Government have offered to Nationalise the franchise holders on British Railways? WOW!

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Dutto

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I'm behind the times because things are moving so fast!

Is everyone aware that the Government have offered to Nationalise the franchise holders on British Railways? WOW!

Pro-privatisation fanatics have continually tried to argue that public services (transport, health services, education, energy, mail delivery ...) need to be transferred to/kept in private hands because the private sector is supposedly 'more efficient' than the public sector.

If this was even remotely true then the natural reaction in a crisis would be to transfer as many public services as possible to private ownership, in order that they can be run more efficiently for the duration of the crisis.

That the opposite is happening, and the government is transferring essential public services from private ownership to public tells us that they know perfectly well that their privatisation ideology is based on a massive lie, and that the state is more efficient than the private sector when it comes to the crunch.

Another factor to consider is the stated justification for this temporary rail nationalisation. It turns out that the profiteering private companies running the rail franchises will not be able to spin corporate profits out of the network because of the fall in passenger numbers.

Instead of just letting these parasitical companies fail, the government is freeing them of their contracted obligations in order to run the entire rail network at the public expense. Why?

It's essentially a huge bailout designed to save shareholders and corporate executives at the expense of the public purse.

But in doing this the Tories are making it absolutely clear that these private franchises, and shareholder payouts, and bloated executive salaries are entirely unnecessary, because the rail system works without them.

When the Labour Party proposed gradually bringing the rail network back under public ownership the Tories and the obnoxious liberal capitalist 'centrists' sneered, and mocked, and ridiculed.

'Where are you going to get the money to do that' they scoffed 'from your magic money tree?'

But now it turns out that it was always perfectly possible to do stuff like that all along, but now that it's the beloved capitalist establishment class doing it, rather than a democratic socialist outsider, the 'where's your magic money tree?' droolers have suddenly gone absolutely silent.

They know perfectly well that 'there isn't enough money' was always an absolute ******** excuse for opposing investment economics and progressive social reforms, but the mindless rote learning idiots kept on repeating it, so they kept on pushing it.

And they know that nationalising vital public services and infrastructure allows them to be run more efficiently and cost-effectively, because if it didn't, then why on earth would they be doing it in the middle of a crisis situation?


Chippy,
I apologise if this in any way takes the Thread away from being "Business (coronavirus related)" but I'm absolutely gobsmacked that this has happened; especially because I didn't even know that it had been offered!
 

MyQul

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I'm behind the times because things are moving so fast!

Is everyone aware that the Government have offered to Nationalise the franchise holders on British Railways? WOW!

Pro-privatisation fanatics have continually tried to argue that public services (transport, health services, education, energy, mail delivery ...) need to be transferred to/kept in private hands because the private sector is supposedly 'more efficient' than the public sector.

If this was even remotely true then the natural reaction in a crisis would be to transfer as many public services as possible to private ownership, in order that they can be run more efficiently for the duration of the crisis.

That the opposite is happening, and the government is transferring essential public services from private ownership to public tells us that they know perfectly well that their privatisation ideology is based on a massive lie, and that the state is more efficient than the private sector when it comes to the crunch.

Another factor to consider is the stated justification for this temporary rail nationalisation. It turns out that the profiteering private companies running the rail franchises will not be able to spin corporate profits out of the network because of the fall in passenger numbers.

Instead of just letting these parasitical companies fail, the government is freeing them of their contracted obligations in order to run the entire rail network at the public expense. Why?

It's essentially a huge bailout designed to save shareholders and corporate executives at the expense of the public purse.

But in doing this the Tories are making it absolutely clear that these private franchises, and shareholder payouts, and bloated executive salaries are entirely unnecessary, because the rail system works without them.

When the Labour Party proposed gradually bringing the rail network back under public ownership the Tories and the obnoxious liberal capitalist 'centrists' sneered, and mocked, and ridiculed.

'Where are you going to get the money to do that' they scoffed 'from your magic money tree?'

But now it turns out that it was always perfectly possible to do stuff like that all along, but now that it's the beloved capitalist establishment class doing it, rather than a democratic socialist outsider, the 'where's your magic money tree?' droolers have suddenly gone absolutely silent.

They know perfectly well that 'there isn't enough money' was always an absolute ******** excuse for opposing investment economics and progressive social reforms, but the mindless rote learning idiots kept on repeating it, so they kept on pushing it.

And they know that nationalising vital public services and infrastructure allows them to be run more efficiently and cost-effectively, because if it didn't, then why on earth would they be doing it in the middle of a crisis situation?


Chippy,
I apologise if this in any way takes the Thread away from being "Business (coronavirus related)" but I'm absolutely gobsmacked that this has happened; especially because I didn't even know that it had been offered!
I heard this on the radio this morning. They're doing it because all the train companies would go completely bust as from what I heard they're 70% down on use. So a massive revenue shortage
 

Dutto

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I heard this on the radio this morning. They're doing it because all the train companies would go completely bust as from what I heard they're 70% down on use. So a massive revenue shortage
Sorry, but I still can't understand why these companies can't go "completely bust". A shedload of smaller businesses from high-street shops to pubs to small kiosks on Skegness Beach are all in danger of going bust, so why should the Government make an exception with the railways?
 

MyQul

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Sorry, but I still can't understand why these companies can't go "completely bust". A shedload of smaller businesses from high-street shops to pubs to small kiosks on Skegness Beach are all in danger of going bust, so why should the Government make an exception with the railways?
Me neither. Like the saying phrase goes, 'privatise the profits, socialise the loses'
 

foxy

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I think the rail companies make good healthy profits, I think our last two here in Victoria metro are English companies and when one lost the contract there were plenty more waiting with tenders in hand.
I can't see them going broke.
 

Dutto

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I can't see them going broke.
Neither can I, especially as the Government is bailing them out in times of trouble!

The problem here in the UK seems to be that they don't invest in the rolling stock, pay themselves large salaries and equally large dividends; and then either get the franchise taken away from them or relinquish the franchise, after they've milked the system for all its worth.

Another outfit takes over and the process starts all over again!
 

foxy

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Neither can I, especially as the Government is bailing them out in times of trouble!

The problem here in the UK seems to be that they don't invest in the rolling stock, pay themselves large salaries and equally large dividends; and then either get the franchise taken away from them or relinquish the franchise, after they've milked the system for all its worth.

Another outfit takes over and the process starts all over again!
Yes I did read that about the company in the north of England, if they are making a pigs ear of something the government should put them out on their ear, the state government here gives them huge fines for late trains or tracks down so it keeps them on their toes.
 

Richie_asg1

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I say let the train companies go bust - then buy up the rolling stock for pennies and move it back to government control. It was a profitable business for them - but "Investments may go down as well as up"- let them take the fall for their greed.
Either way - it shows the greed and corruption that has existed for so long and brings it to the light.
 

Northern_Brewer

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The problem here in the UK seems to be that they don't invest in the rolling stock
Literally the opposite of the problem. It's government who don't invest in rolling stock as they're constrained by Treasury borrowing rules. Sure, Northern have made a mess of replacing their trains but for instance I know a French person who thinks the standard of trains in this country is amazing compared to in France - they poured money into making the TGVs fast, but have starved the "ordinary" trains of cash and they're pretty shabby - and even some of the TGVs feel a bit tired.

The structure of the franchises means that you only make money if you reduce penalties due to delays and increase the number of fare-paying passengers.
When government handed the East Coast back to the private sector, the first thing they did was borrow £30-40m to replace the knackered motors in the engines that government couldn't afford to maintain properly. The cost of borrowing that money was less than the penalties they incur for lateness due to unreliable trains, and they also did a small refurb to the interior because more people take the train if they're not skanky and have eg decent Wifi. One of the main reasons things went wrong on the East Coast was that the government decided to take over the process of buying new trains - Virgin wanted to buy off-the-shelf trains similar to the ones they already had on the West Coast, government instead took 17 years of studies and thinking about it before finally buying from Japan. The delays in government providing new trains meant that the business plan was screwed, but the franchise structure was too rigid to accommodate that, so the operator went bust.

Rail privatisation is something everyone has a view on, here's the view of someone who's actually run franchises, including when nationalised :

His argument is essentially that the government in some ways is more in control than in the days of British Rail, who owns the franchises is pretty much a detail in the global scheme of things. Also worth noting that the operators in England and Wales are not directly subsidised, they are net contributors to the taxpayer. Even if you include Scotland the average subsidy to train companies in 2018-19 was only 0.5p/km, compared to 5.8p/km of subsidy to the state-owned Network Rail. If you include that track subsidy then the only operators that didn't need subsidy were c2c and Virgin East Coast.


(positive numbers mean subsidy, negative means payments from company to Treasury)
TOC subsidy​
inc NR subsidy​
Northern (Arriva)
£407.3m​
£763.3m​
ScotRail (Abellio)
£390.3m​
£638.9m​
Great Western Railway (First)
£281.3m​
£646.5m​
West Midlands Trains (Abellio/JR East/Mitsui)
£133.9m​
£314.0m​
Southeastern (Govia)
£112.8m​
£358.2m​
TfW Rail (Keolis Amey Operations)
£86.4m​
£186.8m​
Arriva Trains Wales
£59.9m​
£180.3m​
Caledonian Sleeper (Serco)
£25.1m​
£36.2m​
TransPennine Express (First)
-£3.0m​
£136.4m​
East Midlands Trains (Stagecoach)
-£21.3m​
£154.3m​
CrossCountry (Arriva)
-£41.6m​
£206.6m​
Chiltern Railways (Arriva)
-£45.9m​
£43.4m​
c2c (Trenitalia)
-£70.7m​
-£16.8m​
London North Eastern Railway (DfT)
-£106.6m​
£68.0m​
Virgin Trains East Coast (Stagecoach/Virgin)
-£116.6m​
-£63.5m​
Govia Thameslink Railway
-£144.6m​
£229.9m​
Greater Anglia (Abellio)
-£176.9m​
£42.4m​
Virgin Trains West Coast (Virgin/Stagecoach)
-£216.7m​
£100.8m​
South Western Railway (First/MTR)
-£217.7m​
£22.0m​
 
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Dutto

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@Northern_Brewer And all this time I thought that they were making money!

WOW! I stand corrected! However:
  1. Were they lying when they printed this article in The Guardian? Richard Branson's Virgin Group has made £300m from rail franchises
  2. How did the Company keep paying Dividends from 2004 to 2018 if they were so poor?
  3. How can poor old Richard still afford to keep his island in the Caribbean and keep pouring money into his railway company at the same time?
As I pointed out, I stand corrected but I can't say that I'm totally convinced!
 

Northern_Brewer

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  1. Were they lying when they printed this article in The Guardian? Richard Branson's Virgin Group has made £300m from rail franchises
  2. How did the Company keep paying Dividends from 2004 to 2018 if they were so poor?
  3. How can poor old Richard still afford to keep his island in the Caribbean and keep pouring money into his railway company at the same time?
As I pointed out, I stand corrected but I can't say that I'm totally convinced!
The numbers I posted above are not the losses, it's best to look at the franchise subsidy/fee as a (negative) "rent" for the privilege of running the service, in the same way as you might pay rent for the privilege of running a pub or shop. It's then an (effectively) fixed outgoing for the duration of the franchise, and how much profit or loss you makes depends on how good a service you run and how many new passengers you attract. Personally I don't have much problem with Virgin taking out £14m/year if you have a system where it's also possible for Thameslink-Southern to lose £15m in a year (and overall Govia made an operating profit of £25.4m on turnover of £2804.9m in 2019. Would you work for less than 1% profit?). Generally Virgin have done a pretty good job, whereas the likes of Thameslink and SWT are pretty crap, and I have no problem with people being rewarded for taking risks to do things better.

As far as the taxpayer is concerned, all that matters is how much cash goes in and out of the Treasury, and how good the service is - the amount of profit is irrelevant. If a nationalised entity can deliver a better service at less cost to the Treasury then great - but historically nationalised services have been more like SWT or Northern and less like Virgin.
 

Dutto

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As far as the taxpayer is concerned, all that matters is how much cash goes in and out of the Treasury, and how good the service is - the amount of profit is irrelevant. If a nationalised entity can deliver a better service at less cost to the Treasury then great - but historically nationalised services have been more like SWT or Northern and less like Virgin.
Sorry, but we subsidised British Rail before it was nationalised and we are subsidising the privatised companies now; the only difference is that any excess money is paid to the people who own the privatised rail networks in the form of dividends and not returned to the Treasury.

Since nationalisation I have seen no improvement in any of the services that wouldn't have taken place within the nationalised industries; but I have seen prices rise well above inflation and in many cases the ownership of what are critical national industries move overseas.

The ensuing profits have also been paid out in dividends rather than returned to the Treasury and in many cases the profits have been moved overseas.

I give you the National Coal Board as an example. According to the Government and the media of the time, the NCB was massively subsidised; but not included in the published equation was that the Director of the NCB (Derek Ezra if memory serves me correctly) considered the NCB to be an "energy company" and had invested heavily in the offshore oil and gas industry.

As a result of these investments, "NCB Limited" made a profit and on privatisation the NCB was split up in order to close the non-profit and marginal profit coal-mines, sell off the profitable coal mines and sell off separately the NCB's investments in oil and gas.

It was a massive con-job - just like every other privatisation rammed through by the same government!
 

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