A really good opportunity for a proper debate about rail renationalisation was lost at the recent Labour party conference. The unions had tabled an amendment suggesting that a third term Labour government should bring the railways back into public ownership.
Their case has widespread support both within the party and outside. Privatisation has clearly failed in many respects and it can easily be argued that the railways were a privatisation too far, an inappropriate model for an industry that needs subsidy and a lot of policy interventions from government.
The unions, aware that Network Rail has effectively been renationalised and has taken back maintenance in house, concentrated their fire on the franchises. Why not, they said, just allow the franchises to wither on the vine, and when they came to an end, merely ask for the keys back, telling the companies ‘ thank you very much’?
As I have frequently written, there is a debate to be had about what is the purpose of a franchise. It is doubtful how much added value the involvement of mainly large bus companies in running trains gives to the industry. This is particularly true now that their freedom to manoeuvre is to be further circumscribed and the deals they work under are effectively rather limited management contracts with a reasonable profit margin.
Now we have an example of a franchise, South East Trains, being run directly by the Strategic Rail Authority which sacked Connex last year. SET’s performance has been good, with a 2 per cent reduction in delays in the latest figures. Certainly, its managers, appointed by the SRA, have coped perfectly well without having a parent company on top of them.
Yet, the response from well-briefed party loyalists and Alistair Darling at the conference was that it would cost £20bn to renationalise the railways. Presumably, they were including buying back the rolling stock and Network Rail, but that was not what the debate was about. Sure, the unions’ motion had been sloppily drafted, but the question as to why franchises cannot simply come back into the public fold when they come to an end was not addressed.
Tony McNulty, the rail minister, ducked the question in the same way at a fringe meeting I was chairing. But when I pressed him, he seemed to be ruling out any chance of SET staying in the public sector, even though he admitted that its performance was much better than Connex. ‘That is all down to Network Rail’ he told me later.
Now it may be that ministers could persuade us that the whole franchise process is beneficial. But they face an uphill task. The present franchise system seems to create a rigid set of services, with little opportunity for private innovation, at a high price and, in particular, because the time frames are so short, the best railway managers are constantly devoting all their energies towards refranchising.
And what is the real difference for passengers on Scotrail between National Express, the previous incumbent, and FirstGroup, who recently took over. Were the bids really so different that the whole upheaval was worthwhile?
Would it not, at the very minimum be sensible to have a couple of franchises in the public sector to ascertain costs. Sainsbury’s does this with its trucking, having about a fifth in house and the rest outsourced?
However, none of this was discussed at the conference because of the dishonesty of the loyalists and the naivety of the unions in having failed to draw up the right motion. But ultimately, it is an issue which should be the subject of a widespread debate both within and outside the industry.