I can't speak for the trade unions.
I don’t think you need to speak for the unions, Dave, they can speak for themselves.
So privatisation is unsatisfactory but we can’t go back to nationalisation, so what is the solution? Scottish independence would help as the government funding accounts for 61% of the cost of running the railway in Scotland and 31% in England.
In the UK the government pays nothing towards the cost of running the trains. Overall this cost is met entirely by the Train Operating Companies (TOCs). The government funding of £4 billion (in 2012/13) accounted for 66% of the cost of maintaining the network infrastructure, the remaining 34%, or
£2 billion, also being paid by the TOC’s.
Network Rail, which is responsible for the infrastructure, has no shareholders and pays no dividends, is a statutory corporation formed by the government when they forced Railtrack into bankruptcy so that they could acquire its assets for 20% of their pre bankruptcy market valuation and also to avoid adding their then liabilities of £30 billion to the National Debt. Despite this the National Audit Office has always been adamant that the company is, prima facie, nationalised and they appear to have won the day as the government are now forced by EU Accounting Standards to classify Network Rail as a government body and add their debts (now a staggering £140 billion ) to the National Debt. A gift from nationalisation to the lucky old taxpayers of our children’s and grandchildren’s generations!
The governments subsidy to the rail industry of £4billion contributes to the cost of developing and maintaining the infrastructure. Perhaps the government feels that it would be unreasonable to expect the passengers to cover the cost of this nationalised operation.
What is particularly interesting is that, although Network Rail pays no dividend, 25% of its total costs, ie £1.5 billion was, in 2012/13 spent on “financing costs”. Like all companies Network Rail needs capital and whoever supplies the capital expects a profit. That’s a rather emotive word for some so lets call it a “return on capital” instead. The TOCs obtain at least part of their capital from shareholders and they expect their return which comes in the form of a dividend. The railways will still require capital if they are renationalised and where will it come from? Not the taxpayers as this would require increased taxation or a reallocation of priorities. No, it will almost certainly come from government borrowing and the Chinese and Middle Eastern buyers of the government bonds will require their pound of flesh. So dividends paid to shareholders will be replaced by interest paid to bondholders. In addition the government will persuade foreign state funds to invest in specific infrastructure projects as seems likely in the case of HS2. So, the HS2 infrastructure will belong to the state, or taxpayer and, while dividends will not be an issue, vast amounts of interest will be paid to overseas financiers. Not a lot of difference in principle to Deutsche Bahn’s ownership of much of our rail freight business except that the German government will eventually be forced by EU regulations to sell its majority shareholding.
So much for the interest of the taxpayer, what about the passenger? The latest National Passenger Survey shows that just 6% of the 26677 passengers surveyed across the country were dissatisfied with the service. That seems remarkable and I wonder what it would have been prior to privatisation. This is achieved by management highly motivated by the benefit to their own shareholdings, by their salaries, and by their bonuses. What would be the motivation for the state employees?
The “East Coast” argument is interesting. As far as passengers are concerned, Virgin have an almost identical satisfaction rate although Virgin have shown better progress since Spring 2012 when 17% of their passengers were dissatisfied as opposed to 10% on East Coast. Presumably Virgin were still reeling from the effects of the disastrous performance of the nationalised infrastructure company in relation to the West Coast upgrade and the appalling mismanagement of track occupations.
As far as financial performance is concerned, East Coasts results in relation to subsidies looks impressive but it would be interesting to look at the detail. How do Virgin and East Coast track access charges and payments to their ROSCOs compare? How do East Coast finance their operation? Perhaps one day I will have time to find out although I suspect that the argument would still continue ad infinitum.
I agree with you, Barbara, in relation to our local rolling stock. It’s called cascading. The south east get the shiny new trains and pass their 15/20 year old stock on to the Midlands who pass their 25/30 year old stock up North. However, with regard to the cost of fares it is not just seniors who benefit from Virgin’s progressive and easy to operate (provided you have access to a computer) ticketing system. There are ten other railcards which provide discounts and, even if you are one of the estimated 33% who are unable to access a railcard, you can still get to Euston and back for £25.
