UK railway line nationalised

Ham'nd'egger

One for the file of how not to privatise a public service. Those who want Dublin Bus and Irish Rail sold off should read this and weep

http://news.sky.com/skynews/Home/Business/East-Coast-Main-Line-Falls-Into-Government-Hands-After-National-Express-Walks-Away/Article/200907115326484?lpos=Business_Second_UK_News_Article_Teaser_Region_3&lid=ARTICLE_15326484_East_Coast_Main_Line_Falls_Into_Government_Hands_After_National_Express_Walks_Away

The loss-making East Coast Main Line will effectively be nationalised after transport group National Express was unable to pay £1.4bn back to the Government. The company has failed to renegotiate the deal to pay back the money over the life of its franchise because passenger growth stalled during the recession. Transport Secretary Lord Adonis said he had set up a publicly-owned company which will take over the London-Edinburgh line, probably at the end of the year.

He added that the Government may terminate National Express' other rail franchises - East Anglia and the London to Tilbury and Southern franchise c2c. "It is simply unacceptable to reap the benefits of contracts when times are good, only to walk away from them when times become more challenging," he said. Other National Express lines could be confiscated. Train services on the East Coast Main Line will not be interrupted, Lord Adonis said.

National Express could be on course for a legal battle with the Government over its decision. The company has taken "clear and detailed" legal advice and believes the Department for Transport would not have the right to recover losses from the breach of the franchise agreement, or take over its other rail contracts. Union officials welcomed the return of the rail line to Government ownership after the "chaos" of privatisation.

Bob Crow, general secretary of transport union the RMT, said: "We welcome this renationalisation of the East Coast route but this shouldn't be a short-term, crisis measure. "It should be a long-term solution to the chaos that privatisation has brought to the UK's most lucrative rail franchise.

"RMT's national conference will send a clear message to the Government today that they should strip National Express of their other franchises and use this opportunity to begin the process of renationalising the rail network."
The East Coast operation was expected to lose £20m in the first six months of this year.

Meanwhile, National Express' chief executive is resigning. Richard Bowker, who joined the group in 2006, will leave at the end of August and will be replaced by Ray O'Toole.

L1011

Wasn't the Connex South Eastern franchise temporarily nationalised too? Isn't the first time in that case. They'll run it till the franchise runs out and let it out again.

dowlingm

Hang on though.

ECML was only "loss making" in that the government required a huge franchise fee to prop up the loss making franchises elsewhere in the network. The question is therefore whether franchise fees are appropriate in a privatised environment, or should NEX have been allowed to lower fares on ECML and the government obliged to fund loss making lines in a different fashion.

(hmmm... high fee for rights leading to unsustainable business model - sounds like Setanta Sports?)

icdg

Strictly speaking, it is not the East Coast Main Line that is being nationalised - it is still in the hands of its owners since 2001, Network Rail. Whether or not Network Rail is a state company or not is a matter of much debate, though most people take the view that if it walks like a duck and quacks like a duck, it must be a duck - i.e. the company's revenue is determined by the Government, the company's policies are determined by the government, and the Government is one of its members...

What is being taken into state hands is InterCity East Coast, a passenger train franchise (train operating company, TOC) which operates between London and Edinburgh. The TOCs are basically special purpose vehicles who own practically no assets (maybe an office somewhere) and whose only purposes are to run passenger railway services. They are effectively renting the right to manage (and benefit from the revenue, if any) passenger railway services from the British Government. When the franchise changes, the top management change but everyone else stays in their jobs. They are a wierd creation and I don't think there is any other railway in the world run in quite the manner that National Rail is.

New Zealand privatised its railways around the same time the UK did, but last year took the railways back into public ownership. Germany has some tendering on a local level but Deutsche Bahn still has the monopoly on InterCity services. Even in the United States and Canada, where the railways are privately owned, intercity passenger railway services are operated by state-owned companies (Amtrak and VIA). So there is no system IMO quite like Great Britain's and the manner BR was privatised was, perhaps a good idea in theory but bad in practice. Don't get me wrong, rail franchising produced a number of benefits such as a massive investment in rolling stock, but overall I think the pain outwieghed the gain. The ironic thing about GB rail "privatisation" is that it ultimately resulted in more government management of the railways than ever under BR (which ran itself, mostly) and the second most ironic thing about is that the only major success in privatisation, the frieght sector, is run by a company which is ultimately wholly owned by the Government of the Federal Republic of Germany!

L1011

...and the German govt. also own Chiltern Railways, a passenger TOC!

Zoney

icdg wrote: »

Don't get me wrong, rail franchising produced a number of benefits such as a massive investment in rolling stock, but overall I think the pain outwieghed the gain. The ironic thing about GB rail "privatisation" is that it ultimately resulted in more government management of the railways than ever under BR (which ran itself, mostly) and the second most ironic thing about is that the only major success in privatisation, the frieght sector, is run by a company which is ultimately wholly owned by the Government of the Federal Republic of Germany!

That investment was paid by the same people ultimately - the public. Private companies' money ultimately comes from the public - that's why it is indeed the business of government and the public to ensure companies are kept in check and cannot absolutely do as they please with their money (obviously one has to allow as much freedom as is feasible).

It would probably overall have cost less to simply fork out for investment in the existing British Rail.

It doesn't take great imagination to realise that any foray into privatisation of rail or indeed bus (e.g. Dublin bus) here would ultimately be a costly exercise and any benefits would only be as a result of extra money being put in (by proxy and not as obviously from the public as direct funding public services).

Really all privatisation seems to offer is less transparency in terms of how much we are all collectively paying, less work for the govt. (especially if they don't even bother to properly regulate private services) and nice cushy numbers for particular businesses and their owners/shareholders. Any improved services or such that private companies pay for to try and attract business (as indeed they are perhaps in some cases more likely to do than a public operator) will in the end have to be paid for by that company's customers (and as we can see in the UK, if the company can't make a good thing out of it, the taxpayer picks up the bill for failure too).

Cool Mo D

Privatisation in the UK is strange though - it's not really that private. The Government owns all the infrastructure through Network Rail, after the failure of the really private Railtrack, and they set the terms of the franchise agreements. Since it's the franchises that own the trains, not the private companies, and the Government sets the conditions for the franchises, they have ultimate control of the rolling stock too. If a franchise expires, or breaches it's terms and conditions, they can run the service without buying back anything from a private company.

The private companies don't actually own anything - they are just contractors who organise and run the services.

icdg

Cool Mo D wrote: »

Since it's the franchises that own the trains, not the private companies

They don't even own the trains - the Rolling Stock Companies (there are three of them) do. The idea was that they would bid for contracts to provide rolling stock to TOCs, but since many TOCs can only run a certain type of rolling stock, that usually, only one ROSCO has, this negates the whole point of them. For example, an InterCity 125 will be only needed by a company operating InterCity services, while a company operating in the Network SouthEast area will want commuter railcars. ROSCOs are essentially licences to print money (which is why, er, they are owned by banks...).

The private companies don't actually own anything - they are just contractors who organise and run the services.

Exactly - they own nothing except the right to provide passenger train services under certain conditions for a certain period of time. End of.

antoinolachtnai

I've done a little work in rail-land in my time, and for me, a lot of the problem with the british railway system is its own scale and success. There is no real model for coping with that scale and success.

See
http://www.dft.gov.uk/about/strategy/whitepapers/whitepapercm7176/multideliversustainrailway?page=5

Note that whilst the number of passengers is only a bit more than 1955, the passenger miles are a lot further, and the amount of track actually in use is much less than in 1955.

An awful lot of people want to travel on the system. But it is extremely difficult to maintain the infrastructure and to scale it up. When you have 'through' trains and the necessity for trains to cross over in front of one another, the whole switching becomes very complex.

It requires absolutely enormous investment.

It is very hard to repair or refurbish a railway. Outsiders have very little concept of just how hard it actually is. Most work has to be done in remote locations, overnight, in one night. Nearly everything has to be brought in by rail. The line has to be closed to do the work. Specialized skills and equipment are needed, and it may need to be brought in from other regions. Even an overnight 'possession' (as they call it when a section is closed to other traffic) causes quite a bit of disruption.

A bit of stupid carry-on goes on with the TOC's but if the lines aren't highly reliable, and if there isn't plenty of capacity, then the schedule falls to bits and everybody suffers.

Cheeble

It's easy to knock the "privatised" industry model, but be careful about what you compare it with. The old nationalised British Rail's services weren't exactly a model of a perfectly run railroad. IMO one thing that the period of privatisation has achieved is that the railways are now run for the passengers, not for the staff.

On a philosophical level, I think that transport infrastructure is such an important national asset that it ought to be run by governments: on a practical level, governments don't have a good track record of doing so.

...Private companies' money ultimately comes from the public...

Yes, in the same way that the public's money ultimately comes from private companies through wages, pensions, etc. It's a circular argument.

Zoney

Cheeble wrote: »

Yes, in the same way that the public's money ultimately comes from private companies through wages, pensions, etc. It's a circular argument.

It's not a circular argument. There is a starting point - actual work by much of the public.

Cheeble

Zoney wrote: »

It's not a circular argument. There is a starting point - actual work by much of the public.

Work for whom, and why does somebody want the work done? It's still circular, that's the whole point about money: it circulates around the system.