Renationalisation: beyond Ed Miliband’s policy?

All aboard the renationalisation express! Jeremy Corbyn’s election as Labour party leader has brought a number of policies back to centre stage, particularly the desire to renationalise the railways. This decision is controversial because it has direct impact over thousands of citizens every day. But is this policy achievable? Is Corbyn going to reach his destination or get sidetracked by an illusionary policy choice?

One of Corbyn’s flagship policies, a ‘people’s railway’, consists of renationalising the railway system. This would require the passing of a railways bill which would, in his own words, ‘progressively bring the railways back into public control, run in the public interest to meet social, economic and environmental goals’. But Corbyn’s choice is, first, at the mercy of the legal system.

Should Corbyn want to return the railways under the public sector, he has an important decision to make. On the one hand, he can wait until those contracts expire, as Ed Miliband intended to do. Alternatively, he can reacquire them immediately in exchange for a penalty.

Should he decide to wait, this can take a very long time. Most of the contracts expire in the current parliament, and the Conservative majority could renew them easily. Some exceptions are East Coast (2023), Thameslink, Southern, Great Northern and Chiltern (2021) and Essex Thameside C2C (2029). Still, his railways bill could be revoked in the meantime.

Should he choose to pay the price of his promise, this could create high debt for the already stretched public budget. It is difficult to quantify, as the government could pay the usually high penalty or try to renegotiate a lower one through commercial arbitration, which is alternative dispute resolution to the courts. And, after paying, he would then need to start delivering.

The plan is deemed to become part of British history. Legally, railway ownership has flipped between the public and the private sector throughout Britain’s contemporary history. While initially private, they were nationalised in 1921. They remained so until Major’s government, with the passing of Railways Act 1993. This tendency was reinforced across the European Union, which has engaged in a process of liberalisation of railway ownership – that is, to open railways to market competition. Nevertheless, states remain free to decide whether to keep railways under public or private ownership. Some have chosen to retain public ownership for all or a large proportion of services with the possibility to bid selected projects to the private sector. This includes Germany, France, Sweden, Italy and Spain. The United Kingdom went far beyond what was required by the EU.

A 2014 poll by YouGov showed strong cross-party support in favour of renationalisation. Results are as high at 60-20 per cent, mainly based on the need to be accountable to the taxpayer rather than the shareholder (62 per cent) or the assumption that fares will decrease (47 per cent). Overall support is as high as 78 per cent in Labour, 60 per cent of Liberal Democrats and 70 per cent of the United Kingdom Independence party. Only the Tories are divided on 42-42 percent.

Corbyn’s plan could get derailed at the expense of the market. The market for railways is fragmented and liberalised. As the contract is awarded, the relationship between the British government and the private sector is regulated in the terms of contract. Among other clauses, these contracts regulate the time for expiry and penalties for non-fulfilment of the contract’s terms and conditions.

The unions see a light at the end of the tunnel in the debate over renationalisation, as they support it strongly. Their case goes along the lines of protecting the public interest, providing higher accountability to the taxpayer and delivering capped fares. A recent report by the main railway unions including Aslef, RMT, TSSA and Unite, ‘Rebuilding Rail’ suggested a step-by-step approach. This means that the public sector should reacquire the railways when the franchises expire or in those cases when the private provider would prove unable to fulfil the franchise conditions – exactly as Ed Miliband proposed to do.

But let’s get back on track: should Corbyn want the railways to be renationalised, he will have to follow this roadmap:

First, he needs to become prime minister in 2020, have a comfortable majority in parliament and a persuasive whip team.

Second, he would have to undergo negotiations on a railways bill through the Houses of Parliament. He will need to gain enough support in the House of Commons, and then convince or wait for the House of Lords to have their say. If not difficult enough to achieve the first, the second might prove even tougher.

The way to deliver renationalisation is tortuous, unlikely and hasty to promise. Unless he can promise decades of himself as prime minister or face the payment of high penalties from the taxpayers’ money, it might be the end of the line for this policy.

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Laura Panades is a Spanish PhD candidate at the University of Cambridge undertaking research in public procurement in the EU rail industry

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Comments: 7...

  1. On January 14, 2016 at 6:00 pm Christian Wolmar responded with... #

    Euh the railways were not nationalised In 1921. They were consolidated into 4 companies in 1923 but these were private with shareholders. Nationalisation was 1948.

  2. On January 14, 2016 at 11:34 pm Stephen Webb responded with... #

    The cost of buying out the franchises would, I suspect, be rather less than that of delivering the lower fares that people are led to believe would be the consequence of renationalisation.

    I am all for state control to ensure services are provided that reduce social inequalities or achieve environmental goals, but it is very unlikely that fares would fall overall.

  3. On January 15, 2016 at 10:06 am Christabel Edwards responded with... #

    Would another solution be to group the companies together to form a BR plc. with a government share-holding to reflect past and ongoing state subsidy? Further stakes could then be acquired over time until the government had control.

  4. On January 15, 2016 at 7:22 pm Forlornehope responded with... #

    As most of the trouble seems to be being caused by Railtrack which is, in effect, already nationalised, I’m not holding my breath for much improvement.

  5. On January 16, 2016 at 9:03 pm Richard responded with... #

    For me Nationalisation is just a means. The public are interested in cost (fares), comfort (getting a seat) and reliability. How will renationalisation contribute to these ?. There is plenty of scope for improving on the current structure but the debate needs to thing about what happens next. The franchising model has inherent weaknesses and is ripe for replacement. We need a structure with more regional focus, guaranteed long term investment and with transport integrated with planning.

  6. On February 10, 2016 at 5:37 pm Claudia responded with... #

    No where do I see any reference to the cost to the government of subsidising the private owners of these franchises.

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