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November 29, 2006

Neil Clark's Question

Neil Clark asks a question.

Why should a privatised railway, which not only receives four times more taxpayers' money in subsidy than a nationalised railway did but charges much higher prices to the consumer, not be bought back into public ownership?

Answer part 1: Network Rail is not a privatised company. Railtrack, which was, received a much smaller subsidy that Network Rail. It is the actions of Stephen Byers which have raised the subsidy required, bankrupting Railtrack and replacing it with the not for profit Network Rail.

Answer part 2: What are the number of passenger journeys? Are they going up or down? They're going up as far as I know thus, with the capacity of the network being strained, it's obvious that prices will rise. Both to manage the congestion and (possibly) to raise the funds to expand the capacity.

Answer part 3: Stating that in time period x, costs and subsidy were y while in time period a costs and subsidies were b, thus it is the method of ownership which explains these changes isn't actually all that useful. What we want to know is whether the method of ownership has increased or reduced  b. What, in fact, would be happening in time period a under both methods of ownership?

Finally, given that Network Rail is a not for profit company, why would public ownership change anything?

Ooops, sorry, second finally. As far as I'm aware (if I'm wrong here I hope someone will tell me) it's an EU requirement that the operating companies and the infrastructure must be owned separately. So renationalising the whole lot simply cannot be done.

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Comments

[It is the actions of Stephen Byers which have raised the subsidy required, bankrupting Railtrack and replacing it with the not for profit Network Rail.]

Tim, did you read the comments on your last abortive Railtrack post? Network Rail requires a higher subsidy than Railtrack because it is maintaining the track properly (and repairing miles and miles of rails that Railtrack had allowed to become dangerous.

Posted by: dsquared | Nov 29, 2006 8:55:44 AM

Tim, the EU rules don't preclude the whole lot being owned by the state, but simply require that infrastructure and transport services are managed separately. In theory, this is to allow open access to all operators, which meet licence conditions, to provide services on the infrastructure.

Here's the relevant article from Directive 91/440/EEC:

1. Member States shall take the measures necessary to ensure that separate profit and loss accounts and balance sheets are kept and published, on the one hand, for business relating to the provision of transport services by railway undertakings and, on the other, for business relating to the management of railway infrastructure. Public funds paid to one of these two areas of activity may not be transferred to the other.
The accounts for the two areas of activity shall be kept in a way that reflects this prohibition.

2. Member States may also provide that this separation shall require the organisation of distinct divisions within a single undertaking or that the infrastructure shall be managed by a separate entity.

Posted by: jimmy knapp's ghost | Nov 29, 2006 9:46:08 AM

Dsquared and JKG are both right. Also, here are some stats I put together for another purpose a while ago:

Total BR subsidy, 1982 (1982 prices): GBP916m [*]
Total BR subsidy, 1982 (in 2004 prices): GBP2.1bn
Total UK rail subsidy, 2004 (in 2004 prices): GBP3.8bn [**]
Total BR subsidy, 1982 (in 2004 prices and inflated by 1982-2004 GDP
growth): GBP3.9bn

In other words, the railways claim the *same* subsidy as a % of GDP under Network Rail as they did under BR (people sometimes use 1994-5 as a comparator year, but that's daft because 1994-5 was the period the network was being run down for privatisation with no new train orders, deliveries or infrastructure investments).

In terms of efficiency, services inflation is the relevant metric for railway costs, and it's higher than goods inflation but lower than GDP growth, so the subsidy figure that demonstrates equal efficiency between now and the 1980s will be somewhere between £2.1bn and £3.9bn.

As far as fares go, I haven't looked up the data but would be genuinely amazed if they haven't more-or-less tracked services inflation since 1982, and would happily eat an entire milliner's shop if they're not appreciably lower as a % of average incomes than in 1982.

Quality of service? Well, trains are more punctual, less likely to be cancelled, lower in average age, more frequent and faster for intercity journes than pre-privatisation. On the minus side, they are more crowded and suburban journeys generally take slightly longer. Roughly equivalent, I'd say.

[*] source: Serpell report
[**] source: Network Rail

Posted by: john b | Nov 29, 2006 11:22:15 AM

Can we just get rid of this 19th Century technology and move on. Transport Watch makes the case for scrapping the rails for roads:

http://www.transport-watch.co.uk/

Posted by: Kit | Nov 29, 2006 11:55:17 AM

I didn't realise "tells lies to promote the halfwitted idea of" was a synonym for "makes the case for".

Posted by: john b | Nov 29, 2006 3:31:03 PM

Do the nationalized continental railways fulfil the "EU requirement that the operating companies and the infrastructure must be owned separately"?

Posted by: JDH | Nov 30, 2006 4:59:44 PM

The statement that trains are more punctual under privatisation is one to be wary of, as the operators have padded the timetables to meet punctuality targets.

In 1998 Midland Mainline used to run a Nottingham-London St Pancras inter-city service that set off at 0734 and arrived at 0911. Today the equivalent service sets off at 0728 and arrives at 0914.

I'll leave everyone to draw their own conclusions. In the meantime, don't get me started about the comparative ticket prices.

Posted by: meester_lowe | Dec 2, 2006 1:48:15 PM

Finally, given that Network Rail is a not for profit company, why would public ownership change anything?
See 'Off The Rails or Why Trains are the Black Sheep of Transport Policy'. This explains that by nationalising you ought to be able to get rid of various monopolistic banking and legal contract difficulties which are almost inevitable with any other setup.

john_b might be right in saying:

As far as fares go, I haven't looked up the data but would be genuinely amazed if they haven't more-or-less tracked services inflation since 1982, and would happily eat an entire milliner's shop if they're not appreciably lower as a % of average incomes than in 1982.

...but I am also prepared to consume a fair amount of fine headgear if train fares have not risen considerably in comparison to other transport options. Car prices have definitely deflated (especially taking all the extra value of new safety features into account), and soon airlines will be paying us to fly.

Can we just get rid of this 19th Century technology and move on. (Kit) While you're at it, we could abolish that prehistoric idea of the Wheel. Except it is so useful...

Posted by: newparadigm | Dec 5, 2006 12:37:26 AM