The naked ideology of re-privatising the East Coast rail line in the UK

A new report suggests the nationalised East Coast line is providing far better value for money than Britain's disastrous private network and its eye watering prices. Is this why the Coalition is desperately trying to re-privatise it?

Flickr Image: Byzantine_K

The coalition government re-iterated their intentions to re-privatise the East Coast mainline rail network this month. This despite a new report by the Office of Rail Regulation (ORR) showing the line as the most cost efficient. The Financial Times stated that the report proves the East coast line is "the most efficiently run rail franchise in terms of its reliance on taxpayer funding".

The ORR report shows the East Coast line required the lowest level of government funding as a percentage of total income, at just 1.2%, a mere 0.2% of the overall share.

The government however have argued they do not ‘accept’ the ‘premise’ of the report. Furthermore Simon Burns, Minister of State for transport, declared that the line had to be privatised, as it was the worst in the country. He referred to the punctuality figures for the line in the past twelve months. However the figures for East coast quoted by Mr. Burns are actually only 0.1% different from the figures for Virgin trains. Virgin recorded punctuality performance figures of 82.9% for the same period, compared to East Coasts 82.8%. The route used by Virgin trains is the West coast line, which recently received taxpayer funded upgrades. The East Coast line in comparison has received no such investment and it is well known within the industry that whoever operates the line, further taxpayer investment will be needed.

The minister further confused matters by comparing the East Coast mainline to the c2c line, which operates along an extremely small route in comparison. The East Coast line is most comparable in terms of train distance covered to the West Coast Line. As shown the two franchises hold near identical time statistics yet Virgin operates at a much higher cost to the taxpayer. 13.2% of direct funding from government compared to the 1.2% of East Coast line.

So if East Coast line costs less than any other franchise and is hitting similar time-keeping numbers for comparable lines why would the government wish to privatise it? It’s not as if privatization helps keep fares down. The United Kingdom has some of the most expensive rail fares in Europe. The McNulty report in 2011 found that costs were 40% higher in Britain to run the network than in the comparable state owned rail industry in Europe. We pay on average £4.6 billion a year more than equivalent travelers in France, where railways remain publicly owned, according a study by The National Union of Rail, Maritime and Transport workers (RMT).

Labour argue that pure political spite is driving the push to privatise the line before elections in 2015, in an attempt to deliver a blow to an incoming Labour government - but perhaps another motive exists? After all it is economic orthodoxy to view the private sector as good, public as bad. Classical economists tend to see privatization as a driver of greater efficiencies within industries as well as a way of boosting overall growth within a nation.

Organisations from the International Monetary Fund to the Organisation for Economic Development to the World Bank have trumpeted privatization and sell offs of state assets (World Bank 1992). Indeed much of the early research by economists seemed to show that privatization wrought great results. However much of the early research in the nineties concentrated on the periods immediately before and after privatization and didn’t take into account longer-term results.

Cook and Uchida carried out research over a ten year period and found that performance could just as easily drop after privatization as it could go up. In fact they found that certain sectors such as utilities suffered a downturn in performance after privatization across the board. They showed utilities began to decline after privatization across all key measurable data and that profitability, investment and employment all trended downwards. Though their work was carried out within developing nations it provides clear, empirical evidence against the idea that privatization is always good for an industry, or indeed a nation.

When the Financial Times article went live some commentator’s below the line argued with the report by the ORR and the article by Mark Odell based on the report. Mr. Odell in reply to one particular comment, noted that in all his years he’d never yet managed to “find a country with a large network anywhere in the world that has cracked the secret of making the railways as a whole profitable.”

This clearly applies to the UK, as despite most of the sector being privatised the government and the taxpayer still have to contribute vast subsidies, over three times those paid to British Rail in real terms. In fact, even by 1999 Railtrack received almost as much money for running just the infrastructure as British Rail received to run the whole operation, according to George Monbiot.

A fast and efficient rail network is essential. It shouldn’t purely be run for economic gains in itself, it is there along with other basic infrastructure to underpin wider economic success. To focus on the rail network as nothing more than a profit producing enterprise is extremely shortsighted. It’s part of the great neo-liberal swindle, now in it’s final phase under the Coalition Government.

But what next? What does Britain do for growth when every single last remaining piece of infrastructure is sold off? When there is no National Health Service left to raid. No part of the national road or rail network remaining. When it is all gone where do we turn for much needed growth?

The government argue their main focus is on reducing the deficit –but investing in infrastructure is one way of doing just that. As Micheal Burke argues in his excellent analysis, privatization can only produce a temporary massaging of the figures; it can’t produce the long-term growth, which some would argue is crucial to reducing the deficit.

For far too long the voices of the privatization hawks have been the loudest. Polls repeatedly show a majority of citizens still believe in publicly owned utilities and transport. When will a party stand for election that campaigns for what the people want in this field? This is one area where the Labour party could really take the popular high ground. What we need is a party with the courage to stand on a platform or re-nationalisation of essential services.

About the author

Rachel Graham worked in finance before moving into teaching, covering law, finance, marketing and organisational development. She currently studies journalism.