Hidden Subsidies via Privatisation Structures We are being Robbed!!

[kermit]

Extremely perceptive article in The Guardian by Aditya Chakrabortty including this quote;

"Under Railtrack, train operators used to pay £3bn a year in rail-access charges; now that figure has nearly halved to just over £1.5bn. Virgin is the third-biggest recipient of this secret subsidy, paying less in 2012 for using the track than it did in 2004. That is despite having a lovely new line to run on, which allows it to offer a more frequent and lucrative service. Without these subsidies, Branson and co would be in the red. But with them, it is taxpayers who are in the red: Network Rail has a debt of £30bn, which is growing at £5bn a year. This is money that will almost certainly have to be paid back by you and me."

Don't be fooled into thinking this is an article knocking Virgin in particular. The whole setup stinks, and begs the question; why will no mainstream political party commit to ending the funnelling of taxpayers' money into private shareholders' pockets.

Read the whole article here - it's good!

http://www.guardian.co.uk/commentisfree/2013/jun/24/richard-branson-defence-virgin-trains

 

[dysonsphere]

Simply stating what most of us here know already.

 

[DarloRich]

Simply stating what most of us here know already.

but what many in the real world do not

 

[kermit]

Simply stating what most of us here know already.

You're right, but it is rare these days to find such a clear articulation of what is so very wrong with the public/private sector setup. It isn't good for us to just shrug and say "so what?". The railways provide a particularly vivid example, but it's everywhere - car park charges to private companies at hospitals, telephone / TV / Radio etc charges for patients in hospitals. If everybody knows these things are fundamentally wrong, but nobody does anything, and people feel utterly powerless or apathetic, sooner or later things turn nasty.

 

[Jordeh]

You're right, but it is rare these days to find such a clear articulation of what is so very wrong with the public/private sector setup. It isn't good for us to just shrug and say "so what?". The railways provide a particularly vivid example, but it's everywhere - car park charges to private companies at hospitals, telephone / TV / Radio etc charges for patients in hospitals. If everybody knows these things are fundamentally wrong, but nobody does anything, and people feel utterly powerless or apathetic, sooner or later things turn nasty.

Privatisation being fundamentally wrong is merely your opinion though. I suspect very few people have an issue with the railways being subsidised by the state, especially the people who pay to use the railways and would only end up paying more otherwise.

 

[LNW-GW Joint]

The article doesn't give figures for the supposed Virgin "taxpayer handout".
As I understand it, access charges are now lower because DfT gives a very large grant direct to Network Rail instead.
I also understand the TOC's costs are insulated from all this, retaining the profile agreed in the franchise contract.
Virgin has run under four regimes since 1997: the original contract; the management contract 2000-06ish; the restated contract until the end of the original contract in 2012; and the new contract not fully finalised.
If anybody can unpick all that in terms of what access charges they actually paid and how it affected the subsidy/premium line, it would be nice to know.
We are getting more heat and not a lot more light with articles like this.
There seem to be two camps: "private profit bad" and "private profit good", with the facts being selected to support what people want to believe.

 

[yorksrob]

In this example, it seems to be more the seperation of track and train that is causing the issue, rather than privatisation per se. For example, who‘s to say that the current track access charge Isn‘t the "correct" one and the 3bil one overinflated. Unfortunately, without an integrated railway it‘s impossible to have any sense of whether the taxpayer is paying the correct subsidy because of the disconnected between where the public money is going in (i.e. NR) and the service provided, with money going to profit along the way.

Then there's the issue of how much InterCity services should pay towards capital improvements etc. What is capital investment and what is routine maintenance, and how costs for a capital improvement with a lifespan of forty years should be spread over several shorter franchises etc.

It's all a bit opaque really.

Please don't think I'm sticking up for privatization btw

 

[swj99]

I was reading something recently which said that when the railways were privatised, they were sold for 3bn, and are now 'rented' back at a cost to the taxpayer and fare paying passengers, of 11bn, per year.

 

[DavyCrocket]

And don't forget the extra money given to TOCs in London for instance to staff stations. On plus side it encourages more PT use and safety but this monetary gain then goes straight to the TOC!

 

[kermit]

I'm prepared to believe that people arguing about privatisation will present figures to suit their arguments. Yorksrob's use of the term "opaque" sums it up nicely. I have no particular beef about Branson, in fact I thought his proposal to run the National Lottery as a not-for-profit outfit was inspired, and in protest at the government's rancid choice of Camelot, I've never bought a single ticket. Why, though, wasn't a similar model proposed for the railway? Passengers are obvious and suitable interested parties to become shareholders, as customers of the Co-op can for £1. If BR had a problem, it was that the public, who owned it, had little sense of ownership or connection with it.

 

[Darren R]

Privatisation being fundamentally wrong is merely your opinion though. I suspect very few people have an issue with the railways being subsidised by the state, especially the people who pay to use the railways and would only end up paying more otherwise.

You're probably right in saying that very few people have an issue with the railways being subsidised by the State. But I think most of us would prefer the subsidy be spent on, oh, I don't know, the trains and infrastructure rather than the vast bureaucracy to make the whole system work. Much of the increase in state subsidy is swallowed up by the increased cost of running the railway. That is not value for money - not for either passengers or taxpayers in general.

 

[dysonsphere]

Bureaucracy is killing us slowly, there was a time when local rubbish collection was run by 1 Manager 2 foreman and 1 office worker to answer the phone and collate time sheets. Now theres a whole department to do the same task not as well.

 

[NSEFAN]

If BR had a problem, it was that the public, who owned it, had little sense of ownership or connection with it.

If the general public took more interest in what's going on with the trains, perhaps they'd be in a better shape regardless of if they were privatised or nationalised.