office, with its universal service cross-subsidised by (what should be) its monopoly, should be state run with full public oversight. Supermarkets, where customers benefit from competition, belong in the private sector

 

[Oswyntail]

.... To suggest that there should be, implies an ideological rather than a pragmatic viewpoint.
Instead, I think things should be judged on their merits.

I totally agree - the trouble is that most proponents of arguments either way seem stuck with their ideology. For instance, the presence of an NHS implies, or somehow validates, the presence of a nationalised railway. Or, as in your example, competition between supermarkets justifies a privatised railway.It seems the intellectual flexibility necessary is sometimes too much.

The post office, with its universal service cross-subsidised by (what should be) its monopoly, should be state run with full public oversight....

A good example, but one that still needs the answer to the question "why?". Is it because it is a universal good, but too costly? In which case, why not simply put the price up? Or, like the NHS, should the state be running it so that, in most cases, it can actually be offered as a free service, so that it is available to all who need it?
Fascinating questions, IMHO!

 

[TheWalrus]

Would it be better to fund loss-making services individually possibly by local authorities like they do buses, rather than national funding just giving them a chunk of money if they dont make enough revenue?

 

[yorksrob]

Is it because it is a universal good, but too costly? In which case, why not simply put the price up? Or, like the NHS, should the state be running it so that, in most cases, it can actually be offered as a free service, so that it is available to all who need it?
Fascinating questions, IMHO!

Because the universal service requires a monopoly to protect the relevant cross-subsidy - and monopolies need to be answerable to public scrutiny.
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Would it be better to fund loss-making services individually possibly by local authorities like they do buses, rather than national funding just giving them a chunk of money if they dont make enough revenue?

Unfortunately, the system used to fund bus services is the very worst one possible, as it allows the private sector to cherry-pick profitable routes at will whilst the taxpayer is left to stump up for anything the private sector doesn't fancy.

Interestingly though, I understand the social railway as introduced by Barbra Castle originally relied on subsidies for individual routes before being changed to a block grant to BR in the late 60's. It's interesting to speculate whether if a continued system of route grants had continued, BR would have felt less incentive to try and close those routes that went in the very late 60's and 1970, none of which should have been closed, as they wouldn't have been able to use their subsidy anywhere else !

(I should add, the route subsidies were paid by central Government rather than local authorities).

 

[Drsatan]

Would it be better to fund loss-making services individually possibly by local authorities like they do buses, rather than national funding just giving them a chunk of money if they dont make enough revenue?

One issue with that is that if local authorities were responsible for subsidising loss-making services, then pressures on the authority's budget may mean subsidy is removed. This then leads to a situation whereby the train operator, having had its subsidy cut or removed, then runs fewer services (which may subsequently lead to more services being cut or withdrawn), or stops running loss making but socially viable services altogether.