British railways – a privatisation scam

The economic historian Robert Millward points out that the popular notion of nationalisation in Europe as a 1940s phenomenon, driven by the perceived failures of capitalism in the 1930s and the successes of the planned economy in wartime, ignores the earlier history of state direction of the universal networks. Gladstone wanted to nationalise the railways in 1844. Even earlier, at their genesis, the railways were dependent on the state to force private landowners to yield right of way to the iron road. The problem of the publicly owned British railways after 1948 wasn’t that they were publicly owned, but that they were expected to do so many things for so many people, often for less than they actually cost, that it was no longer possible to be sure exactly what they were doing with their share of the nation’s resources, or why. What was clear was that they kept failing to meet one of their key targets, which was to break even.

Proof that the solution to the problem of British Rail (as it was called by then) didn’t have to be privatisation comes from a surprising source: the Thatcher years. In 1982, the network was reorganised, its subsidies were cut, and more attention began to be paid to the wants of passengers and freight users. British Rail was still a state-owned, non-profit organisation, but began to combine the public service approach with some of the more rational attributes of a commercial company. From the point of view of the traditional left, this period, which lasted until privatisation under John Major’s government between 1994 and 1997, was simply a precursor to privatisation (as it was, though it needn’t have been), part of the cuts narrative and the war on unions, a nauseating attempt to subject the working man to corporate flim-flam and the gods of profit and loss. From the point of view of the Thatcherite right, it was appeasement, a pathetic effort to let the rust and grease-stained troglodytes of Britain’s neo-Soviet past pretend they knew how to run a business. What gets lost in this trench warfare between positions is that in terms of running a railway, this wasn’t a bad time. Under the reign of its boss from 1983 to 1990, Bob Reid (who was succeeded, confusingly, by a completely different Bob Reid), parts of British Rail broke even; subsidies fell to levels far lower than in comparable European countries; new trains were brought in; lines were modernised; passenger numbers increased. The publicly owned BR was still a slower, older railway than France’s, Germany’s or Japan’s, with higher ticket prices, but that wasn’t because it was publicly owned – they all were. As Terry Gourvish shows in his history of BR, in the 25 years before privatisation, starved of resources by the Thatcher government as it was, and dependent on property sales to placate the Treasury, the organisation was reforming from within. It was even doing what state organisations are supposed to find so difficult – making people redundant as technology changed. Between 1973 and 1994, British Rail shed 75,000 jobs, 39 per cent of its workforce. John Major privatised it anyway. Now fares and subsidies are higher than ever, and investment is still low. …

The exception to Bradley’s ecumenical stance is the privatisation of British Rail, a change he abominates without reservation. It sounds too absurd to be true, but BR really was privatised into fragments set up not so much to compete as to make each part’s work more difficult. The track and stations went to one shareholder-owned company, Railtrack; the rolling stock went to three others; and the operation of the trains was franchised out to a set of bidders, the Train Operating Companies, or TOCs. Railtrack was the most obvious disaster of the privatisation era: an engineering company that started out by sacking most of its engineers, a maintenance company that killed passengers through bad maintenance, a private company dependent on government subsidies, a firm reliant on flawless signalling that committed itself to non-existent signalling technology, a privatised firm that had to be renationalised (as Network Rail) only eight years after privatisation. ‘Privatisation,’ Bradley writes, ‘made no serious attempt to engage with the special character of railway operation and engineering; instead, it drew on the one-size-fits-all ideology of the free marketeer, by which every exchange must be monetised, and competition within an agreed legal and financial framework is the universal ideal. Co-operative relationships were thus replaced – deliberately and knowingly – by adversarial ones.’

Since the state-owned Network Rail took over, costs have fallen, and the railways have become safer. No rail passenger has died in an accident since 2007, and no track worker since 2009. Yet successive governments, Labour and Conservative, have failed to reform the rest of the rotten, still partly privatised system, which, although it functions as a railway and carries many more passengers than it used to, acts as a device to siphon off the resources of state and passengers into the pockets of senior managers and shareholders.

By its end, in the mid-1990s, British Rail was being subsidised to the tune of £1-1.5 billion a year. The figure for 2014-15 was £3.5 billion. A process that, as Bradley writes, ‘was meant to address the supposed scandal of a publicly owned system which required high subsidies in order to operate … has proved an extremely expensive way of saving money’.

Fantasy pervades the current government’s representation of the railway system. There are supposed to be 23 rail franchises operated by 23 railway companies. In fact, only nine companies run Britain’s trains, across multiple franchises. Apart from Virgin and Serco, the outsourcing company, all are either former bus companies (FirstGroup, Stagecoach, National Express and Go-Ahead) or state-owned European railways (Abellio is owned by Nederlandse Spoorwegen and Arriva by Deutsche Bahn, while Keolis is majority owned by SNCF). In order to preserve the fiction that privatised railways work better than publicly owned ones, the fact that the Dutch, German and French state have part-nationalised a significant chunk of the British railways has to be ignored. When National Express’s attempt to run the InterCity East Coast franchise failed in 2009 and the route was nationalised, the state company formed to do the job did so very well. That too has to be ignored. More reality denial: in order to maintain the fiction that private railways are the best, the TOCs have to be made to seem profitable. The only way this can happen without politically unacceptable ticket price increases is by allowing them to pay Network Rail artificially low prices for maintenance and renewal. And the only way that can be done is by allowing Network Rail to borrow money to cover its losses, and the only way that can be sustained is for it to use part of its government subsidy to pay its creditors. In 2014-15, Network Rail, now £34 billion in debt, spent £2.4 billion on doing its job and £2.6 billion on financing its loans. Such is the price of making sure Richard Branson and Deutsche Bahn make a profit by repainting Britain’s trains a different colour every few years. As Bradley says, ‘Mr Gladstone would have seen through this rigmarole very quickly.’

It is easy, writing about the railways in Britain today, to shift into a denunciation of the privatisation scam. It is a scam, and the anger is justified. Restoration of public ownership and reunification of the network under a single hand would be beneficial. But to talk about the railways in terms of whether they are privately or publicly owned is to diminish other powerful dichotomies. When the railways burst into the world in northern England the dominant tension was not between public and private but between old and new. The opposite of privatisation could be called ‘nationalisation’. But what might nationalisation of the railways mean in the 21st century? It’s easier to remove the profit motive, easier to stop the siphoning off of money from the railways to absentee landlords whose stake in them is exclusively financial, than to come up with a new set of guiding principles for a network in which utilitarian technological change both conflicts with the historical culture of the railways, and supplies the material for the historical railway culture of the future.

Trains in Space