Britain’s experiment in radical rail privatisation is over

[DavidB-AU]

Quote

Britain’s experiment in radical rail privatisation is over

 

In 2013 the then transport secretary, Patrick McLoughlin, gave a speech to mark the 20th anniversary of railway privatisation. It had been a brilliant success, he said. Britain had turned a clapped-out railway network into the safest, most improved system in Europe. Naturally, there had been “a few wobbles along the way”, but these had been sorted out. Anybody who believed that railways ought to be controlled by the state was “completely missing the point”.

 

Now look at it. On September 21st the transport secretary, Grant Shapps, declared that the model of railway privatisation that Britain has followed for the past two and a half decades had stopped working, and would end forthwith. He did not even pin all the blame on covid-19, which has cut train travel by about three-fifths. So was railway privatisation a brilliant success that went wrong, or was it flawed from the beginning?

 

https://www.economist.com/britain/2020/09/26/britains-experiment-in-radical-rail-privatisation-is-over

 

For a publication that promotes economic liberalism and is strongly pro-privatisation, this is quite a radical view. 

[Pandora]

Wearing my "being objective" hat, and trying  my best to avoid being party political,  I would say flawed from the beginning.

It is not correct to say all privatisation is wrong, but in this case, the wrong model for the Railway.

We saw, 

1)the failure and winding up  of Railtrack and losses to shareholders.

2)the near gifting of the public assets of traction and rolling stock to private leasing companies

3) the  TOCs handing back their franchise contracts mid-term

4)some of the highest fares per travel mile and fare rises  in Europe for travellers

5)the failings in the WCML upgrade,  and GWR electrification projects

 

I praise the Govt for having the integrity to tackle a problem their  political ancestors initiated.

However,  what is for the future, what is the long-term model for the railway?

 

Edited September 25, 2020 by Pandora

[Oldddudders]

The basic concept of separating infrastructure from operations seems to have found favour elsewhere in the world. I wonder if that will continue to be the case. 

[DY444]

3 hours ago, Oldddudders said:

The basic concept of separating infrastructure from operations seems to have found favour elsewhere in the world. I wonder if that will continue to be the case. 

 

The figures may be skewed by the fact that EU member countries are obliged to do it irrespective of whether they feel it to be a better or worse organisational structure.

Edited September 25, 2020 by DY444

[Arun Sharma]

The two main reasons for any form of privatisation of any industry are:

1. As a method of gaining private i.e., non-taxpayer funding for capital infrastructure refurbishment/investment. Often this might be after a long period of insufficient taxpayer-funded injections of money.

2. To remove or reduce the public liability for pension provision of current and new employees of such industries in the future.

 

The reasons for not privatising relate to whether the industry has a strategic or military importance which shouldn't be compromised though in some cases (if not sold to non-national agencies) that can be solved by compulsory renationalisation.

 

It really is as simple as that.

 

[Joseph_Pestell]

5 minutes ago, Arun Sharma said:

The two main reasons for any form of privatisation of any industry are:

1. As a method of gaining private i.e., non-taxpayer funding for capital infrastructure refurbishment/investment. Often this might be after a long period of insufficient taxpayer-funded injections of money.

2. To remove or reduce the public liability for pension provision of current and new employees of such industries in the future.

 

The reasons for not privatising relate to whether the industry has a strategic or military importance which shouldn't be compromised though in some cases (if not sold to non-national agencies) that can be solved by compulsory renationalisation.

 

It really is as simple as that.

 

 

I think that there is a third reason. Politicians don't like the media coverage that they get when anything goes wrong on the railway.

[DY444]

2 minutes ago, Arun Sharma said:

The two main reasons for any form of privatisation of any industry are:

1. As a method of gaining private i.e., non-taxpayer funding for capital infrastructure refurbishment/investment. Often this might be after a long period of insufficient taxpayer-funded injections of money.

2. To remove or reduce the public liability for pension provision of current and new employees of such industries in the future.

 

The reasons for not privatising relate to whether the industry has a strategic or military importance which shouldn't be compromised though in some cases (if not sold to non-national agencies) that can be solved by compulsory renationalisation.

 

It really is as simple as that.

 

 

I don't agree with point 2 (or the security point for that matter) but rail privatisation has failed on both 1 and 2.   Tax payer exposure is now higher than it ever was and the DfT is desperately trying to offload the pensions liability.

 

Re point 2.  Most privatisations came with a crown guarantee for the pensions liability.  A liability that was made significantly worse in most cases by Gordon Brown's pension fund tax raid.

 

Re security.  I worked on a highly strategic military project critical to national security which was delivered and managed entirely by the private sector included in which was the privatisation of strategic military infrastructure.

 

 

[DY444]

7 minutes ago, Joseph_Pestell said:

 

I think that there is a third reason. Politicians don't like the media coverage that they get when anything goes wrong on the railway.

 

Rail privatisation hasn't exactly done much to quell that either

[Joseph_Pestell]

2 minutes ago, DY444 said:

 

Rail privatisation hasn't exactly done much to quell that either

Oh yes it has. How much comment has been made by / demanded of ministers about the recent Stonehaven derailment? Or the train fire in Wales?

[Wickham Green too]

24 minutes ago, Joseph_Pestell said:

Oh yes it has. How much comment has been made by / demanded of ministers about the recent Stonehaven derailment? Or the train fire in Wales?

Too much covid in the news to bother politicians with train set matters .................. more important things like sorting out the Brexit mess largely disappeared off the radar too.

[JimC]

39 minutes ago, Arun Sharma said:

The two main reasons for any form of privatisation of any industry are:

 

That's debatable, of course, but turn that around, what is the point of nationalisation? It was primarily about an arguably discredited political philosophy, and secondarily about reducing the huge debt owed to the private companies after WW2.  The financial side at least was a failure, and you could argue that there hasn't been a successful model of how to run the railway system since economic conditions had even the slightest resemblance to current ones.

[woodenhead]

Strategically privatisation gave the Government distance when large monopolistic industries came face to face with changing industrial realities.

 

The UK had a wealth of aging, resource heavy, union dominated industries falling behind emerging economies and were a millstone around HMGs neck.

 

The Government had the choice to invest heavily, address union issues and rebuilld these industries anew or allow private companies to try and do so and if they failed it was not the Government's fault.

 

Looking back now, privatisation raised a lot of capital for the Government, allowed the UK public to be involved in decision making (through buying of shares, which they then quickly sold) and then not worry what came next.  In some respects it was a bit of a con - not many members held on to their shares, the businesses were sold cheap then large investment houses purchased them at a higher price from Joe Public who felt they had made a profit to spend on themselves, the large investment institutions got their hands on things that could later be broken up and sold off.

 

You could argue perhaps that the government economists could see what the future held, recognising there would be a temporary lift before the realities that these monolithic industries would need to radically change, sell or simply be absorbed into larger international conglomerates but it would now be something that the Government was not responsible for and could deflect away from.  A more unpalatable thought would be that those in charge knew if they invested wisely in the rising economies abroad and waited they would gain massively later on when the UK industries failed or became absorbed into these new international organisations.

 

Back to Railways - they were never suitable for selling off and the Government knew it because left wholly to the private sector Serpell would have been enacted quickly and such pruning would probably have killed off the rest apart from maybe commuting into London.

So the Goverment had to concoct a form of privatisation that would give them UK public the impression it was private, but it never really was.  Railtrack very quickly demonstrated what happens when you let go of infrastructure - they cut costs and eventually something went bang and in the worst way.  Network Rail rose from the ashes, it was now back in the hands of Government and remained so.  The franchising arrangement was a big con, making the public think that it was the private companies making lots of decisions but in reality they did as they were asked in the proposal and the one that would take the least or pay the most to Government won - even if the plan they offered was unfeasible and quickly evaporated when faced with realities. 

 

To me it seems the big winners in all this have been the ROSCOs - they got the stock, have continued in the main to be the people who control it (apart from the few HSTs owned by First).  Every franchise let seems to involve new stock being procured - sometimes before the previous stock even had a chance to turn a wheel in revenue earning service.

 

I don't yet understand why the most radical arm of the Tories now being in charge are talking language like the opposition, but that is another debate and not for this forum I imagine.

 

 

[The Stationmaster]

In reality we don't really know what the Govt Treasury has in mind beyond some headline statements - which effectively mean very little and with claimed rates of contract returns that will be even more unattractive once you include bidding costs.  To me it looks like no more than a typical politicians (of all colours) short term, carefully not thought out, reaction to a situation which has caught them unawares.  I doubt if they have properly thought through the implications, such as handing the unions a prospective national bargaining situation on a plate, taking on from many operators pension deficits, not given any thought to lease costs, not even considered the amount of privately owned 'railway' (in its broadest sense which will remain (resource ownership of all passenger rolling stock, privately owned freight operators, open access passenger operators - and so on).  

 

It's just a 'quick fix' piece of bucket kicking to grab headlines which could very easily and very quickly turn round and bite them a lot harder than they could even imagine.  and that's before anybody takes them to court to seek compensation for breach of contract.

Edited September 25, 2020 by The Stationmaster

[DY444]

53 minutes ago, Joseph_Pestell said:

Oh yes it has. How much comment has been made by / demanded of ministers about the recent Stonehaven derailment? Or the train fire in Wales?

 

Those are two incidents in the middle of an unprecedented global pandemic.  And anyway Shapps still managed to trot out the usual ministerial twaddle in response to Stonehaven about "lessons will be learned", "make sure this never happens again" as every minister has to every serious rail accident since the dawn of time.

 

In the more general sense, over the 25 odd years since privatisation there has been a huge amount of adverse media comment about the railways in general and the Government's role in creating the mess they became in particular.  Barely a week has gone by in the last two decades without my Sunday Newspaper having an article criticising the mess on the railways or the DfT or both.  In fact far more than I can remember about BR which was just accepted for what it was and got off relatively lightly by comparison. 

Edited September 25, 2020 by DY444

[Dagworth]

24 minutes ago, woodenhead said:

Looking back now, privatisation raised a lot of capital for the Government,

And that’s the primary reason, selling off national assets* for quick funding of tax cuts. Short termism and only ever looking at the next election. 

*Largely to foreign governments!
 

Andi

Edited September 25, 2020 by Dagworth

[m0rris]

20 minutes ago, woodenhead said:

To me it seems the big winners in all this have been the ROSCOs - they got the stock, have continued in the main to be the people who control it (apart from the few HSTs owned by First).  Every franchise let seems to involve new stock being procured - sometimes before the previous stock even had a chance to turn a wheel in revenue earning service.

 

They were winning for a while, but the recent trials an tribulations in the rolling stock market are quite interesting - the influx of "new" ROSCOs/funding sources has seen many of the older names squeezed out by RockRail and left with significant fleet disposals over the next few years. Its a new model that is likely to have its ups and its downs...

[DY444]

42 minutes ago, woodenhead said:

Strategically privatisation gave the Government distance when large monopolistic industries came face to face with changing industrial realities.

 

The UK had a wealth of aging, resource heavy, union dominated industries falling behind emerging economies and were a millstone around HMGs neck.

 

The Government had the choice to invest heavily, address union issues and rebuilld these industries anew or allow private companies to try and do so and if they failed it was not the Government's fault.

 

Looking back now, privatisation raised a lot of capital for the Government, allowed the UK public to be involved in decision making (through buying of shares, which they then quickly sold) and then not worry what came next.  In some respects it was a bit of a con - not many members held on to their shares, the businesses were sold cheap then large investment houses purchased them at a higher price from Joe Public who felt they had made a profit to spend on themselves, the large investment institutions got their hands on things that could later be broken up and sold off.

 

You could argue perhaps that the government economists could see what the future held, recognising there would be a temporary lift before the realities that these monolithic industries would need to radically change, sell or simply be absorbed into larger international conglomerates but it would now be something that the Government was not responsible for and could deflect away from.  A more unpalatable thought would be that those in charge knew if they invested wisely in the rising economies abroad and waited they would gain massively later on when the UK industries failed or became absorbed into these new international organisations.

 

Back to Railways - they were never suitable for selling off and the Government knew it because left wholly to the private sector Serpell would have been enacted quickly and such pruning would probably have killed off the rest apart from maybe commuting into London.

So the Goverment had to concoct a form of privatisation that would give them UK public the impression it was private, but it never really was.  Railtrack very quickly demonstrated what happens when you let go of infrastructure - they cut costs and eventually something went bang and in the worst way.  Network Rail rose from the ashes, it was now back in the hands of Government and remained so.  The franchising arrangement was a big con, making the public think that it was the private companies making lots of decisions but in reality they did as they were asked in the proposal and the one that would take the least or pay the most to Government won - even if the plan they offered was unfeasible and quickly evaporated when faced with realities. 

 

To me it seems the big winners in all this have been the ROSCOs - they got the stock, have continued in the main to be the people who control it (apart from the few HSTs owned by First).  Every franchise let seems to involve new stock being procured - sometimes before the previous stock even had a chance to turn a wheel in revenue earning service.

 

I don't yet understand why the most radical arm of the Tories now being in charge are talking language like the opposition, but that is another debate and not for this forum I imagine.

 

 

 

Lots of mistakes were made by lots of organisations.   The biggest mistake in my view was the assumption that BR was inefficient.  I am convinced that came about because somebody conflated quality and efficiency ie BR wasn't offering an especially high quality product so it must be inefficient.  I think it was subsequently demonstrated that BR was one of the most efficient railways in the world in terms of what it got out of every pound it spent.

 

That mistake cost lives and sunk Railtrack.  Railtrack found it was impossible to maintain the network to the same standard as BR for the same cost.  NR has the opposite problem in my opinion.  Everything it does is either gold plated or too expensive or both.  It is aided and abetted in this by the ORR who, in my view, issue decrees with no cost accountability.

 

Most of the franchise bidders seemed to leave their smarts at the door when talking to the DfT resulting in a lack of independent due diligence of the market they were hoping to serve with the franchise. 

 

The ROSCOs may have been a licence to print money at one time but that gravy train is in store along with much of the stock they have on their books. 

 

As for the DfT, well I don't know where to start.  Suffice to say they were the architects of this mess and just about every single thing they have done since has made it worse.

 

And if you think Boris represents the most radical wing of the Tory party then you've been misinformed.

 

 

Edited September 25, 2020 by DY444

[Quarryscapes]

But what does i tall actually mean in practical terms? I ask because at the very moment I was reading the news story (which gives zero information), my partner was sending in her job application to Transport For Wales, who still have publicised plans for the next 15 years or so, and last time I looked out the window, were still running trains past it. So what is ACTUALLY happening to the railways?

[woodenhead]

5 minutes ago, DY444 said:

 

And if you think Boris represents the most radical wing of the Tory party then you've been misinformed.

 

 

I believe Boris just wanted to be the leader, I don't think he is in charge.

 

I think one person's rampant rule breaking in order to 'test' his eyesight put paid to any idea that Boris was fully in control.

[woodenhead]

15 minutes ago, Quarryscapes said:

But what does i tall actually mean in practical terms? I ask because at the very moment I was reading the news story (which gives zero information), my partner was sending in her job application to Transport For Wales, who still have publicised plans for the next 15 years or so, and last time I looked out the window, were still running trains past it. So what is ACTUALLY happening to the railways?

Which exactly proves the point that the railways are run by the DFT, always have been, doesn't matter what the name on the side of the carriage says the trains will run.  A franchise is just a licence to run the trains on behalf of the government, they have certain freedoms within the scope of the contract but ultimately they are doing the Government's bidding and they don't then the Government will put someone else in charge but it will be the same staff running the actual trains with a different badge on their uniform.

 

No failure of a franchise has ever seen the trains stop - however, if a company like Grand Central got into difficulties the trains would simply be shunted into the siding of the Rosco's choice and left until someone else leased them or they were scrapped.

 

At the moment the ex franchisees are running the services they are told to by the DFT - 50%,60%,70%,100% of their services with the Government subsidising any shortfalls due to lack of passenger income.  Grey areas may be stock refurbishment - Avanti have Voyagers going through refits, do they stop or continue, I would hope the latter but if the DFT decide that isn't a priority then it may come to a halt - of course the refurbishment is keeping staff employed so maybe it's a wise investment and it continues. I don't know what the current status of that programme is so I am just guessing here.

Edited September 25, 2020 by woodenhead

[Pacific231G]

4 hours ago, DY444 said:

 

The figures may be skewed by the fact that EU member countries are obliged to do it irrespective of whether they feel it to be a better or worse organisational structure.

Isn't that one of the policies that our government, with its "private good public bad" ideology, persuaded the EU to adopt before we flounced off.

 

They do need to be very careful though with a concession based system. It's what the French used before they nationalised their national network in 1938 and there was a tendency for companies to "farm" their concessions. In other words to profit from the guarantees the governnment (or local government) gave them to run defined services but with little or no incentive to develop them. So,many local stopping services, especially on branch and secondary lines, were conceded in the nineteenth century on the basis of three passenger services a day. That's what they offered right up to to closure and beyond when the replacement buses provided, and often still do provide, exactly the same paltry service that was deemed adequate in the 1890s. Ironically, the most arguably dynamic of the big five pre-nationalisation railways was the Etat and that was owned by the government which had to take over various private companies that had failed financially. 

 

However, if you look beyond the TGVs, SNCF is a pretty good example of how not to run a nationalised railway. Lines have been closed because of rotting infrastructure*, potentally profitable freight that any US short line would give its right arm for has been forced onto the roads because SNCF thought it not worth their while and resisted any attempt by other rail operators to take over and an awful lot of local pasenger services are operated entirely or partly by buses. Whether that's been the fault of its own management or of of successive goverments that seem to have alternated since the 1950s between wanting railways and wanting railways to close, is hard to say.

 

*(CFF-the French equivalent of NR-  was never truly independent from SNCF and has effectively been reabsorbed as SNCF-Réseau though it's supposed to offer a level playing field to  all train operators including Fret SNCF and SNCF's passenger operations)

[DLT]

51 minutes ago, DY444 said:

Lots of mistakes were made by lots of organisations.   The biggest mistake in my view was the assumption that BR was inefficient.  I am convinced that came about because somebody conflated quality and efficiency ie BR wasn't offering an especially high quality product so it must be inefficient.  I think it was subsequently demonstrated that BR was one of the most efficient railways in the world in terms of what it got out of every pound it spent.

 

There was a lot of political "spin" involved, from a government that was anti-railway.  Putting taxpayer's money into road-building was described as "Investing in Infrastructure" but putting it into BR was "Subsidising a Loss-Making Industry".

[DLT]

I remember Sid Weighell, former General Secretary of the NUR, saying  "If you separate ownership of the wheel and the rail it runs on, you are asking for trouble".

[Oldddudders]

1 hour ago, DY444 said:

As for the DfT, well I don't know where to start.  Suffice to say they were the architects of this mess

Were they? I think a determined Government, at a level far above DfT, brought in commercial lawyers and merchant bankers and these people together cooked up a market model and were invited to implement it. Their ideas were at 180 degrees to those of both Bob Reids (successive chairmen) and designed to ensure no chance of putting Humpty Dumpty back together. 

[Andy Kirkham]

It seems to me that governments have been so determined to show that privatisation was a success that they've poured huge sums into the privatised railway that they would never have dreamed of giving to BR.

 

 

Edited September 25, 2020 by Andy Kirkham