Labour should just renationalise the railways

Yesterday’s announcement of a rail review marks the first step in the long march towards common sense on the railways. Ever since 1997, Labour politicians have been under the misapprehension that the industry would sort itself out, despite the fact that they knew it was a botched privatisation.

No longer. It is difficult to exaggerate the extent to which yesterday’s statement by Alistair Darling represents a U turn. I have sat through countless meetings and press conferences at which Labour ministers have stressed that the last thing the industry needs is more upheaval. To some extent, they were right. The review will, with justification, be viewed by investors in the industry with great suspicion. And managers in the rail industry are also concerned with the prospect of further change.

But ultimately, change was inevitable. The privatisation railway was more than a botch – it was the disastrous fragmentation and destruction of a perfectly viable industry into a 100 disparate bits.

It was quite remarkable to watch Darling admit that the structure of the railway was dysfunctional and that the fragmentation was inefficient. Yesterday, though was the easy bit, a statement that changes in the structure are to be announced in the summer. The difficult bit is deciding what, precisely, to do.

Indeed, there was precious little content in the speech, apart from the fact that we are going to have a review. No wonder it was not leaked in advance – it was just too boring. Even the suggestion that there would be eight regional ‘fat controllers’ to improve punctuality did not materialise.

Even the one definite thing Darling said, that he did not want to renationalise the railways, does not make sense. It would be a massively popular policy among the general public and rail passengers, but apparently it has been ruled out. Or has it? Darling said delphically that there are certain things which only governments, rather than commercial concerns, can do. The hard bit is working out what those limitations are.

That begs the question, though, as to why the government is so concerned at saying renationalisation is not an option. Even many right wing commentators recognise that an industry which requires so much subsidy sits unhappily in the private sector. The private sector may have brought some money into the industry, but at a high price.

This is where the fear of the R word seems to be counter productive. Why not, instead, recognise that the state is going to have a key role in all decisions concerning the railways and work from there. That does not mean the state has to run every train or check on every spending decision. Nor does it suggest that private investment has no role.

Of course, there is a need to lever in private sector money. But the key question is who has control over how the money is spent and who takes the risk. In reality, the government always takes the risk since the railways cannot be allowed to go bust.

Theresa May was right to highlight some other basic contradictions in Darling’s statement. For example, ministers were infuriated in December when Tom Winsor, the rail regulator, decided that Network Rail needed a massive £24.5bn over the next five years, much more than the government had budgeted for. Yet, under the rules, Winsor has the right to demand that the Treasury coughs up this money.

Yesterday, Darling stressed that it must be the government which decides how much money should go into the industry. But that’s a contradiction. Either the regulator is independent or not.

Moreover, Darling said that the key issue was to have one point of decision making, a sensible strategy. But hold on a sec. If the government is putting nearly £4bn into the industry, is it really going to allow a private sector organisation to make the decisions. Hardly.

There is widespread agreement among the industry that the decision to separate the operations and the infrastructure was a key mistake at privatisation. Even Kim Howells, the junior transport minister, said this earlier this month, but if the two are to be knitted together, what will happen to the franchising process which seems to be going ahead without any pause. But will any private companies be willing to commit themselves to these franchises if they don’t know what structure they will be working under.

Politically, yesterday’s announcement does not seem to make sense. Everyone knows there are problems with the railways but merely to announce a review, without any suggestions as to how it will be taken forward, seems remarkably weak. It certainly will not gain any votes by the next election.

Perhaps that is a cause for celebration. Is Darling really looking towards the long term given that any change in the structure would require primary legislation and therefore could only be done after the election.

Moreover, there are concerns that the review is being hamstrung right from the beginning. Proposals for ideas are supposed to be sent in to Richard Bowker, the head of the Strategic Rail Authority and yet there are many in the industry who argue that he and his organisation are a big part of the problem.

Nevertheless, despite these concerns and the timidity of the statement, Darling’s effort deserves a couple of cheers for recognising the structure of the railway needs changing and that there are too many organisations with overlapping responsibility. Sorting out that mess, however, will require a forensic brain, the courage to attack vested interests and, perhaps, an acceptance that some form of renationalisation is inevitable.

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