Daily Archives: February 12, 2011

Public ownership = public confidence

There is a further consideration with public services – safety. It may be that the public will have greater confidence in, for example, a state run railway simply because it is state run. The public’s confidence might be completely unfounded but that would not matter: the confidence itself is a valuable thing.

The experience of all privatisation has been to make money by enforcing massive job cuts. Of course there was overmanning during the nationalised industry days. The trouble is that the cuts made since privatisation have often gone beyond improving efficiency. They went to the limits of safety, and probably past it, in pursuit of profit. Maintenance staff were reduced and consequently maintenance was reduced. The facts which have emerged since the Watford train crash in 2000 shows beyond doubt that many of the people involved in rail track maintenance are inexperienced at best and completely raw at worst.

When the state does not take direct responsibility for a service which has inherent safety consideration, the danger is that governments will respond to any safety fears by imposing ever more onerous obligations on the private suppliers of the service. The private companies are also susceptible to being overly cautious after an accident has happened or a possible danger becomes the subject of public  comment.

Train crashes in Britain have been thankfully rare under both nationalised and privatised regimes, but when they happened under the nationalised industry the government was able to keep the show on the road because the public had confidence that safety was not being compromised simply to save money. Since privatisation crashes have been met with absurd caution by both the bodies responsible for the infrastructure and the Government, with the national rail network being reduced to a farce after cracks in some rails were found after the Watford crash mentioned above. For the better part of a year, rail travel became a misery as hundreds of emergency speed restrictions were introduced and rails were tested for cracks and a massive programme of rail replacement was begun. The consequence was horrendous delays and vast numbers of cancelled trains. The effects are arguably still being felt in 2006.

Perhaps the classic industry to which the safety consideration applies is the production of nuclear energy. Despite this the Blair Government  is saying that if a new generation of nuclear power stations is built it must be with private money and run by private companies. A clear case of ideology – private is best – driving common sense out of the window.

Foreign ownership further complicates matters. When a massive explosion devastated a fuel storage and refinery complex in Hemel Hempstead in 2006 and further parts of the complex were thought to be in danger of exploding, it was impossible to get the necessary information quickly because the company which owned the complex was French and no one with  sufficient authority could be immediately  contacted.

The railways – a classic public service

Railways cannot be simply a private enterprise with no concern but profit.  They are a necessity to maintain general economic activity. Take away the railways and a substantial part of those employed in London could not continue to work there because the roads will not take the extra traffic. The same applies, to a lesser degree, to other large cities and towns.  The railways also fulfill  important social functions in providing transport to those without cars, by reducing car use generally and moving much heavy goods traffic from the roads. Finally, railways have a strategic value in times of war or blockade.

The simple truth is that without massive public subsidy the railways could not be maintained. No national railway system in the First World operates without taxpayers’ subsidy. Parts of systems may be profitable but not the entire system. It is not that our railways would simply shrink if left entirely to private enterprise, most of the system would not run at all. Commuter traffic is running at near capacity in the South East of England and fares are already so high generally that the massive price hike needed to meet the full cost of rail travel would result in a vicious circle of decreased traffic and decreased revenue. 

The cost of maintaining Britain’s railways is simply beyond the private sector. Profit can be made on some intercity routes but that is about it. Even with the massive subsidies given to private companies since privatisation – ironically substantially larger than the pre-privatisation subsidies in real terms – private companies have signally failed to invest adequately. Indeed, the companies have radically reduced staffing levels – which may well have contributed to some crashes – and have constantly failed to meet their timetables.

The farce of the company with responsibility for railway maintenance immediately after privatisation in Britain, Railtrack, is a cautionary tale in itself. It created a completely different culture from that under the nationalised railways. Instead of employing most of the labour directly, they engaged subcontractors

to do most of the work. The army of skilled workers built up by the original private companies and inherited by the nationalized British Rail was dispersed in reckless fashion and, inevitably, control over standards of maintenance became much diluted as it always does with subcontracting.

To put the cherry on the Railtrack story, the financial resources of the company, even with public subsidies, proved hopelessly inadequate. In 2002 the plug was pulled and it went into administration to eventually re-emerge restructured as a not-for-profit company Network Rail. But before the administration was done and dusted, the  taxpayer had to cough up a great deal of money to compensate shareholders because the government was faced with legal action by the shareholders alleging maladministration, an action which looked as though it might not only succeed but in the process wash some very dirty government linen in public over exactly why and how Railtrack went into  administration.

The taking back into public ownership has also extended to the rail operators franchises. In 2006  a major franchise holder, GNER relinquished the east coast London- Edinburgh franchise in 2006 “after admitting that its promise to pay the Department for Transport (DfT) £1.3bn over 10 years was too much.” http://www.guardian.co.uk/business/2009/jul/01/national-express-london-to-edinburgh  . National Express took the franchise over in 2007 with a  bid £1.4bn for a seven-and-a-half year contract”. They gave noticce of relinquishing the franchise in 2009 also on the grouinds that it could not be made to pay.

In 1993, the Conservative MP Robert Adley aptly described the the privatisation as “a poll tax on wheels”.  It has brought nothing but increased costs and confusion to passengers who are now faced with a bewildering array of fares and companies instead of the sanity of a single nationalised railway where the only difference in tickets was between on peak and off peak, first or second class and you could go on any train  within those very broad constraints.

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