The government is now on the back foot over transport. Even Daily Telegraph readers want renationalisation. There’s a golden opportunity to reverse the madness of privatisation...

Bring back publicly owned rail

WORKERS, NOV 2012 ISSUE

Rail unions and transport campaigners scored a major victory last month as the government succumbed to massive pressure over high rail fares and decided to peg future fare increases. At the same time, in the wake of the West Coast franchise fiasco, the franchising system that underpins the privatised railway began to collapse under the weight of its own internal contradictions.

The government had been committed to raising rail fares by up to 11 per cent next year along with similar increases in future years, well ahead of average pay increases. However, during September these massive increases were scrapped, and the rises limited to the Retail Prices Index (RPI) plus 1 per cent until 2019. Tensions between Tories and Liberal Democrats in the government added to panic among many commuter-belt MPs as fares campaigners impressed on them the electoral consequences of the hit on living standards. The forthcoming by-elections in Corby and Croydon have clearly concentrated minds.

But unions were not satisfied with giving the government a bloody nose. White-collar rail union the Transport Salaried Staffs’ Association warned that planned increases were still “inflation busting” for the next seven years. “Ministers are misleading passengers when they claim they will end inflation busting increases as soon as possible,” said General Secretary Manuel Cortes, highlighting the fact that passengers now contribute 60 per cent towards the cost of running the railway, £6 billion a year, and Chancellor Osborne plans to increase this to 75 per cent.

Not that George Osborne is willing to pay! The arrogance of the Tories was once again shown in the wake of the Andrew Mitchell “plebgate” resignation as Osborne decided he was entitled to sit in first class with a standard class ticket, something it seems he has done on a number of occasions. It seems that rail workers have been unimpressed by Osborne’s arrogance, and have presented him with the choice of sitting with the “plebs” in standard class or coughing up the first class fare!

An annual season ticket from Corby to London will cost over £7,000 next year. This compares to £336.17 a year in Italy for a 22-mile journey from Velletri to Rome. In France, the 24-mile journey from Ballancourt-sur-Essonne to Paris costs £924.66 a year. Britain has the most expensive rail fares in Europe.

The RMT says since privatisation more than £11 billion of public funds has been mis-spent. It says that removing complex interfaces, transaction costs, increased debt servicing and private profit and dividend payments from the industry could save over £1 billion a year, resulting in lower fares and lower public subsidy.

Publicly owned

The East Coast mainline is currently run by Directly Operated Railways, publicly owned and controlled, following the collapse of two previous private operators. Last year It made a profit before tax and service payments to the Department for Transport (DfT) of £195.7 million, an increase of £13 million. Passenger journeys on East Coast, which runs trains from London to Yorkshire, the North East and Scotland, increased by 2.1 per cent. Customer satisfaction at East Coast rose by 2 per cent, and the latest punctuality figures were its best since records began in 1999. All of which adds weight to those who argue the case for renationalisation of Britain’s railways.

Transport workers on the march in London at the TUC demonstration, 20 October.
Photo: Workers

This was boosted following the government’s decision to scrap the refranchising of the key West Coast route. Having announced that First Group were to take over from Virgin, ministers were forced not only to reverse their decision, but to put the whole of their refranchising timetable on ice while they try to sort out how to salvage the situation. The cost to the prospective franchisees of the bidding process are being paid back to them. And that’s not just Virgin and First – there were two other bidders who must be reimbursed. Given that First took a £240 million hit in share values as a result of the decision (for which they will probably get compensation!), the cost to the public purse could run to hundreds of millions of pounds.

Legal challenge

The crisis was precipitated by incumbent franchisee Virgin mounting a legal challenge when it lost the contest for the next franchise period. This has led to the uncovering of massive flaws in the bidding process, and has raised serious questions about the whole process even among advocates of a privately run railway.

The government has of course tried to deflect any responsibility for the mess, scapegoating a few civil servants – to the ire of civil service union PCS, which has fingered massive cuts in staffing in the DfT as being part of the problem.

The franchising system is supposedly “apolitical”, with government ministers having no influence on the outcome of the bidding contests. But the way in which Virgin boss Richard Branson has been able to influence events is also alarming, with reports that he has been pulling strings in Downing Street to reverse the decision to award the West Coast franchise to First Group. And First Group has itself gone suspiciously quiet about the whole sorry affair, with some pondering on how much “compensation” they will get following the abandonment of the West Coast refranchise. There is a strong whiff of corruption.

Against the background of a growing trend for outsourcing and contracting out in other public services like local authorities and the NHS – where companies like Virgin are looking for quick profits in providing healthcare – public service workers and service users should sit up and take heed of what is going on in the rail industry!

The problem with the current rail franchising system is that train companies can submit “fantasy bids”, knowing they can keep raising fares or just walk away or seek bailouts if they can’t sustain large profits. While they make large profits, they receive in nearly all cases huge subsidies from the taxpayers. And failure to pay money they owe the taxpayer for broken commitments doesn’t stop them being allowed to bid for more rail services. Over £450 million is being paid to another eight different profit-making train companies who've failed to meet the targets they predicted in their own bids.

The government will now be extending Virgin’s current franchise by up to a year, then holding not one but two further franchise bidding rounds for West Coast, all in order to keep the service in private hands. It is ironic that allowing Virgin to keep the franchise may bring the government into conflict with EU law – it was of course the EU that began the “liberalisation” of railway across Europe that led directly to the privatisation of Britain’s railways.

Renationalisation

There are signs that the Labour Party may at last be moving away from its previous position of support for the franchising system for Britain’s railways. Even the Daily Telegraph has run a readers poll which shows a majority in favour of renationalisation, and it has perhaps dawned on the likes of Labour Transport spokesperson Maria Eagle that acting on the party’s policy of returning the railways to public ownership and control might be electorally popular.

But shadow chancellor Ed Balls has clearly not got the message (does he ever?), angering the rail unions at the Labour Party conference by continuing to peddle the long-discredited line that renationalisation will cost billions. It won’t – the government merely has to wait for a franchise to end, and then take it over, as happened in East Coast. And there are a number of effective ways of bringing franchises to a premature end! It is certain that the Labour Party can't be trusted – we have to continue to look to our own devices, and look sharper.

There is now a golden opportunity to force an end to the madness of the privatised railway that is costing workers dear, both as taxpayers and fare paying passengers. The rail unions must be supported in their efforts to ensure that this opportunity is seized and Britain’s railways are run as a public service, not to line the pockets of billionaires like Branson. ■