Sunday, November 08, 2009

Privatise the railways

Constantly Furious is absolutely fucking raging about the fact that many people were prevented from getting to Remembrance Services because First Capital Connect's drivers decided not to turn up for work this Sunday in "a dispute over pay".

The Unions are really starting to flex their muscles at the moment, and we are being reminded just what a bunch of cunts they are. Of course, people like myself couldn't give a shit about Royal Mail staff striking—which is why, I suspect, the CWU have come to an arrangement—and, now that I have a car, I don't take the train very often; similarly, the fact that BA staff are being balloted doesn't bother me one jot.

However, it is worth noticing that all three of the businesses cited above have something in common: they all used to be state-owned monopolies. And, actually, all but BA still are.

"What?" I hear you cry. "But the railways were privatised years ago!"

Um, no...

The railways are not run, in any meaningful sense, by private companies. Consider the evidence, m'lud:
  1. The tracks are not run by private companies; they are maintained by a state monopoly called Network Rail. Yes, yes: technically it doesn't appear on the government's books, but it's £19 billion or so of debt is under-written by the state and the vast majority of its income is also derived from the state.

  2. As regards the running of the train services, the government controls the franchises.
    • These franchises are made so short-term that—given the capital cost involved in so doing—there is little incentive for the private companies to invest.

    • A company can lose the franchise just like that if the government so wishes—and it often does, e.g. Connex South Eastern, National Express East Coast.

    • The private companies must pay a guaranteed amount of money to the government in order to run these franchises regardless of earnings, e.g. GNER (although one cannot ignore the fact that GNER negotiated spectacularly badly, such that they were about the only rail company paying a nett amount to the state. Which brings us on to...).

  3. The state pays out a massive subsidy—currently sitting at about twice what it was under British Rail—to rail companies to operate these services. Of course, you might look at the whole thing a little differently if—instead of calling it "a subsidy"—you use the word "fees".

  4. Of course, many of these subsidies are necessary because the state also broadly controls:
    • the train timetables: the companies involved cannot decide to axe or reduce the frequency of many services. (Remember that the biggest destruction of the rail services was carried out by the state.)

    • the price of tickets: the state sets maximum pricing, and many of the conditions pertaining to those prices (as the state has done almost since the railways' inception, by designating them a Common Carrier).

    • the relative priority of passenger and freight services.

    • the rental prices of the lines, through Network Rail.

    • The terms of employment (and many other conditions) by insisting that the companies that are picked for the franchises recognise unions, etc.

This is not to say that the private companies do not exploit the Simple Shopper—I am sure that they do. It is also not to say that, were the railways properly privatised that they would, in fact, be any better than they are now. (Indeed, since the railways are, like the banks, "too big to fail" they might be worse.)

All I am pointing out is that the railways, right now, are not privatised. What the Tory government did was precisely what Gordon and his merry men have done with schools, hospitals and many other public services: they have entered into a public-private partnership in order to run these services.

The idea is that the private sector puts capital into the services, and the government pays them a massive fee for running those services. The fee has to be pretty massive because private companies cannot borrow at the same favourable rates that the state can: however, the state gets to keep the capital investment off the Treasury's books since the fees count as expenditure rather than capital investment (the reasons why the state would want to do this would make up a whole other post).

And that's all I wanted to point out: that the railways are not privatised. But maybe, just maybe, we might look at whether proper privatisation could work.

But it would have to be proper privatisation—without the constant and crippling interference and condition-setting, occasional nationalisation (e.g. WWI) or commandeering (e.g. WWII) or the companies and network that the state has indulged in almost since the very inception of the rail industry.

Just a thought...


James Higham said...

Yep, that action was well out of order. Not Remembrance Day.

john b said...

A company can lose the franchise just like that if the government so wishes—and it often does, e.g. Connex South Eastern, National Express East Coast.

Err, no: in both those cases, the franchisee asked the government for extra cash above previously agreed subsidies (CSE) or to be let off previously agreed payments (NXEC). In both cases the government said no, so the franchisee and government agreed that the franchise was void.

andy janes said...

People forget that the network was built entirely by private companies and operated sucessfully for over a hundred years until Labour bollixed it up by nationalising them in the 4o's.

We need to go back vertically intergrated firms (i.e they own track and trains) and are left to themselves. No subsidies or bailouts if things go wrong either.

Constantly Furious said...

And it was only because of the faux-privatisation that ASLEF was able to negotiate the preposterous deal these drivers get.

38 grand a year for a four day week? Rising to 50 fucking grand a year if you're good enough to work extra days?

Where's Maggie when we need her?

Anonymous said...

Were you aware, Mr Kitchen, that the reason the railways were privatised this way was that there was an EU directive explicitly laying out the privatisation mechanism?!celexapi!prod!CELEXnumdoc&lg=en&numdoc=31991L0440&model=guichett

Council Directive 91/440/EEC.

john in cheshire said...

And don't forget Mr Byers' role in all of this. The 'pants on fire' man who lied and stole? Socialists, eh; you can't trust them with anything. Especially power and money.

indigomyth said...

I have just starting reading "Atlas Shrugged". Serendipity that you happened to write on this topic now, DK.

Perhaps we need a Dagny Taggart?

DM Andy said...

Hang on Devil, I was under the mistaken belief that you're a libertarian.

Surely a train driver given the opportunity of some overtime has the right to say no? This wasn't a strike or any kind of industrial action. The incompetence of First Capital Connect management to make sure that the work is covered isn't the fault of unions or government and I don't understand why you think it is?

Would you prefer First Capital Connect's workers to be treated like some kind of serf and forced to work whenever the employer wants?

Tomrat said...

Same thing could be said of the bus services of Leeds (and probably elsewhere); City councils controls the route, regularity and to some extent price.

The impact of placing pressures on services like this is to skew them in favour of incorporated bus services, not big for their efficiency/success but big because of pull, cept the pull has got so big that they can dictate the rules or bring Leeds to a standstill; a knockon effect all the way down the foodchain from management to unions to busdrivers to travellers.


To be fair Dagny Taggart fails to stop anything; likewise calls for the return of the Mag are as pointless- she merely postponed it a generation; what is needed is something more subtle, non-personified but has a massive impact: LPUK fiscal policy, particularly free banking, is this thing I believe. Our troubles and that of the past 2-300 years are caused by one underlying monopoly on currency and the rules which govern it's exchange; ultimately it blinds us to a more profound truth- that we have exchanged the ultimate currency for worthless paper.

That currency, that commodity, being ourselves and the work from the sweat of our backs; bond markets are the modern embodiment of slave trading: the exchange of guaranteed pounds in the future based on the forced coercion of the sheeple for pennies now.

Paul Garrard said...

Yes FCC's problem is down to drivers not wishing to work overtime on a Sunday and bad organisation. Clearly FCC's management don't know how to incentivise their drivers, perhaps they should model themselves on banks!

Constantly Furious said...

"This wasn't a strike or any kind of industrial action."

What a bunch of arse. Of course it was. Just a devious, sneaky one.

These drivers have been working for more than their ridiculous 4 day minimum, glad of the overtime, consistently for years.

It's only when they're not given exactly the pay rise they want that they suddenly, simultaneously decide that they don't want to volunteer after all.

Co-incidence? Of course not: a good, old-fashioned, centrally-organised 'work-to-rule'.

Cynical? Selfish? You bet.

DM Andy said...

Constantly Furious, I'm afraid that you misunderstand the nature of the FCC issue.

The drivers at FCC get as you say a good wage for their 4 day week and often bump up that wage with overtime. No driver is contracted to work Sundays and so to provide services on Sundays FCC decided to offer overtime at generous rates (I've heard double time but don't know if that's the case). It sounds to me to be a stupid way to run a railway but as I've said in the cases of City bankers and professional footballers, salaries are the business of the employee and the employer. If someone can get a good deal then good for them. As a Libertarian wouldn't you agree?

A couple of months ago, FCC said that they wanted to change the payments for Sundays and pay plain time rather than overtime rates. On the first day that they would only pay plain time - they found that not enough drivers wanted to work so their network ground to a halt.

If FCC wants drivers to drive it's trains on Sundays, they need to come to a deal with the drivers. My suggestion would be to offer a payment to anyone who wants to change their contract so that Sunday's a normal working day (you don't need everyone to be available to work Sundays so any driver who for religious or personal reasons doesn't want to work Sundays doesn't have to). Then employ more drivers on 4 out of 7 day contracts because FCC knows exactly how many trains they are running, for a business to rely on overtime to do their regular work is silly.

Simples and Libertarian-friendly unlike you and the Devil's new feudalism.

neil craig said...

The large majority of union members are now in the state sector.

The Fact Compiler said...

Anonymous is talking through his derrier:

"Were you aware, Mr Kitchen, that the reason the railways were privatised this way was that there was an EU directive explicitly laying out the privatisation mechanism?"


There was a requirement for separate accounting for infrastructure and operations.

Which is why very few other European countries emulated the disastrous method of UK privatisation.