Posted 3rd August 2020 | 3 Comments

Monday essay: Attlee returns?

The Department for Transport has been traditionally unhappy about the n-word – nationalisation, that is. But Sim Harris has been wondering whether perhaps it is time for a u-turn.

WHEN the Virgin Trains East Coast franchise collapsed in 2018, it was suggested that the Intercity East Coast operation had been nationalised (or strictly renationalised, as it had been in the possession of the DfT’s Operator of Last Resort between 2009 and 2015). Use of the n-word triggered disapproving intakes of breath among the communication gurus at the DfT, with one press officer telling Railnews sternly that the changeover was not ‘renationalisation’ at all.

Railnews suggested that as the Oxford English Dictionary defines ‘nationalise’ as ‘to convert from private to government ownership’ the n-word seemed appropriate, but the DfT would have none of it, presumably because it was trying to protect and preserve the already flagging franchising system. (It is also true that the rolling stock remained with the private sector leasing companies.)

Now the Office for National Statistics has confirmed that all the British franchises (apart from Transport for Wales, which is not strictly a franchise) have had their debts moved to the public sector. After all, virtually all their commercial freedoms such as they were have been removed, and so they can hardly be expected to continue to accept the liabilities. None of the franchises, for example, may ‘make significant changes to fares or staffing levels without government agreement’, and they are bound to pass all revenue to the government. In return, the DfT pays their costs and also gives them a modest management fee.

The railways were first nationalised on 1 January 1948, when the Labour Prime Minister was Clement Attlee, and slowly privatised again between 1994 and 1997. The franchising system replaced the British Railways Board on the passenger railway in 1996 and 1997.

The old companies, although not insolvent, were looking financially uncertain after World War 2, although they insisted that they could ‘carry on’. In any event their protests were disregarded, and British Railways began what also turned out to be an uncertain existence.

The future of the franchises is looking critically uncertain now. They have already been effectively abolished by Keith Williams, whose review of the railways remains unpublished but who had been dropping plenty of hints.

The Rail Delivery Group, which represents the franchised operators, is refusing to accept defeat. At the end of last week, RDG chief executive Paul Plummer said: ‘This is a temporary accounting change that reflects the extent of government involvement in running trains during a national emergency. The Covid crisis presents a chance to move towards a new way of running the railway where contracts put customers at the centre and the private sector’s track record of attracting people to travel by train in safety is harnessed to boost the economy, the environment and the public finances.’

He could hardly say less, but it is now widely rumoured that the DfT’s Emergency Measures Agreements, introduced in late March and currently due to expire on 20 September, are being discussed behind the scenes with a view to extending them – and the ‘renationalisation’ they represent – for up to two years. It is surely reasonable to suggest that the old franchises would not be able to withstand a return to the previous arrangements as soon as next month in any case.

If there is a major extension of the EMAs into 2021 and 2022, a return to ‘traditional’ franchises looks even less likely. Now that the events of 1996 and 1997 have effectively been reversed, perhaps the shade of Labour Prime Minister Major (later Earl) Attlee is muttering in a dark corner of the afterlife. It is hard to hear his words, but he seems to be saying ‘I told you so’.

The August print edition of Railnews, RN282, was published on 30 July. The new edition and some previous issues can be obtained by calling 01438 281200 from UK numbers or +44 1438 281200 internationally, and selecting Option 2.

Reader Comments:

Views expressed in submitted comments are that of the author, and not necessarily shared by Railnews.

  • david c smith, Bletchley

    To give some background to what I wrote below, it is very similar to "option 4" of the study made in 2016 by the Competition & Markets Authority of alternatives to franchising. The main difference, I think is that the CMA recommended that profitable operations should cross - subsidise the loss makers, with operators compelled to take on the latter alongside the former.

    An allied issue is subsidy / premium arrangements. The aim of these payments ought to be to represent "hidden" benefits and costs in the market place. Examples might be subsidy for relieving parralell road / aviation congestion , on a performance - related basis (offered to all operators equally) ; another might be offered by some local communities to persuade operators to serve them , whilst charges might be levied on pollution generated . And so on - this isn't an exhaustive list.

    As for access charges, a part of the CMA study recommended operators "bidding for bundles of paths ".

    If there were to be the" horses for courses" approach, the above would largely be applicable to the "national" longer distance / intercity services, whilst more local / commuter operations , under localised direct democracy,
    would follow their own arrangements.

  • John Porter, Leeds

    I agree with David Smith that "we need accountability [with] different models for different types of operations. An open access competition model [for] intercity /long distance service [and] commuter /shorter distance captive markets in direct democratic control."
    That was British Rail's preferred solution in 1994. But we also need democratic control of
    1. access charges,
    2. inter-availability charges and
    3. late evening and other fringe services.
    IE renationalisation with some competition.

  • david c smith, Bletchley

    For what it's worth, my understanding is that even in that bastion of free enterprise, the USA, the private railroads were being centrally directed through a government agency, USRA, during the two World Wars. Some form of governmental control during crisis situations seems appropriate.

    The mistake made by the 1945 government lay in assuming that a model that worked well in wartime would continue to in the peace. The main assumption in this was that human nature / motivations would continue much as during the conflict. ( human behaviour underlies the success or otherwise of economies).

    For our current look into the future, it seems we should learn lessons from the various models tried so far ; franchising ( referred to by one commentator as "pretend privatisation") was going to have collapsed eventually, with its fatal flaws.

    Yes, we do need effective accountability , but the best way of achieving this may probably involve different models for different types of operations. An open access , ongoing competition model could best suit intercity / long distance service , whilst more localised operations ( commuter / shorter distance), being essentially captive markets, ought to be in direct democratic