ECML should stay public
ECML should stay public
Opponents of privatisation of public services are often accused of being ideological dinosaurs, closing their minds to the benefits innovation and creativity and ignoring economic reality. While proponents of private sector delivery suggest the public sector is sluggish, inert and performs poorly compared to profit-motivated entrepreneurs. There are many examples of where this economic orthodoxy is completely exposed, the most recent and currently most telling is in the rail industry. A new report from the Centre for Research on Social-Cultural Change (CRESC) shows how uneconomic and badly performing the rail industry has been since privatisation. Far from leading to significant investment in railway infrastructure and rolling stock, with the state gradually reducing its subsidy to rail services, we have seen declining investment, increasing subsidy and major leakage of finance from service to shareholder.
Train Operating Companies (TOCs) are entirely reliant on government subsidy to generate any kind of profit at all. From 2007 to 2011 the top five TOCs received a massive £3billion from the government, returning just over half a billion in profit. Less than 10 per cent of this state-subsidised profit was reinvested in the industry, with £466 million paid out in shareholder dividends. In fact, over 90 per cent of infrastructure investment has been paid for by Network Rail - or the tax payer.
The report also shows how the average age of trains has risen since rail privatisation, from 16 years in 1996 to 18 years old today. Just £1.9bn was spent on rolling stock between 2008 and 2012, compared to £3.2bn between 1989 and 1993 (the four years before privatisation). Meanwhile passenger numbers have gone up 60 per cent in the same period, an increase which is nothing to do with privatisation, leaving trains overcrowded and uncomfortable.
Meanwhile, rail passengers in the UK are paying twice as much per mile than passengers in France, Germany, Italy or Spain, who all have publicly owned rail services. UK train fares have increased three times faster than wages making rail travel increasingly unaffordable.
On any measure, privatisation has failed to deliver any benefits to anyone except the shareholders in the TOCs who have essentially been gifted money from this government year on year for failing to provide improvements to and investment in the rail infrastructure.
As the East Coast Main Line comes up for refranchising back into the private sector it's time to think again about the costs, benefits and values of keeping or bringing rail services back into public ownership. All of the surpluses made on ECML while it's been in the public sector have been ploughed back in to rail services - there are no share dividends to seep money away. We need continued investment in ECML; the best way to do that is keep it public.
And the public backs public ownership. More people think train services will be better and cheaper if it stays in the public sector. On the ECML that's based entirely on evidence and experience.
Kevin Rowan
Head of Organisation and Services
TUC
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