Where’s the enthusiasm for reprivatisation

The surprise announcement that there are only three bidders shortlisted for the controversial East Coast franchise suggests that the Department has been scratching around for bidders. The very fact that the government allowed Eurostar, which it partly  owns, to bid, in a joint effort with Keolis (partly owned by SNCF) when earlier it had intimated (through ‘informed’ newspaper articles) that it might block the idea smacks of desperation.

So we have FirstGroup, a company that walked away from a three year extension on  Great Western and which clearly massively overbid for the West Coast; Virgin with its chequered record and smelly trains on West Coast; and a partly owned government company. All this because of an ideology that dictates that private is better than public and therefore we need to have entrepreneurial flair so that part of the profits of the railway can be hived off by shareholders rather than all going to taxpayers.

Moreover, because of the ridiculous way the bid process is carried out, we will not be able to see what these various companies are offering until the decision has been made. So, as usual, I ask – ‘What is franchising for?’

  • ricp

    Branson Beardierail will make a bid for the prestigious franchises, but if they still have West Coast, that’s bye bye to competition and mega-rises in unregulated fares, a philosophy completely opposite to Virgin Record Stores. Beardies Virgin only wants the flash franchises, funnily not Stagecoach alone; is Brian Souter too uncertain about his profits?
    First similarly want another prestige route to adorn with its pink doors and stripes, but it removes competition from Peterborough. Hmm. Does this suggest the much criticised First Capital Connect will get the boot? The contributors to ‘I hate FCC’ Website and Facebook, would hope so! And as for Eurostar SNCF, well we know what this Government’s attitude is, if it’s British sell it to the Foreigners! No Chinese bid yet, or are they too busy sorting out their own High Speed Network. Will be interesting to see how this charade develops!

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  • Tom

    Franchising is designed to improve efficiency in the way the railway is run. I am interested to know whether you think Network Rail (as an arms-length public sector organisation, as you might want British Rail to be) would run the whole railway as efficiently as the current operators do?

  • Tom

    ‘…and a partly owned government company. All this because of an ideology that dictates that private is better than public’
    Can you not see the error here? Maybe you have been blinded by your ideology that public is better than private.

  • RapidAssistant

    Depends on what you mean by “efficiency”, doesn’t it. Efficiency of what? If you mean the cost of moving one passenger one mile, or the cost of performing upgrades, I’ll think you will find it has gone up considerably since “privatisation”. That’s what the whole debate is about at the end of the day – costs. Is the current system any better value to the taxpayer in its current fragmented state, than what it was as one coherent whole, state owned or otherwise. I think not.

    I will draw you to the recent example of the Paisley Canal Line electrification in Glasgow last year – NR and Scotrail worked together to deliver the upgrade, and it finished ahead of schedule and millions under budget. If that isn’t an advertisement for how re-integration would improve matters, I don’t know what is.

  • RapidAssistant

    Perhaps its down to the fact that in this country we can’t get the balance right between what should be publicly owned and what should remain in the private sector. France and Germany in particular seem to have a handle on what’s better being publicly owned for the wider benefit of society, and what should be left to free market forces. There’s nothing new here – dig deeper and you’ll find that the only profitable parts of the railway are the long distance express routes and the freight. That hasn’t changed since BR days, arguably even goes back to the Big Four days – yet the few remaining supporters of “privatisation” still champion this as an achievement – whilst at the same time try and explain away the doubling of taxpayer subsidy as putting right the neglect of bad old British Rail.

    And anyway, are we talking about the same private sector that mucked up HS1 and the London Underground modernisation. Both had to be bailed out at enormous cost, and in the case of the former – reprivatised at a massive loss.

    Private better than public my a**e – certainly in the context of railways.

  • RapidAssistant

    Isn’t it a strange coincidence how only the highly profitable long distance routes are the ones that get fought over, and cause controversies like EC and WC? The little-heard-of regional franchises hardly merit a mention whenever they get let out….

  • Tom

    Interested to see that you quote an example of the private sector assisting Network Rail in an alliance structure as a reason for complete public sector ownership. How realistic do you think the public sector’s original estimate of £28m is for 5 miles worth of wires?

    Likewise, do you think publicly owned East Coast and publicly owned Network Rail have worked well together to deliver improvements, sitting as they do at the bottom of the PPM table?

  • Tom

    The public sector, as part of Eurostar, have been shortlisted to bid for the East Coast franchise. How is this supposed to illustrate an unfair bias towards the private sector?

  • Tom

    Eurostar, partially owned by the UK government, has been shortlisted for the East Coast franchise. How exactly is this illustrative of an ideology that private is better than public?

  • Tom

    From your previous article:

    First did ‘duck out’ of the old contract but it was perfectly entitled to do so under the arrangement as it was an option which, not surprisingly given the large losses it was making, First did not take up.

  • ricp

    Is Tom one of the many people within the industry, or having right-wing leanings, who have not evaluated fully that the privatisation of the railway industry has caused costs to rise, and thus subsidy to rise, typically four fold over the last 20 years since the demise of British Railways. How does this suggest that Private = Good, and Public = Bad? It does not.
    Where the problem lies is in the inordinately bureaucratic process that the 1993 act set up, putting far to much responsibility with civil servants with little intrinsic understanding of how the railway works or the economics of the railways operation.
    This is amply demonstrated with HS2, where an exciting idea is presented in a crass, haphazard way that does not really benefit the regions as fully as it should, and at an inordinate cost to the taxpayer.
    The private Transport Conglomerates have drained vast sums of money out to the system to give their shareholders’ good dividends, propping up a supply chain with so many participants, all wanting their 10% or more. Thus we have lost the benefits of the ‘economies of scale’.
    Within the present system, the publicly owned DOR East Coast has performed reasonably well, it is not without it’s critics, but it has delivered both on service and premiums back to the exchequer. If it works, don’t break it!
    Christian Wolmar and I are fellow economists, and both of us see a fundamentally flawed system. The problem is Government, the civil service and the industry have become complacent, and entrenhced in a system that delivers a product rather inefficinently, and since few people understand the machinations of a very complex industry. Politicians in particular have not got a clue, with the possible exception of three members of the House of Lords!

  • RapidAssistant

    And you also remember the many years Virgin spent at the bottom of the same table, even post WCML modernisation. East Coast gives a massive return to the taxpayer all of it being used to prop up the massive waste in the current structure – the artificial profit that has to be given to the regional TOCs in order to make it worth their while, in other words.

    Re the first point….I am not trying to rehash the Public-Private debate since it is very obvious from your posts where in the ideological spectrum your opinions lie and we are going to have to agree to disagree there. I was merely trying to illustrate what happens when there is greater cooperation between the operator and NR, and making a case for ending the ridiculous fragmentation of the rail industry.

  • RapidAssistant

    Either way, it isnt a true privatised business anyway. Would First (or any other private company for that matter) have got into this industry if all these safety nets didn’t exist in the first place. The worshippers of The Gospel According To Thatcher all preach free market ideology should be applied to everything, yet if it was applied to the railways in its purest form then the industry would go bust completely. So if a private train company goes running to Mummy every time the going gets tough, then what’s the point of trying to pretend that they are at the cutting edge of capitalism??

  • RapidAssistant

    Here here!

  • andrewbowden

    Eurostar has not been shortlisted for the franchise. A joint bid involving Eurostar has. According to the Telegraph, Eurostar’s a minority stakeholder in the bid.

    The bid is joint with Keolis,70% owned by SNCF. Eurostar’s majority shareholder is SNCF. You can easily argue this is a public sector bid. Unfortunately the public sector involved is not British, but French.

  • Tom

    ‘But it has delivered both on service and premiums back to the exchequer. If it works, don’t break it!’
    But it isn’t delivering passenger growth as high as other TOCs (such as Virgin), and it isn’t performing well in PPM terms. It is broken, we need to fix it. It performs well in paying back a premium (just like GNER did) because it is an InterCity service running out of Kings Cross. A private company might skim off some profit, but it would also be better incentivised to improve delivery in terms of both revenue and performance regimes.

  • Steve

    Is Stagecoach not the majority bidder in the Stagecoach/Virgin bid? Indeed, I’m sure I read that Virgin only has a 10% stake in the bid.

  • CdB

    Good that NR and Scotrail worked together to find the best solution, you’d expect that huh? Just as my (private) company works with our (private) suppliers and customers to try to find a way of workinmg together that works best for both of us. This does not stop either us, or our customers, switching to other companies to ‘partner’ if we / they feel someone else would do the job better. The bit that amazes me is that there is not much more of this working together between two different companies whomever they are and whomever they are owned by. Thus I do not believe it is an advertisement for re-integration, but it is an advertisement for common sense.
    Indeed I am sure you can have two companies work well together just as much as you can have two parts of the same company fighting each other!

  • Fandroid

    Comparing East Coast and Virgin’s performance is like comparing apples and oranges. Virgin have new trains, specified by themselves on a line which has had £billions of investment. East Coast is running old BR-specified trains, which have had refurbs specified by previous franchise holders. The investment on the ECML has been tiny compared with that on the WCML. I regularly use both. I find the Pendolinos to be claustrophobic and some seats (backward facing with no window at all) really should be downgraded to third class. The Mk4s on East Coast are lighter and more pleasant, but I find the seats uncomfortable. On balance, I think East Coast stations are better run than Virgin’s (think of Crewe!). Both have expensive Anytime Tickets, but Virgin’s are mind-boggling: £321 return London to Manchester. Compare that with £249 return London to Leeds!

  • Tom

    Completely agree. So why are people so keen to hold East Coast up and say it is better run than other franchises? Because their ideology dictates that public ownership is better – it is not that East Coat’s performance is actually better.

  • RapidAssistant

    Perhaps the reason why Virgin’s unregulated fares have gone up so much in recent years is that they find themselves having to pay their own way (like East Coast does, incidentally) – I think back to the days in the early/mid 2000s when they were getting huge subsidies after the WCML upgrade had gone t**s-up. One way advance tickets from Glasgow to London were available at £16 at short notice without breaking a sweat – sometimes the week before, and if you sat in the first class section there was seemingly unlimited free booze from the drinks trolley. You try getting the cheapest Advance fare from Glasgow-London now even if you play ‘fastest finger first’ as soon as reservations open. Impossible in my experience – I haven’t gone on a Virgin train in over four years, because they are completely uncompetitive on price terms with East Coast.

    Ironic really, that a leftie like me is taking advantage of this artificial free market, yet its the publicly owned TOC that is more competitive. Are Virgin being greedy or is their cost base too high?

  • Tom

    Virgin have different fixed track access charges to pay and a fleet of trains that is more or less 10 years old. Therefore, to balance the books, the chances are that they require a higher yield per passenger.

  • Paul Holt

    Shouldn’t that be “hear hear”, as in “hear him, hear him”?