City AM: Full privatisation

[EM2]

A number of the ATOCs in the L&SE region make nett payments to the governemnt for operation of the rail services. If NR was privatised it would be able to get its funding from teh markets which are more reliable than government funding. If the companies were allowed to operate the businesses without statist interference, the other operators are also likely to be profitable - or at least very close to that.

And could they, in your opinion, maintain (or increase) the current service patterns whilst doing so? Or, in order to become profitable, would they need to pare back services on lightly-patronised routes?
What would happen to NR's funding when the markets crash (as seems to happen with quite alarming frequency)?

 

[anme]

[planning] is handled by NR. ORR and DfT get involved around funding, policy, and regulation.

First, thanks for responding to my questions. Despite many previous attempts, you are the first advocate of privatisation to do so.

My understanding is that planning covered by franchise commitments (as in "there will be two trains per hour from London to Leeds") is done by the DfT, which, figuratively if not literally, means Whitehall. According to reports, this level of planning may go down to the level of cleaning schedules. I'm not sure this is a great demonstration of private sector dynamism.

Capital investment in NR projects largely comes from Government funds, however the structure of NR and the level of capital investment were designed to ensure that NR would take that debt with it on full privatisation but would not be so high as to adversely affect its credit rating.

True. But let's be clear. This is not private sector investment. This is a "clever" way of investing government money without affecting the government's credit rating. There is very little private sector investment in the railways. The structure, with short term franchises, means there is little opportunity for the private sector to invest.

They [some ToCs] are 100% privately owned entities in based in the UK, but yes some are partially foreign owned.

My point is the some are wholly or partially owned by foreign *governments* - for example Arriva are owned by Deutsche Bahn. I've always wanted to hear what an advocate of privatisation thinks of this (I'm undecided and would like to understand the arguments). Is something really privatised if it is owned by a government? Would it be a good idea for the government to set up, for example, a new "British Rail" to bid for contracts outside the UK? The UK seems to be missing out!

BTW, for the record and speaking from very regular experience, I strongly disagree with your claim that standards of service on the railway are higher in the UK than elsewhere in Europe.

 

[yorksrob]

No; undertaken by the government with the intention of future privatisation. There was no basis for the investment otherwise.

Or the Glasgow electrification in 1974, or the Kent electrification in 1959. (I'm presuming Sir John Major wasn't briefing the railway about his future plans to privatise from his parents flat in Brixton).

The basis for investment is that either you decide as a matter of policy that you need a working railway, in which case you need to invest, or you don't.
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It is really basic stuff - rather like first-grade arithmetic - it is fundamental to the characteristics of a business such as an infrastructure company like NR. Think of Government Bonds; they are essentially long-term capital borrowings against the reputation of the UK PLC for repayment of the bonds.

You are correct in that the arithmetic is really very simple (so simple that even a free marketeer should be able to understand it).

Any train which society deems necessary to run but which doesn't recoup all of its costs from paying passengers needs to be paid for either by other services which do - with requires regulation, or by the state, in which case the paying client will always have an interest in how its money is spent.

The only alternative is much smaller railway in a spiral of decline as people have fewer destinations and trains run at less convenient times etc.

 

[Deerfold]

No; undertaken by the government with the intention of future privatisation. There was no basis for the investment otherwise.

Are you seriously saying that the 70s and 80s rolling stock on the ECML was provided only because privatisation was going to happen in the 90s? I find that unlikely given that Thatcher's government was not in favour of rail privatisation (despite being in favour for just about everything else).

 

[Manchester77]

Are you seriously saying that the 70s and 80s rolling stock on the ECML was provided only because privatisation was going to happen in the 90s? I find that unlikely given that Thatcher's government was not in favour of rail privatisation (despite being in favour for just about everything else).

Isn't it more that Thatcher didn't care enough about the railways to privatise them because she didn't really like the railways? It was BR, the NHS and the Royal Mail that it seemed she wouldn't privatise, think the phrase was she wouldn't privatise the queens head (with regards to the Royal Mail) and yet her successors have!

 

[Deerfold]

Isn't it more that Thatcher didn't care enough about the railways to privatise them because she didn't really like the railways? It was BR, the NHS and the Royal Mail that it seemed she wouldn't privatise, think the phrase was she wouldn't privatise the queens head (with regards to the Royal Mail) and yet her successors have!

I don't think she was a big fan - but if makes little difference to the arguement that investment only happened because privatisation was in the offing.

 

[Tom B]

BA, P&O, American Airlines, First Bus, Telecoms providers, supermarkets, health care, etc, etc.

I'm not sure whether you're being sarcastic or not, but if not I suggest you open your eyes.

First Bus a successful company? Look at what they have done to the former SYT operation - once arguably the best service in the country (public run). In broad terms, look at the decrease in passengers on the buses since deregulation.

Telecoms providers, the PO were slated for taking too long to install a line - it took three months to do a simple installation for me last year, at least partially because of contractors being incompetent and needing a proper (ex-PO) engineer to attend. If you think they provide good customer service, I suggest you have never had to speak to them!

Private health case in the UK depends upon (in a parasitic manner) the NHS - they need somebody to train their medical staff (before they poach them) and somebody to pick up the pieces when something goes wrong in the private operating theatre (why have your own private casualty department when you can dial 999?).

 

[yorksrob]

Isn't it more that Thatcher didn't care enough about the railways to privatise them because she didn't really like the railways? It was BR, the NHS and the Royal Mail that it seemed she wouldn't privatise, think the phrase was she wouldn't privatise the queens head (with regards to the Royal Mail) and yet her successors have!

Whilst I doubt Mrs T was a fan of the railways, I suspect it was more that she couldn't see a form of privatisation that would work and be profitable.

 

[ainsworth74]

Whilst I doubt Mrs T was a fan of the railways, I suspect it was more that she couldn't see a form of privatisation that would work and be profitable.

Smart woman that Mrs T

 

[yorksrob]

Smart woman that Mrs T

Fair point in some ways !

 

[HH]

How is it that the publicly owned railways in Northern Ireland managed to attract and retain additional passengers - rising to record numbers - during the same period?

LOL. They've had a quantum change in the services provided.

 

[yorksrob]

LOL. They've had a quantum change in the services provided.

Which, to be fair, re-enforces Railsigns' point.