Why calls for rail nationalisation miss the point

[Crispy]

This is just a little metaphor, really, for the whole nonsense embedded into the system. I am somebody trying to use public transport to get into and out of London. Why am I having to deal with multiple companies as part of this process?

I suppose teuchter's point is that you *don't* have to deal with this nonsense on London buses, despite them all being operated by private companies, because the regulation and funding is tightly controlled by TfL. Therefore, the same organisational system can be imposed on the railways, to the same effect.

It's probably true.

I'd counter that this is a "least bad" solution. TfL buses are run by private companies not because it's the best way to run buses, but because the GLC managed to get a better deal (I'd love to read a detailed account of how this was achieved btw) than the rest of the UK. From the passenger's perspective, there are no benefits compared to a fully TfL-owned and operated bus fleet.

I mean, can you imagine the shitshow if each tube line was run by a different private company?

IMO, a single monopolistic public service like the railway *needs* to be operated as a single monopolistic public body, for operational and public good benefits. Franchising out various parts of the operation does nothing for the passenger and only increases complexity and cost of management.

 

[teuchter]

Or, rather than multiply up the rules ever further and have to keep stamping down on other types of unanticipated problems that arise due to perverse incentives and non-aligned interests, simply recognise that a natural monopoly public service belongs in public ownership, and thus solve all these kind of alignment problems in one fell swoop.

Yes, maybe, but that's assuming there aren't any positive aspects of the current setup that would be lost.

Going back to your specific example: you have two choices for your ticket. One that you can use on all services or a slightly cheaper one that you can use on Southern only. If there was only one operator, then what would change? I reckon you'd lose the option of the slightly cheaper one, because its availability is generated by the competition between the two operators.

It's also possible that the Southern-only route is less desirable, and that one way of spreading load between the two is to introduce the price difference. If that's the case, then with one operator the incentive to do this would remain.

 

[teuchter]

But London buses are run by one authority, whereas the trains are different for profit franchises

No, this is incorrect. You've obviously not read my explanation.

 

[teuchter]

Franchising out various parts of the operation does nothing for the passenger and only increases complexity and cost of management.

I'm not sure this is proven, or even provable.

 

[kabbes]

Yes, maybe, but that's assuming there aren't any positive aspects of the current setup that would be lost.

Going back to your specific example: you have two choices for your ticket. One that you can use on all services or a slightly cheaper one that you can use on Southern only. If there was only one operator, then what would change? I reckon you'd lose the option of the slightly cheaper one, because its availability is generated by the competition between the two operators.

It's also possible that the Southern-only route is less desirable, and that one way of spreading load between the two is to introduce the price difference. If that's the case, then with one operator the incentive to do this would remain.

This is what I meant when I said that one attitude to it all is "more freedom of choice is brilliant". This is the inherently liberal mindset that is prevalent throughout all of consumer culture. It assumes that the alternative created by removing choice is just that only the poorest options remain.

But if the entire system was set up on the basis of public need, your whole scenario wouldn't make sense. The cost of tickets into and out of London from my station would be priced according to a combination of cost, ability to pay and need for future investment for the system as a whole.

 

[Santino]

Presumably a heavily-managed, invisible-to-the-passenger system of franchises would still be funnelling money to shareholders, money that has been generated from public investment and management of assets.

 

[teuchter]

But if the entire system was set up on the basis of public need, your whole scenario wouldn't make sense.

What scenario do you mean?

 

[kabbes]

What scenario do you mean?

The scenario in which pricing is altered according to arbitrary restrictions on travel according to which carrier is used.

 

[teuchter]

Presumably a heavily-managed, invisible-to-the-passenger system of franchises would still be funnelling money to shareholders, money that has been generated from public investment and management of assets.

It only matters if the amount of money being funnelled off is enough that it makes a significant difference to the overall cost of running the system.

If it's an ideological objection to the basic principle that private companies can make a return from being involved in providing public services, then would you go so far as nationalising all of the manufacturing industries that provide rolling stock, signalling equipment, construction materials and so on to the rail sector?

 

[teuchter]

The scenario in which pricing is altered according to arbitrary restrictions on travel according to which carrier is used.

I don't understand why you describe that as "my" scenario. It's not a scenario I want to see.

 

[Pickman's model]

London buses are also operated under a franchise system, but are there often calls for these franchises to be nationalised? Not really, because the system works pretty well from a passenger's point of view. There's a consistent and fully regulated fare system. The different ownership between routes is basically invisible to the passenger. The difference between london buses and national rail is that the overall system is managed, regulated and funded in a different way. This is what needs to change about national rail. Fiddling with whether the franchises are public or private run is just shuffling deckchairs.

Bollocks is it invisible, it's on the side of every bus you dozy twat.

 

[kabbes]

I don't understand why you describe that as "my" scenario. It's not a scenario I want to see.

Then I don't understand what benefit you think you are describing in your previous post.

 

[maomao]

Bollocks is it invisible, it's on the side of every bus you dozy twat.

I'm sure it is but I can't say I've ever paid attention. As long as it's big, red and got the right number on the front it's my bus.

 

[Pickman's model]

I'm sure it is but I can't say I've ever paid attention. As long as it's big, red and got the right number on the front it's my bus.

Make sure it's going the right way too, chuck

 

[teuchter]

Then I don't understand what benefit you think you are describing in your previous post.

*If* the reason there's an option of a cheaper, operator-specific ticket is that it's generated by keen commercial competition, then that option might disappear under a single operator system. Having that option may be a benefit of the current system.

The way I see it, there are various potential positive aspects of having the service operations franchised out to private companies who compete with one another to gain those contracts. There are also various potential positive aspects of having the services operated by a single publicly owned entity. I don't see that there's a clear case for one over the other. I don't actually think the railways should have been privatised in the first place and argued strongly against it at the time but now I am not sure there's a clear case to renationalise. What matters is overall transport policy and the management of the system as a whole. That's why the discussions about, for example, whether east coast was better in public hands frustrate me. They are a distraction from the real problem which is our attitude, nationally, to public transport, and the priority given to the private car in so many considerations.

 

[Gromit]

In what way is it less efficient?

12.243% more cancellations in the first year.

 

[Pickman's model]

12.243% more cancellations in the first year.

Why not round to 12.25?

 

[Santino]

It only matters if the amount of money being funnelled off is enough that it makes a significant difference to the overall cost of running the system.

If it's an ideological objection to the basic principle that private companies can make a return from being involved in providing public services, then would you go so far as nationalising all of the manufacturing industries that provide rolling stock, signalling equipment, construction materials and so on to the rail sector?

Are those manufacturing industries a natural monopoly?

 

[teuchter]

Are those manufacturing industries a natural monopoly?

No entity has a monopoly in bidding for TOC franchises.

When a new train is ordered, a number of manufacturers bid for the job.

When a franchise is renewed, a number of companies bid for the job.

 

[Teaboy]

The trains are leased from third parties though I believe, it has to be done this way and the operating companies are not allowed to buy or lease directly. I imagine the banks etc that own the trains make very little profit from this system.

 

[Crispy]

No entity has a monopoly in bidding for TOC franchises.
When a new train is ordered, a number of manufacturers bid for the job.
When a franchise is renewed, a number of companies bid for the job.

That's not an answer to the question being asked.
Trains are interchangeable. There's a natural market for them.
Railways are (generally) not. There is one station in each town, and one line that goes to the next town. You can't choose a competing railway. This is why we call it a "natural" monopoly.

 

[teuchter]

That's not an answer to the question being asked.
Trains are interchangeable. There's a natural market for them.
Railways are (generally) not. There is one station in each town, and one line that goes to the next town. You can't choose a competing railway. This is why we call it a "natural" monopoly.

That's why I'm talking about the process of bidding for the franchise, not the process of running the service. That's where competition primarily is involved in the system. The government can choose a competing TOC at franchise award. This is where the element of competition would be removed, were we to bring the franchises back into public ownership.

 

[doodlelogic]

Network Rail is a natural monopoly and it probably makes sense to keep it within state ownership (or near enough).

The Train Operating Companies don't generally make enormous profits due to the re-franchising process, though some might say running them as a concession would make more sense (like I think Merseyrail and TFL Rail?).

Where the real money is being syphoned out of the system is the rolling-stock leasing companies, who make a killing because deals are always made on an expected life of trains (at a pretty high profit rate) but they keep them in service (and charge rental fees) for much longer.

 

[teuchter]

Yes, absolutely the infrastructure, ie. Network Rail should be kept in public ownership.

 

[NoXion]

Yes, absolutely the infrastructure, ie. Network Rail should be kept in public ownership.

Why have franchises at all?

 

[Magnus McGinty]

Why have franchises at all?

So profit can be extracted.

 

[teuchter]

Why have franchises at all?

Are you under the impression that I'm trying to argue that the franchise system is necessarily better than a single public operator system?

 

[NoXion]

Are you under the impression that I'm trying to argue that the franchise system is necessarily better than a single public operator system?

The link in your OP is a defence of the franchise system, and you don't really seem to have challenged that.

 

[Puddy_Tat]

London buses don't make a profit

umm...

Transport for London (the franchising authority) doesn't make a profit as it's in effect a bit of the GLA therefore local government. such things don't make a profit, even if they make an operating surplus that contributes to the provision of other public services.

It is not currently self-financing, requiring revenue support from local and (at present) national taxation. (the shit is starting to hit the fan as the central government funding is in the process of being withdrawn - a parting gift from george osborne, but maybe that's for another thread)

The private sector bus operators (by 'private sector' that includes about a third of the market which is run by companies owned by european state governments) who own and run the buses do make a profit, or they wouldn't bother to do it. Go-ahead London (who operate about 25% of the London bus market) made £ 43 million profit from their London bus operations in 2017 (source - one of the downloads here)

arguably, the re-tendering of (generally) each bus route as a separate franchise every 5 - 7 years stops operators taking the piss with profit margins, as in most parts of london there's other companies who have depots that could absorb another route or two, but there's certainly a profit element.

TfL buses are run by private companies not because it's the best way to run buses, but because the GLC managed to get a better deal (I'd love to read a detailed account of how this was achieved btw) than the rest of the UK.

not quite.

up to the point when the GLC had its buses taken away from it in 1984, all the buses were run in-house. Under the following central government quango, the 'tendering' of routes to outside operators started in a smallish way, mostly with operators using shagged out old buses, some of which had already been disposed of by London Transport and were third-hand when they came back.

As was often the case in the Thatcher years, potentially unpopular policies were trialled elsewhere first, and buses outside London were deregulated from 1986 with a view to doing London later. the London Transport bus operation was split in to business units in 1989 with a view to privatisation / deregulation, but the deregulation bit never happened.

Nobody is quite sure why, although it's generally believed that the government were frightened by the gridlock in some places (Sheffield was the worst - see picture here) caused by far too many buses competing for passengers. The London Buses units were privatised in the early - mid 90s. An in-house unit 'East Thames Buses' was set up in a hurry in 1999 when a private operator went pop, but this was later sold off under Boris Johnson.

(yes, i am involved somewhere in this process but don't really wish to say exactly where or how)

As for the basis of this thread, I'm not quite sure I get it.

Yes, a rail network franchised to private sector operators could (depending on government policy) be run on the basis of high subsidy and low fares, or a nationalised operation could be run on the basis of (at least) break-even and high fares. And yes, some bits of the rail network cross-subsidise others, and always have done.

but the current set up, with multiple contractual relationships between train companies and government, rolling stock leasing companies, then network rail and their contractors and sub-contractors all involve money going on lawyers and accountants (and i'm not going to start on the 'delay attribution' industry) and every company involved is taking a profit, and most of the 'private sector efficiency' means cutting jobs, wages and terms and conditions of employment.

and then there's a hidden cost to the state of benefits and tax credits supporting low wage / zero hour employment.

then there's the cost to the train companies of preparing franchise bids - reported to be well in to seven figures a time, and provides a load more work for accountants, lawyers and consultants. that money has got to come from somewhere - ultimately from passengers on that transport group's other bus and rail services if the bid isn't successful.

the bottom line is that real terms financial support to the railways, while it's been reduced partly due to railtrack having been put out of its misery, and partly through tory policy of reducing subsidy, is still double what it was under BR (can only find this in a PDF so can't post direct link. it's probably somewhere on here.)

 

[Crispy]

not quite

Exactly the detailed account I was looking for; thank you