A good time to renationalise the railways
Guardian Comment is free: October 13 2008
Unlike the bank bail-out, it wouldn't even cost us anything. But will this government have the guts to do it?
With banks being nationalised almost daily and the national debt now soaring well over the 40% which used to be Gordon Brown's target, what about the railways? Could it not be possible to slip them back into the public sector, something that many people would love to see happen?
There is undoubtedly a strong case to be made, since the railways may soon find themselves in financial difficulties. In recent years, passenger numbers have soared and the government has let a series of franchises on the basis that revenue will continue growing at 7-8% per year. This has partly been predicated on fares rising above the rate of inflation, and partly on an expectation that passenger numbers will continue growing.
So far there has been little sign of the impending recession, with patronage on the railways continue to increase, though at a slower rate. However, railways are very dependent on the general state of the economy and there is no doubt that passenger numbers will soon level off and start to go down. The above-inflation fares rises of 6% – with some rising by 11% – that will be imposed in January will probably be the turning point.
That will leave the train operators, and ultimately the government, in a real pickle. Many train operators are paying heavy premiums for the right to run services and if they plunge into the red, they will do an Oliver Twist on the government. Ministers have repeatedly said that they will not renegotiate franchises and that if big operators such as FirstGroup, Stagecoach or National Express throw in the towel on one franchise, it would have to hand back all its other ones as well. In a rational world, that would be the perfect opportunity for the Department for Transport to say, sorry guys, we are going to bring the franchises back in-house and effectively renationalise the railways.
That is to underestimate the absolute antipathy that New Labour has to nationalisation. The reluctance to step in over Northern Rock and the initial plan to take out only preference shares rather than normal stock which gives the government a say over the running of the banks in today's huge recapitalisation, demonstrates this. The recently sacked transport minister, Tom Harris, told me in an interview earlier this year that if New Labour had inherited British Rail, it would have privatised it. That was not, incidentally, the reason for his departure – being too rightwing has never been the cause of a New Labour minister's dismissal.
In fact, what New Labour refuses to let on is that the railways are effectively largely publicly-owned anyway. Network Rail, which owns the infrastructure, is a company without shareholders that is dependent on government backed debt (to the tune of £20bn), for its survival. It receives billions in annual grants direct from government and is, to all intents and purposes, a state-run enterprise.
Yet Peter Hain was quoted at the weekend as saying that there was no question of renationalising the railways because it would be too expensive. In fact, with Network Rail already in public hands, it would cost nothing to bring back the railways under public control if the train operators handed back the franchises either when they get into financial difficulties or when their terms expire.
Hain's dishonest argument, parroted for some time by successive transport ministers, suggests that British Rail will not emerge Phoenix-like from the ashes of the recession-hit railway system. The new transport secretary, Geoff Hoon, will undoubtedly toe the same line, but he will face a rocky time when the whole complex privatised edifice starts to fall apart as the expected growth of passengers on which it is based does not materialise.