Britain’s railways: A failed market in need of reform

High speed one. Rail. Transport.

With almost all major franchises due to expire during the next parliament, a Labour government in 2015 will face some major decisions about the future of our railways. After two decades of a failed privatisation, it is time for Labour to offer a bold alternative that delivers a better service for passengers and a fairer deal for taxpayers.

Britain’s railway network is a failed market in need of reform. The usual arguments in favour of privatisation – that the market will encourage innovation and competition to drive down prices – do not apply under the current franchising arrangements. Since privatisation, fares have risen three times faster than wages, while the level of public subsidy has more than doubled. Innovation has been limited.

Against this backdrop of failure, it is unsurprising that a number of parliamentary candidates in marginal seats along commuter lines favour a new model of pubic ownership and it is encouraging that Labour’s front bench is considering all the options. As Ed Miliband told Andrew Marr on Sunday, no one wants to see a return to the days of monolithic British Rail, but there are serious issues that need to be addressed under the current model of privatisation.

The East Coast model shows that public ownership can be achieved with benefits to passengers and to the taxpayer. Passengers have seen an improvement in punctuality, reliability and safety. Unlike the situation under previous private franchisees, taxpayers have seen more than £1bn returned to the public purse in franchise payments in full and on time. And the ‘not for dividend’ model sees more than £300m in profit reinvested into the service. It is a model that Labour should consider adopting on other lines.

We know where the Tories stand. While Labour has moved on from a dogmatic commitment to nationalising the commanding heights of the economy, the Tories retain a blinkered commitment to privatisation – even where is works against our national interest. Nowhere is this better exemplified than in their commitment to re-privatising East Coast, where they would happily take a profitable line from the British taxpayer only to hand it to German or French state operators. A significant amount of profit being made from British passengers is already leaving the UK to keep fares lower for passengers on the continent, thanks to flexibility and entrepreneurship allowed to the state railway operators of France, Germany and the Netherlands. Small wonder that fares on the continent are, on average, a third lower than on the British railway network.

There is a wider debate to be had about the model of public ownership and further benefits that might arise, for example, by reuniting track and trains under arms length body. But there is a public mood that is open to the case for reform, as we saw with East Coast: where a majority of voters backed the move to public ownership – including almost half of all Tory voters. Labour just has to make it.

———————————

Wes Streeting is Labour’s parliamentary candidate for Ilford North

———————————

Photo: Les Chatfield

Print Friendly

, ,
  • http://www.davidpoyser.com David Poyser

    Absolutely right “While Labour has moved on from a dogmatic commitment to nationalising the commanding heights of the economy, the Tories retain a blinkered commitment to privatisation.” Surely the rail privatisations (both Railtrack as was, and now the TOCs – the Train Operating Companies, are the worst of both worlds i.e. they are private monopolies). Markets surely work well when there is competition e.g. two different food outlets on the same station (or even the same train), or even the expensive quick Virgin to Milton Keynes competing with the cheaper-stopeverywhere-pokier Silverlink service to MK. Where one operator wins a franchise, surely that company almost invariably just makes loadsamoney, while not investing in the future infrastructure.
    Perhaps there is an exception in another industry to private companies running rings around the regulator, but I can’t think of one

  • Martinay

    Wes says the railways are an instance of “market failure”.

    He means, I think, that the transport system (or maybe a part of it) is not doing what it needs to do:

    [a] to get everyone that wants to and everyone that needs to get from A to B greener, quicker, safer, more comfortably and cheaper than in the past;

    [b] to invest so as to get continued measurable improvement meeting agreed targets.

    But the dominant free-marketeer definition of “market failure” is all rather vague with talk of inefficiency etc while ignoring societal needs. What’s more, those free-marketeers hate to discuss market failure: like Dracula they rush to the crypt of denial when light is cast on their failure.

    So Wes is doing us a service by widening and concretising the idea of market failure.

    Market failure is all around us, not just on the railways. Which bit of the transport system is greener, quicker, safer, more comfortable and cheaper than in the past?

    Housing is at high risk of catastrophic market failure. The energy industry is a mess. The financial markets have failed and no-one denies that further convulsions are on the cards. Our manufacturing industry has been failing for decades.

    Market failure after market failure is therefore at the heart of Britain’s problems.

    Yet we fear to say so.

    Unless we say so, we won’t be able to start the hard work of specifying new business models that are efficient and that also meet societal needs for today and tomorrow.

    And we won’t win support for those models. Mainstream Labour will simply be dismissed as Old Labour.