Friday, 5 October 2012

Renationalising the railways and other public services would offer a real way forward for Ed Miliband's one nationism

The news that the franchising process relating to the West Coast mainline railway route has collapsed came the day after Labour leader Ed Miliband’s speech to the annual conference trumpeting one nationism.


While Miliband attempted to set out an alternative vision to that of the cuts crazed Coaltion Government, the collapse of the franchise process offers a real opportunity to put meat on the bones of his one nationism. What better way to set out a new vision than to announce the renationalization of the railways and indeed maybe go further by adding other public services like water, gas and electricity?


The call for the railways to be renationalized has grown over recent months, with the latest far hikes allowing tickets to go up by 3 per cent above the Retail Price Index. The rises come at a time when food, energy and other living costs are rising while wages flat line or fall.


The rises have helped the campaign of those who argue for the re-nationalization of the railways. They claim that the service provided is the most expensive anywhere in Europe.

Figures from the Campaign for Better Transport (CBT) show a season ticket, including tube travel, for a journey from Woking in Surrey to central London costing £3,268 last year. This compares to £336.17 in Italy for a similar 22-mile journey from Velletri to Rome.

In France, the 24-mile journey from Ballancourt-sur-Essonne to Paris cost £924.66.

The RMT union claim that since privatisation, more than £11 billion of public funds has been misspent. “On debt write-offs, dividend payments to private investors, fragmentation costs including profit margins of complex tiers of contractors and sub-contractors, and higher interest payments in order to keep Network Rail’s debts off the government balance sheet,” say the RMT, who believe that “removing complex interfaces, transaction costs, increased debt servicing and private profit and dividend payments from the industry could save over £1bn a year, resulting in lower fares and public subsidy.”

Further evidence of the case for renationalisation comes with the case of East Coast mainline, which following the collapse of two previous private operators has been run directly by the state for the last three years.

Directly Owned Railways (DOR) posted results for the last year showing turnover of £665.8 million, an increase of £20 million, leaving a profit before tax and service payments to the Department for Transport of £195.7 million, an increase of £13 million.

Passenger journeys at East Coast, which runs trains from London to Yorkshire, the North East and Scotland, increased by 2.1%

Customer satisfaction at East Coast rose by 2%, and the latest punctuality figures were its best since records began in 1999.

There are signs that the Labour Party may be tipping toward a policy of at least renationalizing the railways by stealth, taking different lines back into public ownership as the franchises become due or are reneged upon by their private owners. It happened with the East Coast line and the same could happen with the West Coast line.

But the argument though over renationalization of the railways is but a microcosm of a much bigger debate on public services generally. And it is on this subject of re-nationalisation that the Labour Party could at last come up with a big idea that would appeal to the one nation.

Put very simply how can a privatized concern, whose first priority is always going to be its shareholders, ever provide better value for money that a nationalized industry. There is always going to be a substantial amount of the money raised via the service going out to shareholders that could otherwise be reinvested in the service and the workforce.

If the neo-liberal based argument that the private sector can provide a more efficient service is accepted for one moment there then has to be an evaluation as to why. If it is providing a cheaper service that can only be through reducing the pay, terms and conditions of the workforce. This has implications for individuals and families, so cannot be for the common good of the country.

So should other privatized industries be renationalized? The water industry that was privatized by Thatcher back in 1989 is hardly a shining example of success.

Some 23 years on, 25 per cent (3.4 billion litres a day) of water is lost through leaks. Leaks have been reduced by just 5 per cent since privatisation in 1989. In Germany, where the water utilities remain under the public control of the municipalities, less than 10 per cent is lost.

A look at Thames Water’s record on leakage since privatisation is revealing. In 2006, Thames Water was leaking 900 mega litres per day. It missed its leaks target under the regulatory framework for the third year in a row and was fined. At the same time, the company declared a 31 per cent rise in pre-tax profits to £346.5 million.

The average customer bill for water has risen by £64 since 2001 and is now £376, while the companies have collectively made a £2 billion in pre-tax profits and paid £1.5 billion in dividends to shareholders in 2010-11.

Other parts of the energy market tell a similar tale, shareholders first, consumers second. Even the advocates of privatisation have not been able to hide the fact in an area like electricity, whilst there has been a 40% fall in wholesale cost since privatisation, the consumer has seen only a 25% cut – how much cheaper would it have been to the consumer if those shareholders had not had to be paid?

The debate over renationalizing some of these privatized public services is only now seriously beginning. The case of the railways seems to offer the most conclusive case for renationalization. The same argument though can be advanced to other areas like water and electricity.

This is a popular idea that the Labour Party could adopt and really push forward under the flag of one-nationism. It would have to be prepared to face down those in the private sector and Parliament who will attack the idea but this can be done. The offer would be to provide cheaper transport and energy sources to the tax paying public in austere times. There can be few better ways in which Miliband could really put forward a sellable idea that epitomizes his idea of one nationism appealing to the common good.
see also - 15/10/2012


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