speri.comment: the political economy blog

What’s really at stake in the renationalisation of the railways?

Renationalisation might spook big business but it represents a welcome injection of legitimacy into a maligned public sphere

Jeremy Green, Lecturer in International Political Economy, University of Cambridge, SPERI Honorary Research Fellow

Jeremy GreenThe state of Britain’s railways has long been a bee in the public bonnet.  There are very good reasons for this preoccupation.  Ever since the decision to privatise the railways in 1993, costs have spiralled amidst a general perception that the quality of service provided hasn’t moved up in step.  Rather than the downward drive on prices, and the upward push in service quality, that free marketeers believed would transpire from the unleashing of ‘market forces’, privatisation has produced regional monopolies and consistent above- inflation price rises.

A team of researchers at the University of Manchester’s CRESC research institute concluded, in a damning report last year, that privatised rail has been a ‘serial shambles creating artificial profits for the franchise and hidden costs for the public’. Private train companies have relied upon massive state subsidies and stealthy accounting in order to remain profitable, while the franchises have failed to provide adequate investment or modernisation of the service.  The real-terms cost of the railways to the taxpayer has more than doubled since privatisation.

British commuters have been left to cast longing glances towards the much more impressive continental rail services of countries such as France, Germany and Austria. The fate of the railways has become yet another chapter in the sorry story of Britain’s economic decline and dysfunction.

It is within this context, and a more immediate perception of public dissatisfaction with pricing policies in key services such as energy provision, that Ed Miliband’s Labour Party have begun to entertain the idea of renationalising parts of the rail service.  A growing swell of support for renationalisation from within Labour is threatening to put the issue firmly on the policy agenda before the next election.

As things stand, however, there is a split between the Party’s leadership and many of the grass-roots members.   Miliband is expected to call for an opening of the franchises to competition from public sector bidders.  But these plans fall far short of the demands from the unions and the Labour left for a staggered, automatic, renationalisation by returning each of the franchises to public control as they expire.

Opening the franchise to public sector bidders provides no guarantee of renationalisation and preserves the neoliberal fixation with the merits of market competition. Renationalisation should be introduced as a principled restatement of public ownership, rather than as a result of the requirement to prove competitive efficiency through bidding against the private sector. Maintaining a franchise system split between private and public ownership would also make it much harder to give coherent strategic direction to the rail system as a whole.

The hesitancy of Labour’s leadership to demonstrate an appetite for policy audacity is no doubt partly a consequence of fears over the business lobby, with the chief executive of Stagecoach already having expressed his opposition to renationalisation.   There is no doubt at all that the opposition to renationalisation will be strong and vocal.

Yet there are also strong economic arguments in favour of restoring a publicly owned and controlled rail service.  Running the service on a not-for-profit basis should enable a reduction in prices and the unified buying power of a public monopoly would allow the government to bargain for lower prices from suppliers of rail technology and equipment.   More broadly, the potential reduction in costs and improvements in service would create a more connected economy within Britain, with many associated growth and social benefits.

Whatever the economic benefits, even the discussion around renationalisation is an important break from the near-teleological faith in privatisation that has characterised post-Thatcherite politics in Britain.   Both major parties have advocated privatisation of key public services in recent decades, whether through the hybrid ‘Private Public Partnerships’, which were in vogue during the heyday of New Labour, or the kind of creeping privatisation of the NHS that has accelerated under the Coalition.

So, is this just a clever piece of electioneering from Labour or something more significant?  Much depends upon how the battle within the Party pans out over the coming weeks, but there is no doubt that a genuine commitment to full-blooded renationalisation in the Party’s manifesto would be a major breach of the prevailing pro-market order.  The potent symbolism of a move to renationalise a major service within the British economy should not be underestimated.

It would represent a timely and politically important re-legitimisation of a public sphere that has been on the back foot ever since the hegemonic ascendance of neoliberal ideology.  In the aftermath of the global financial crisis the public sector came under even greater pressure.  A private banking crisis was repackaged by political elites as a crisis of profligate public spending and excessive national debt. The prescribed remedy for this mendaciously reconstructed crisis was simple: austerity.  That meant public sector retrenchment and a dependency upon business-led recovery, with all the associated problems of stagnant wages, regional unevenness and spiralling private debt.

Renationalisation of key services would be an important step towards countering the austerity agenda.  Reinstating the prerogatives of public service and regaining confidence in public control of major national assets could form the basis for rebuilding a wider progressive agenda in Britain.  This needs to encompass not only the reassertion of public ownership and the expansion of the public sphere, but also a combination of redistributive ‘tax and spend’ politics that tackles inequality and reduces the overwhelming power of big business to shape the national economic and investment agenda.

It’s surely time to counter the creeping privatisation of the previous decades with a creeping renationalisation of key services.  Rail renationalisation offers a firm platform for starting this process.

 

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Categories: Business, Economics, SPERI Comment | Tags: , | 2 comments

Articles and comments posted on this blog reflect the views of the author(s) and not the position of SPERI or the University of Sheffield.

Comments (2)

  1. Neal Lawson of the left leaning group Compass is one of several lefty interests to make a similar argument. It is one, in principle, that I really like. Jeremy’s is more academically set and far easier to agree with there is one crucial point that Neal didn’t address and one I’d like Jeremy’s response to. The role of EU law and obstacles therein derived from Britain’s membership of the EU.

    Under current EU law railways are one of those network industries that must be subject to public procurement procedure (using EU parlance) or, as we know it, a tendering/franchise process. Not only is the relevant directive clear on this but relevant UK experience on the European Commission’s interpretation of EU law in this area of transport networks is also clear (Scotland’s lifeline ferry network was subject to severe pressure Although the ECJ case law is messy, the Altmark case also made it clear that, although a public sector bidder can win a contract, a public procurement procedure must be used for such bids to take on a franchise.

    In short: what Jeremy and many is offering, and one I lean toward personally, has serious obstacles in EU law and it’s hard to imagine this situation altering without a change in EU law itself or a sharp change in the Commission’s view. I’d be very interested to hear Jeremy’s response. It’s great SPERI blog is covering topics like this.

  2. The ‘Rebuilding Rail’ paper is another document worth publicising. Also did you not realise that the Green party is committed to full renationalisation of the railway, unlike Labour’s usual timid and reactionary posture.

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