General UK politics

[Darat]

Starting this thread as there are quite few policies and stuff happening that aren’t just Covid politics or Brexit.

One I want to raise is the rail system.

The UK government has now extended “support” for the rail operators to 18 months in total: Rail franchises axed as help for train firms extended https://www.bbc.co.uk/news/business-54232015

Surely it would be cheaper and simpler to re-nationalise the rail system? The infrastructure has been nationalised for some time now, several of the franchises have moved back into public control.

What on earth can be the benefit of trying to keep the rail system even nominally “privatised “ in light of the changes of passenger numbers for the foreseeable future?

 

[theprestige]

Were the franchises intended to be run for profit? I.e., the private operator was supposed to charge the riders somewhat above cost and pocket the difference? (I'd imagine the other side of this ideal coin would be the franchise operator reducing costs while maintaining quality of service.)

 

[The Don]

Starting this thread as there are quite few policies and stuff happening that aren’t just Covid politics or Brexit.

One I want to raise is the rail system.

The UK government has now extended “support” for the rail operators to 18 months in total: Rail franchises axed as help for train firms extended https://www.bbc.co.uk/news/business-54232015

Surely it would be cheaper and simpler to re-nationalise the rail system? The infrastructure has been nationalised for some time now, several of the franchises have moved back into public control.

What on earth can be the benefit of trying to keep the rail system even nominally “privatised “ in light of the changes of passenger numbers for the foreseeable future?

I don't know whether there is a good economic argument for it, but to re-nationalise a whole industry would be to spit on the grave of Maggie Thatcher - as opposed to subsidising private industry by taking the assuming the economic risk by nationalising parts - which is apparently fine.

IMO rail privatisation never made sense and IMO the model used wasn't chosen to make the privatisation or ongoing running of the railways more efficient, cost effective or profitable - merely to make it most difficult to re-nationalise.

Christian Wolmar who is a passionate railway advocate has opined that if British Rail had had a fraction of the subsidy that the private railways had enjoyed alongside the growth in passenger numbers then the service would be far superior and less expensive.

 

[lionking]

Railways have been privatised in Victoria, Australia for decades. The standard of the service, safety, reliability and cleanliness are clearly better. It’s entirely possible for government to set the standards for transport and other services and let the (more efficient, in my opinion) private sector deliver these services.

 

[Darat]

Were the franchises intended to be run for profit? I.e., the private operator was supposed to charge the riders somewhat above cost and pocket the difference? (I'd imagine the other side of this ideal coin would be the franchise operator reducing costs while maintaining quality of service.)

Yes and no.

No simple way to sum it up. But one of the major flaws is that the government ended up giving more in financial subsidies to the private companies than it used to do to fund the previous nationalised rail system.

 

[Darat]

Railways have been privatised in Victoria, Australia for decades. The standard of the service, safety, reliability and cleanliness are clearly better. It’s entirely possible for government to set the standards for transport and other services and let the (more efficient, in my opinion) private sector deliver these services.

The private sector unless it is a not for profit is always going to be more inefficient than a equivalent non-profit system as it has to add in those extra percentage points that represent the profit.

Now of course a nationalised system can be inefficient, badly run and so on but it doesn't start with the inherent inefficiency of having to make a profit.

 

[Mojo]

Were the franchises intended to be run for profit? I.e., the private operator was supposed to charge the riders somewhat above cost and pocket the difference? (I'd imagine the other side of this ideal coin would be the franchise operator reducing costs while maintaining quality of service.)

The service is subsidised by the government, so what is likely to happen is that the operator runs the service as cheaply as possible and pockets the subsidy.

Last I heard the railways were being subsidised at a higher rate than they were when they were nationalised.

Of course, there has been a line run at a profit: https://www.chroniclelive.co.uk/news/north-east-news/east-coast-main-line-makes-8656990.amp

The East Coast Main Line franchise made a profit of £13 million last year - with the cash returned to the Treasury.

And the financial success of the line is in stark contrast to other rail franchises, which required millions in subsidies to keep going.

The government took action to remedy this, with predictable results: https://www.bbc.co.uk/news/amp/business-44140410

 

[lionking]

The private sector unless it is a not for profit is always going to be more inefficient than a equivalent non-profit system as it has to add in those extra percentage points that represent the profit.

Now of course a nationalised system can be inefficient, badly run and so on but it doesn't start with the inherent inefficiency of having to make a profit.

With quite a lot of experience in the public service, I would argue that public sector inefficiency trumps what you refer to as profit inefficiency. Didn’t you guys invent the term “jobsworth” to illustrate this public service inefficiency?

 

[Mojo]

With quite a lot of experience in the public service, I would argue that public sector inefficiency trumps what you refer to as profit inefficiency. Didn’t you guys invent the term “jobsworth” to illustrate this public service inefficiency?

When a franchise collapsed and had to be run by the public sector, it made a profit. See above for the results of returning it to the private sector.

 

[lionking]

When a franchise collapsed and had to be run by the public sector, it made a profit. See above for the results of returning it to the private sector.

I don’t think one example proves anything.

In my experience services run by the private sector are more efficient, at least in Australia. I don’t see even the Labor party here calling for re-nationalising of utilities.

 

[Darat]

With quite a lot of experience in the public service, I would argue that public sector inefficiency trumps what you refer to as profit inefficiency. Didn’t you guys invent the term “jobsworth” to illustrate this public service inefficiency?

No "jobsworth" is private/public indifferent!

 

[The Don]

I don’t think one example proves anything.

In my experience services run by the private sector are more efficient, at least in Australia. I don’t see even the Labor party here calling for re-nationalising of utilities.

I had direct experience of seeing why the public sector is less efficient when it comes to running a power company because I was working at National Power just after vesting.

The CEGB was obliged to have a significant amount of excess capacity in case of outages and the operating regimen was designed to ensure minimum stress on the generating equipment.

Now we have very little excess capacity and the government is having to pay the private sector hand-over-fist in order to secure it - it is a major concern in the UK at the moment. The plant was run into the ground - which didn't really matter because coal-fired power stations are obsolete but unplanned generation outages are higher than under the CEGB.

Because electricity prices are so dependent on the cost of fuel perhaps it's unfair to compare electricity prices (they are significantly higher in real terms now), but many of the other privatised industries including water and railways have far higher prices in real terms.

It may have been the privatisation models used in the UK which led to this position, it could be poor regulation (I also spend a couple of years in the water industry and saw how the water companies were able to manage their investment so as to influence the regulator) but we seem to have poorer service at higher cost (to the consumer and the treasury) than our European neighbours.

 

[psionl0]

Yes and no.

No simple way to sum it up. But one of the major flaws is that the government ended up giving more in financial subsidies to the private companies than it used to do to fund the previous nationalised rail system.

Wouldn't the Tories consider that a resounding success?

 

[psionl0]

I don’t think one example proves anything.

In my experience services run by the private sector are more efficient, at least in Australia. I don’t see even the Labor party here calling for re-nationalising of utilities.

When the WA government privatized the bus network, they did save money but not for the reason that you might think.

MTT bus drivers, being public servants, had a guaranteed wage which could not be reduced. After privatization, these same drivers had to get jobs with the private companies at up to 1/3 less than they were being paid previously. So the government savings came straight out of the bus drivers' pockets. (Whether the government managed to keep those saving or paid out to the private companies in other ways, I don't know).

 

[lionking]

When the WA government privatized the bus network, they did save money but not for the reason that you might think.

MTT bus drivers, being public servants, had a guaranteed wage which could not be reduced. After privatization, these same drivers had to get jobs with the private companies at up to 1/3 less than they were being paid previously. So the government savings came straight out of the bus drivers' pockets. (Whether the government managed to keep those saving or paid out to the private companies in other ways, I don't know).

I’m not that worried about the market setting pay rates, or featherbedding of public service pays being attacked. I said earlier that I was a public servant for many years. I only realised I was overpaid when I left and hit the normal job market.

 

[Mojo]

When the WA government privatized the bus network, they did save money but not for the reason that you might think.

MTT bus drivers, being public servants, had a guaranteed wage which could not be reduced. After privatization, these same drivers had to get jobs with the private companies at up to 1/3 less than they were being paid previously. So the government savings came straight out of the bus drivers' pockets. (Whether the government managed to keep those saving or paid out to the private companies in other ways, I don't know).

That can’t happen here. Well, not until next year.

https://en.wikipedia.org/wiki/Transfers_of_Undertakings_Directive_2001

 

[theprestige]

Yes and no.

No simple way to sum it up. But one of the major flaws is that the government ended up giving more in financial subsidies to the private companies than it used to do to fund the previous nationalised rail system.

The service is subsidised by the government, so what is likely to happen is that the operator runs the service as cheaply as possible and pockets the subsidy.

Last I heard the railways were being subsidised at a higher rate than they were when they were nationalised.

Of course, there has been a line run at a profit: https://www.chroniclelive.co.uk/news/north-east-news/east-coast-main-line-makes-8656990.amp




The government took action to remedy this, with predictable results: https://www.bbc.co.uk/news/amp/business-44140410

It kinda sounds like the government was hiring private contractors to operate the lines, rather than funding a government department and government employees for that purpose.

Rather than selling the entire operation, lock, stock, and barrel, to a private firm that wanted to make a go of it.

I wonder how much of the rising costs were simply the usual costs of things rising over time. "Cheaper than it would be if you were running it today." Is one thing. But was "cheaper than it was when you ran it ten years ago" ever actually on offer?

 

[The Don]

I wonder how much of the rising costs were simply the usual costs of things rising over time. "Cheaper than it would be if you were running it today." Is one thing. But was "cheaper than it was when you ran it ten years ago" ever actually on offer?

When operations are taken back into public hands, costs drop significantly.

 

[Mojo]

It kinda sounds like the government was hiring private contractors to operate the lines, rather than funding a government department and government employees for that purpose.

Precisely. And the private sector needed more money for it because some of it had to be handed to their shareholders.

The purpose wasn’t to run the railways more efficiently, it was to hand over public money to the private sector.

 

[Darat]

It kinda sounds like the government was hiring private contractors to operate the lines, rather than funding a government department and government employees for that purpose.

Rather than selling the entire operation, lock, stock, and barrel, to a private firm that wanted to make a go of it.

I wonder how much of the rising costs were simply the usual costs of things rising over time. "Cheaper than it would be if you were running it today." Is one thing. But was "cheaper than it was when you ran it ten years ago" ever actually on offer?

They could and did raise prices above inflation every year.