Michael Meacher

In the article below, Labour MP Michael Meacher sets out the case for renationalising Britain's railways.

He argues that a policy of "rolling nationalisation" as franchises expire would end industry fragmentation and reduce cost overruns.

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Michael Meacher - Renationalising the railways

Whether politicians can run the trains on time is a question that has exercised their supporters and detractors since the Spanish Civil War.

In the UK the situation has become so dire that it has sometimes seemed as if the question should be whether anybody can run the railways at all.

For passengers, the UK rail system is characterised by poor service and poor safety records. Meanwhile, the CBI has estimated that the direct cost of poor punctuality is around £3 billion annually and a recent survey from the Institute of Directors revealed that 65 per cent of UK businesses regarded the transport infrastructure in the UK (including the road network) – as being a hindrance to business rather than a help.

Given the deeply disillusioning experience of rail in the private sector over the last eight years, it is not surprising that the public is now demanding taking the rail franchises back into public hands.

The UK has never benefited from the kind of state intervention offered to other European railway systems. Belgian railways were state run from inception and that paragon of railway punctuality, Switzerland, nationalised their railways in 1902. No one would claim that British Rail was a popular state institution but in a consolidation process lasting over a century and a half, it was a major step. Receiving a lower level of public subsidy than almost any other rail system British Rail nonetheless proved itself as the most efficient in Europe.

Efficiency meant providing a service that was low cost and basic. It could not be a replacement for infrastructure investment. The absence of a high speed network in this country – perhaps best represented until recently by the slow chug of the Eurostar through Kent – was a specific consequence of this lack of funding for railway renewal and expansion.

The fragmentation of the railways in the 1993 privatisation is now regarded as a disaster. The replacement of a "natural monopoly" with an invented market place was an ideologically motivated catastrophe. Vertical disintegration has led to limitations on track, rolling stock and expansion. Contrary to the Thatcherite dogma that drove the sell off, privatisation has not levered in extra investment and competition has been both marginal and secondary. While there has been consolidation in the number of companies that own and manage railway franchises, this is evidence of their efficiency in winning and managing contracts, not in managing a railway system.

When the private companies that took over the infrastructure looked at what they had bought, they discovered that profit margins were low. Fixed costs, on the other hand, were very high; railways are a highly capital intensive business. Major investment was needed to maintain and improve the network and the benefits are reaped only over a very long period of time.

The rail and train operators acknowledged this truth but were unable to respond in a way that would see past the ideology dictating that businesses could only focus on delivery of shareholder value and short term returns. From the now defunct Railtrack downwards, privatisation was characterised by asset sweating, high management, consultancy and legal fees, plus scaling back on maintenance, renewal and safety, all to maximise immediate profits in an industry where a focus on the long term was a prerequisite for running a successful railway.

The debate on rail safety has been high profile and an understandable driver of public concern. Ironically and perhaps counter intuitively, where passengers are concerned, the privatised railway system has a slightly better record than that of the publicly owned British Rail.

However, worker safety has declined noticeably and exposes the problems of fragmentation in the railway industry and the concomitant loss of specialised knowledge that could be distributed across an entire network. In the publicly owned railway skilled engineers could turn to one another for discussion and professional advice without negotiating the arbitrary boundaries of a privatised network erected by repeated fragmentation and outsourcing. After privatisation many such people lost their jobs. When some hired their skills back to the management companies that won the franchises, they discovered that their knowledge was now defined as commercially sensitive and could no longer be shared.

It's that kind of barrier that has produced the huge cost escalation that is eating up the money poured into the industry by the government. In the words of one rail journalist, "the industry is awash with money… the problem is that it is being spent rather badly".

The modernisation of the West Coast mainline is the best known example, where costs have risen at least threefold, if not twice that and where the transport select committee noted that "it is hard to think of a more telling example of the divided leadership of the railway and the powerlessness of the Strategic Rail Authority". The result is that plans for development and expansion of the railways are being scaled back. We’re spending more, yet getting less.

We don't have to continue this way. As the franchises for train and track operators come up for renewal, they could and should be taken back into public ownership. This is a practically driven solution, not an ideological response to rectify the original mistake. The IoD survey mentioned earlier also found 81 per cent of businesses felt that there were too many organisations involved in running the rail network.

There are concrete examples that demonstrate the benefits a publicly owned network could produce. Network Rail announced in October 2003 that track maintenance would be brought back in house. Around £300 million will be saved through increased efficiency and coordination. Delays have fallen by between 36 and 50 percent. When Connex lost the South Eastern franchise, the SRA owned subsidiary South Eastern trains took over. In every quarter since then, punctuality has improved. There’s no reason why this shouldn’t be true of the entire network.

Since privatisation in 1993, repeated reorganisations of the rail system have been presented as bold attempts to resolve the problems of privatisation. In truth, these have simply served to hide what has been timidity in the face of the need for radical structural change.

Privatisation, leading to rapid fragmentation and horrendous cost escalation was the problem. Public ownership, gradually renationalising the franchises as they naturally expire, is the solution.

The nationalisation of the punctual Swiss railways was the result of an 1898 plebiscite. If a commitment to renationalisation, as voted for at Labour conference this year, is included in the general election manifesto, the 2005 election may be a marker of the same importance in the UK.

Your Views

The railways are currently undergoing a transformation with unprecedented levels of investment, key routes such as the West Coast Main Line being upgraded, new rolling stock coming into service and more passengers using the railways than at any time in the last 40 years.

A lot of this would not be possible without the private sector who have invested millions alongside the government in transforming our railway. Without their contribution a lot of the benefits passengers are experiencing now would be lost.

There was no doubt that the railways suffered from a botched privatisation, however "The future of rail" white paper published in the summer puts this right, with a simpler, streamlined structure to ensure that passengers get a better railway. It specifically ruled out renationalisation and this remains government policy.

Renationalisation would cost billions of pounds of taxpayers money without a single new train being ordered or piece of track replaced.

Transport minister Tony McNulty

Renationalising the railways is not the answer. A simpler structure, less regulation and a reduction in the huge amount of money wasted on consultants and fat cats would be a good place for transport secretary Alistair Darling to start.

John Thurso, Liberal Democrat transport spokesman

The one point that Mr Meacher, and others calling for the renationalisation of the railways, doesn't address is whether it would be compatible with EU law. EU Directive 1991/440 requires that the operation of the rail infrastructure (the track and stations) and the actual train services should take place under rigorously separate accounting systems.
 
Would a single state railway company be compatible with this EU requirement? Is Mr Meacher aware of this directive and, if so, what is his answer?
 
This issue shows yet again that either our politicians - and the media - are unaware of the extent of EU influence on public services or that they choose deliberately to obscure the fact that they have given away the powers to decide on these issues.
 
The same can be said, for example, about postal services. We hear so much about the dire state of the Post Office but no one ever mentions directive 1997/67 which requires the liberalisation (ie. opening to competition) of postal services throughout the EU.
 
The motivation is the same in the railways and in postal services: the construction of EU-wide, harmonised services, open to private sector competition.
 
Tell us the truth and stop pretending that the British government has sole control in these areas.
 
Dr Peter Gardner - Oxford UKIP candidate in the 2001 general election

The Institute of Directors has long argued that parts of the rail system, post privatisation, were too fragmented. However, this does not amount to a case for renationalisation.

The privatisation process was far from perfect but a return to state ownership would ultimately be far worse.

Graeme Leach, chief economist at the Institute of Directors

As we reported in the Construction Products Association's recent report, "Achievable targets? Is government delivering?", the rail network has suffered from decades of underinvestment (both under British Rail and Railtrack).  As a result, Network Rail has a worn and tired network.  On average the track has between 35 per cent and 45 per cent of its service life remaining compared to 50 per cent as it should be.

To address this backlog and deliver long-term improvements, the construction industry needs reliable forward-looking targets upon which it can plan its workload and capacity.  Following the interim review, Network Rail has now provided this certainty with funding secured for the next five years. 

Network Rail is making progress. It is currently compiling a comprehensive asset register of the infrastructure to allow it to plan better and real improvements to the state of the network are being delivered – for example, it has reduced the annual number of broken rails from 444 in 2002/03 to 334 in 2003/04.

The main problem now is a lack of government impetus for new rail projects to enhance the network. The government has backed down from the ambitions it set out in the 2000 10 year transport plan. The white paper published this July included no targets for the delivery of any of the major schemes which are so desperately needed. Business and voters alike want to see targets for the delivery of long-promised enhancements like Thameslink 2000, the Great Western Upgrade, the East Coast Mainline Upgrade and Crossrail.

Chris Bennett, external affairs executive at the Construction Products Association

After posting one billion passenger journeys in 2003, the highest number for more than forty years, and showing up as the fastest growing railway in Europe, this seems an odd time to be facing a call for renationalisation.  Isn't the growth of passengers on the railway exactly what we were supposed to deliver and hasn't this been happening with stunning success?

So why this call for renationalisation?  It may be that some people just do not like the idea of private companies providing public services, particularly with taxpayer support. Fine, it's a point of view. But it misses a great deal about what is involved in running a business in a modern economy, about the flexibility and responsiveness people want from a service, about the complexity of a modern supply chain. 

Network Rail is undertaking a massive programme of investment in track and signalling, The new multi-million pound Train Protection and Warning System has been fully installed across the network and is helping to reduce the likelihood of a serious accident occurring. The root and branch modernisation of the West Coast Main Line and of the cross-country services have been pushed through. You could go round the country pointing to other substantial improvements.

I take very seriously the inconvenience passengers have experienced where there has been poor punctuality. The intensity of the train service required for the growth in passengers and the scale of the engineering work on the tracks presents a real challenge. We have to learn better how to organise and run the very intensive service we how have.

But the business of train operation and passenger service has different dynamics. It requires a focus on passengers, whose requirements are essentially local. For a successful railway, the train operators must be strongly motivated to attract and look after passengers, which is just what the private train operators are doing, within necessary cost constraints. In a sense they must be the champions of the passenger within the whole railway – so that passenger needs are balanced against engineering convenience.

These two parts of the railway, the network operator and the train operators, must work together. This we do, much more so than outsiders seem to think.

The real challenge for the railway is this: not a nostalgic debate about state versus private, but rather meeting the challenge of constantly rising expectations of passengers and the need to cut costs. This is what we must focus on. We owe this to ourselves as an industry, to the thousands of men and women who work in the railway and to our passengers who will make more than one billion rail journeys this year.

George Muir, director general of the Association of Train Operating Companies

Travelling on some rail lines recently has been a real pleasure with comfortable and modern trains but it is a shame that we are getting an improved train service when it has been handed over to privateers.

The state has run a train service which has benefited no one but Henry Ford but now the privateers have been given billions of the taxpayers' money we are getting a taste of what it could be like if the people not privateers or new Labour ran the railways.

Take the railways into control by the people, possibly Bob Crow could be the watchdog to make sure that new Labour does not spoil it.

Tony Kelly, retired electrical engineer

This is an issue which resonates and is popular with the public. We want Labour to win a third term - to do this it needs bold, popular policies which it can sell on the doorstep. Public ownership for the railways is just such a policy.

It's right because it would ensure that every penny that goes into the railways is reinvested back into the industry. It's right because it would streamline decision-making and improve passenger services. And it's right because it would be a popular, vote-winning policy.

TSSA general secretary Gerry Doherty