Nationalising the railways would be wrong on every level

Nationalising the railways would be wrong on every level

by Liam Kerr
article from Friday 17, February, 2017

LAST YEAR, when responding to some of the severest rail delays in Scotland’s recent history, the transport minister told Parliament he had established a ‘shell company’, ready to make a public sector bid for the ScotRail franchise. It was a calculated move to mollify the rail unions and throw a bone to Scottish Labour’s call for nationalisation.

The idea that nationalisation is a panacea for Scotland’s railway ills has been allowed to settle for too long. Practically, the plans will lead to a worse service and higher fares; ideologically, the call for nationalisation is myopic.

It is typical of the SNPs ‘back-to-front’ style of government, its politicians identify their desired model, then contort it and its products to make the model appear to have delivered the solution. Far more productive, far less costly and far more sensible, would be to start with the desired outcomes (e.g. a punctual and reliable service, so that passengers are getting value from their fares, and can rely on advertised services), and work back to find the model which will best deliver them. Nationalisation will not.

Currently, Network Rail, funded by the taxpayer, owns much of the track, signals and pathway timetabling. Abellio ScotRail (‘ScotRail’) a private company, having won the right to run trains on that network following a competitive tendering process the terms of which are set by the SNP Government, leases its trains from rolling stock companies (‘ROSCOS’), under the eye of the Independent Rail Regulator and Department for Transport.

Setting up a public company, owned by the SNP Government as proxy for the taxpayer, and awarding it the franchise, simply replaces one corporate entity with another. ROSCOS still own and lease out the same rolling stock to the new Scotrail. Nothing changes, save that the public purse – via the public company – is directly on the hook if things go wrong.

So where does the money come from to fund the operation? When departments across government are tightening budgets and slashing spending to prioritise health, social care and education, it is inconceivable that the millions of pounds needed to bid for and run a national rail service can be found.

Which begs the question of who should pay for the service: the user e.g. she who relies on the train to get to work daily; or the taxpayer, living at the end of a branch line ripped up under Dr Beeching in the 60s and who has no alternative but to drive 50 miles to work and has no option to get the train? Under nationalisation, the answer is the latter.

Furthermore, a nationalised company would answer to the SNP Government only. Indeed, any minister who established it, in post for only a few years, whose career could be stalled if performance dips, and who had invested his or her personal reputation in making such a system work, would be marking their own company’s performance.

And where would the incentive to improve the nationalised service come from? Currently, ScotRail operates in a market. When travelling from Aberdeen to Edinburgh, I am presented with a choice: do I go with ScotRail’s frequency and free wifi over the more spacious but less frequent Virgin East Coast service, or the less busy but infrequent CrossCountry service?

Choice matters. The shareholders of Virgin Trains, CrossCountry and Abellio demand a return, delivered by more passengers actively choosing a particular provider and service, buying more tickets, purchasing on-board products and making a positive choice of train over road or air. The companies are in competition to deliver market-leading reliability, punctuality, value for money, speed of wifi and even the quality of the sandwiches, to deliver a return to shareholders.

No such imperative exists where the shareholder is the SNP Government. Freed from the need to compete, innovation stalls, service declines and the product stagnates.

But perhaps, freed from the shackles of executive pay, and shareholder returns, public ownership might lead to slashed fares and reinvested profits? Yet public ownership is no guarantee of frugal pay. One need only look at the salary for the chief executive of your local council to find that. And to reinvest profits, a company first needs to actually MAKE a profit. Not something British Rail was able to achieve for the bulk of its existence. Absent profits, a nationalised railway must make investments / improvements by spending surplus funds: generated either through fares increases, borrowing (which must be repaid) or higher taxes, presumably hypothecated to avoid being sent straight to education, health etc.

So, the nationalised company will struggle to deliver the desired outcomes. The calls for nationalisation are impulsive and ill-thought through, promulgated by those looking to the ‘glory days’ of BR through sepia-tinted glasses; focussed on the means of delivery rather than delivery itself. There is no evidence that nationalisation will improve services, decrease fares, or do anything to improve punctuality or reliability.

No one argues there aren’t difficulties for ScotRail, but nationalisation does not provide the answer. In the Scottish Conservatives, we remain keen to participate in any discussions on how to improve rail services but we want to see improvements now, not in years; and instigated by ScotRail rather than vast sums of public money being thrown at the problem, only for services to decline and fares to increase. Let’s work to deliver genuine improvements to Scotland’s rail services and value for money for taxpayers and users alike.

Liam Kerr MSP is the Conservative spokesman for transport and infrastructure

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