Corbynomics – Nationalisation Part 1

A truly disastrous title, I will never really understand the need to try and produce catchy names out of policy ideas. Regardless, it is not even really Corbynomics because these ideas have not come from his flat in North Islington.

So we are going to start with re-nationalisation of the Gas and Rail industries. It is important from the onset to appreciate that these are two very different industries, and consequently pose different problems in regards to how they may be nationalised. This post will start with rail.

The form of privatisation that took place in the rail industry is by no means conventional. At the moment Network Rail is the owner of infrastructural assets such as the rails, signals, stations, etc. and this company is government owned. While the operation of these railway lines is effectively sub contracted to single companies, with a distinction between rolling stock operation companies and train operating companies.

To simply understand the current system we may view it as something alike to the franchise model, the Office of Rail Passenger Franchising puts to tender contracts to operate portions of rail network, which are then bid for by private companies. Nationalisation would see the government take back all of these contracts into a government owned company resembling what was initially British Rail.

From various research reports and analysis, the current privatised system does not have such clear benefits compared to a government owned system. From an initial look one would note that anyways the government already heavily subsidises the industry with taxpayer money, for passengers to only then be victim to at times predatory pricing.

The theory behind a strong and dynamic competitive market to produce the best outcome for customers and firms is valid, but I would hardly call the rail industry an example of complete privatisation. If one was go to a train station now in a non-central city, they will find that they actually only have one company which they can choose to travel with. So where is the competition? Well the answer is that it is meant to be in the bidding process for the contracts, but it’s hard to see how that translates into direct benefits for the customer.

Even more frustratingly these companies take government subsidies, but still produce convenient profits to then dish out in the form of bonuses for their staff. Of which in some cases is going abroad as these companies are owned by European rail companies simply operating through subsidiaries in the UK examples being SNCF and Deutsche Bahn. Not to mention the lack of transparency in the bidding process itself. So in the best of cases it is unclear where the competition is coming from, and why this type of competition would lead to consumer benefits. Passengers can still be held hostage by the train driver unions as seen during the First Great Western strike earlier this year.

The two main problems people have are overcrowding and being priced out. Would bringing it back into government ownership solve these problems? Well at the moment it is clear the private system currently running is not solving them. Not forgetting to mention there have not been vast improvements in the rolling stock either (a promise that modern technology in trains would be a common sight in privatised rail), South West trains still don’t have air conditioned carriages or even Wifi.

The system clearly needs change. In my opinion it all needs to be in government ownership, or to find a manner in which to privatise everything but have dynamic and progressive competition. I agree here with Corbyn (which is rare) that this area needs serious reevaluation.

The below section is effectively price frustration that is simply extension to the problem (accurate at the time of checking):

If I book a ticket one month in advance for London Kings Cross to Manchester Piccadilly on a Monday at 7:40 the ticket costs £113. Lets hypothesise I have to take this hour in order to get to a meeting, and I don’t want to sacrifice weekend (even then one would need to a book a night in a hotel then, which in itself is not a cheap affair). One may argue that this is an accurate cost representing the time and nature of the trip, the main issue is that I don’t have any other choice but to go with Virgin. That is unless I went from Kings Cross to Birmingham New Street, and then to Manchester which I get to pay £92 instead. Any decent European would be shocked people pay these prices for rail travel, especially seeing that the government is already subsidising it…

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s