Labour could be planning to allow public sector to bid for franchises

[Gareth Marston]

There was something of a boom in passenger numbers in the second half 1980s associated with the increase of economic activity at the time, followed to an extent by freight. I hadn't realised that we were privatised as long ago as 1986!

Cause and correlation are two different things altogether and the observation of one does not necessarily imply the other.

BR managed to grow passenger numbers when the economy was growing and had already started doing so again before the start of the franchises. Privatisation coincided with an unprecedented 15 years of uninterrupted economic growth from 1993 to 2008. BR had stop start boom and bust and stagflation to operate in. BR saw the population of England and Wales decline between 1971 & 1981 whereas the franchises live in a time of population growth not seen since the start of the industrial revolution.

Why has growth continued during the recession? Firstly this recession is not like the early 80's and early 90's, unemployment went over 10% of the workforce back then and over 3 million in numbers, this time the overall number and the percentage has been lower whilst those in employment have grown to record numbers on the back of a growing population. Secondly external drivers such as population growth,petrol costs and the availability Of work in centres accessible by rail, growing older population with disposable income have continued. Thirdly government has continued to pump £ into the system so there's ben no service cuts unlike under BR. There's no way proponents of franchising can claim rising passenger numbers as proof of their success the size and scale of the external drivers is just to great.

 

[Manchester77]

Why is it never the airlines that they seek to nationalise ?

I'd imagine one reason for it would be because British Airways was floated on the stock market and so the nationalise it the government would have to buy all (or at least the majority) of the shares which is costlier than by comparison the railways where all that's required is to let the contract expire and take it in house (massive simplification).

 

[David Barrett]

BR managed to grow passenger numbers when the economy was growing and had already started doing so again before the start of the franchises. Privatisation coincided with an unprecedented 15 years of uninterrupted economic growth from 1993 to 2008. BR had stop start boom and bust and stagflation to operate in. BR saw the population of England and Wales decline between 1971 & 1981 whereas the franchises live in a time of population growth not seen since the start of the industrial revolution.

Why has growth continued during the recession? Firstly this recession is not like the early 80's and early 90's, unemployment went over 10% of the workforce back then and over 3 million in numbers, this time the overall number and the percentage has been lower whilst those in employment have grown to record numbers on the back of a growing population. Secondly external drivers such as population growth,petrol costs and the availability Of work in centres accessible by rail, growing older population with disposable income have continued. Thirdly government has continued to pump £ into the system so there's ben no service cuts unlike under BR. There's no way proponents of franchising can claim rising passenger numbers as proof of their success the size and scale of the external drivers is just to great.

Precisely my point and I entirely agree. Unfortunately the said proponents do and many others accept this tosh. I'm sure that if doctors and engineers behaved in the same manner as politicians and other associated professions then the prisons would be full of former doctors and engineers. Anyway the planet is 4 000 years old, the sun revolves around it and the trees moving their branches cause the wind. Must be a lot of branch waving trees in Westminster.

 

[Simon11]

There's no way proponents of franchising can claim rising passenger numbers as proof of their success the size and scale of the external drivers is just to great.

When TOC's bid for franchises, they need to demonstrate that their revenue model is fit for purpose and that the assumptions used are reasonable. Therefore bidders carry out a lot of work, to perform a backcast, looking several years back. Through this, they use the known inputs (GPD, unemployment, timetables etc) to compare the revenue model growth to existing actual growth. The teams perform this several time, making tweaks to narrow the gap between model growth and actual growth by identify all the factors affecting rail demand (using sources of information such as PDFC).

It is therefore possible to produce a reasonable analysis, however it would need to be carried out at a local level to identify all the factors affecting demand. This would be a huge piece of work, although there have been pieces of work carried out for the industry looking into growth seen during the recession.

Finally by the way, TOC's can influence around 30% of their revenue growth through marketing, fares etc with the rest made up of inflation, Employment etc. Using that statistic of 30%, that is a large chunk for a private firm to develop and expand, whereas a nationalised firm will have little incentive to increase this revenue, thus leading to increased subsidy required. Overall, I believe that this incentive to drive revenue should more than make up than 3% in profit firms make.

 

[Dave1987]

Ok so Labour promise to slowly bring back the railways into public hands, then what? What differences would it make exactly apart from this complete myth that all the millions of pounds of profit the TOCs supposedly syphon of in profit being put back into improvements which I think is a complete fallacy! How would putting the railways back in public hands automatically make them better, sell it to me......

 

[yorksrob]

whereas a nationalised firm will have little incentive to increase this revenue, thus leading to increased subsidy required.

This isn't really borne out by experience. Effective marketing during the 1980's did increase revenue and reduce subsidy (and many innovations introduced at the time have continued to do the same throughout the privatised era).

 

[Railsigns]

Ok so Labour promise to slowly bring back the railways into public hands, then what? What differences would it make exactly apart from this complete myth that all the millions of pounds of profit the TOCs supposedly syphon of in profit being put back into improvements which I think is a complete fallacy! How would putting the railways back in public hands automatically make them better, sell it to me......

There'd be a massive reduction in public subsidies to the rail companies, by around £1.2 billion pounds per year, leaving more of our hard-earned tax revenue to be spent on other public services.

TOCs' profits are only a part of the problem. The complex industry structure that exists to facilitate franchising is incredibly wasteful.

 

[ainsworth74]

There'd be a massive reduction in public subsidies to the rail companies, by around £1.2 billion pounds per year

Where's that figure come from?

 

[Dave1987]

There'd be a massive reduction in public subsidies to the rail companies, by around £1.2 billion pounds per year, leaving more of our hard-earned tax revenue to be spent on other public services.

TOCs' profits are only a part of the problem. The complex industry structure that exists to facilitate franchising is incredibly wasteful.

I'm sorry but can you please point me to a govt department that runs ultra efficiently? Can you please show me the evidence that these subsidies would be used on other public services rather than keeping the loss making services around the country going which is what the subsidies are there for. Can you show how a new nationalised railway wouldn't be bound up in tonnes of red tape and bureaucracy that all govt departments are when even the smallest contract has to be put out to tender and have at least three bidders to make the system supposedly fair, whereas a TOC can just approach a local supplier? You make it sound incredibly simple that nationalisation would make things instantly better just because the govt is running it and not a private company. And that sounds an awful lot like an avocation for the 'C' word.

 

[Railsigns]

Where's that figure come from?

The Rebuilding Rail report.
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I'm sorry but can you please point me to a govt department that runs ultra efficiently?

What would be the relevance of that? BR wasn't a government department, but rather it was a publicly owned organisation that operated at an 'arm's length' from government. The level of government interference in the railways is greater now than under BR.

 

[317 forever]

With the new Thameslink franchise being a management contract, I wonder whether all franchises under Labour could be management contracts? I then wondered about whether inter-city type franchises could be let on a net cost basis and local stopping services on a gross cost basis? While this would give inter-city type franchises more commercial freedom, in practice a few francises - such as East Midlands and Great Western - combine inter-city and local services.

 

[Manchester77]

Ok so Labour promise to slowly bring back the railways into public hands, then what? What differences would it make exactly apart from this complete myth that all the millions of pounds of profit the TOCs supposedly syphon of in profit being put back into improvements which I think is a complete fallacy! How would putting the railways back in public hands automatically make them better, sell it to me......

In the last financial year TOCs received £4bn in subsidy yet they still manage to pay out millions to their shareholders for example northern:

Northern Rail, a joint venture between Serco and Dutch state rail subsidiary Abellio, paid £36m in dividends with subsidies totalling £713m.

Compare this to state run East Coast:

East Coast, the London-York-Edinburgh intercity service run by state-owned Directly Operated Railways, made a net payment of £16m to the government, returning £203m in franchise payments against a £187m track subsidy.

or even the last financial year of BR which received around £2bn of subsidy of which £0 went to shareholders.

http://www.theguardian.com/uk-news/2014/apr/16/rail-operators-200m-dividends-subsidy - source for quoted articles

 

[Simon11]

In the last financial year TOCs received £4bn in subsidy yet they still manage to pay out millions to their shareholders for example northern:
Compare this to state run East Coast:

or even the last financial year of BR which received around £2bn of subsidy of which £0 went to shareholders.

http://www.theguardian.com/uk-news/2014/apr/16/rail-operators-200m-dividends-subsidy - source for quoted articles

TOC subsidy does not mean that this goes straight to shareholders. It simply means that franchises such as Northern will never be profitable, because the government wants it to run non profitable services to support local communities.

It is also worth pointing out that Northern Rail would have invested millions and millions into the franchise at the start of the franchise and are only now starting to reap the benefits of their investment (although worth pointing out that DfT did a poor job of tendering the contract by going for zero growth). Looking at c2c, they are looking to invest £160m in that franchise in the first few years.

Its also worth taking that article with a pinch of salt. They only show the TOC's which are making the highest profit, not the loss making franchises.

If running TOC's meant huge profits, why are there only a few firms in the market bidding for these contracts?

Looking at that article, it says: "Running costs have also fallen by 6.2% in that two-year period, based on pounds for every kilometre a passenger travels."

 

[NSEFAN]

Seems to be doing pretty dam well at the moment, I read recently that there's been another big rise in passengers numbers this year. If passenger numbers were dropping I could maybe give you some credence.

The railway was never privatised, merely franchised (at least the passenger side was, freight has been given a bit more freedom). It now runs under more state control than when it did under BR. The private sector merely does what it's told with the money it's given. What this "privatisation" has done is injected a lot more money into the industry, a lot of which falls down the bureaucratic cracks, but overall there's more money to invest into new trains and infrastructure. I suspect if BR had been given more money it would have been able to make similar improvements to what we've seen since privatisation. Of course, there probably wasn't the political will to do such a thing, hence the model we currently have!

 

[HSTEd]

Considering that at the prseent time all rolling stock is used to almost its full extent, you would expect per mile passenger costs to fall by approximately the same percentage as passenger mile numbers increase since the railway does not really incur any additional significant costs from having more passengers on existing rolling stock.

So current figures about falling operating costs are not really that impressive, especially considering this is the first sustained fall since privatisation occured.

 

[Xenophon PCDGS]

After 30 plus years of employers having their own way it's time organised labour made a comeback.

How will "organised labour" see the continuing growth in all the British industries ? Does the TUC have a master plan not yet revealed ?

 

[HSTEd]

With current zero hours contracts employers can dispose of employees for any reason at any time with essentially no chance of redress.

In other words, if an employee brings up problems with dodgy working practices or sharp practice with regards to pay and conditions they will be disposed of immediately.

 

[al.currie93]

Ok so Labour promise to slowly bring back the railways into public hands, then what? What differences would it make exactly apart from this complete myth that all the millions of pounds of profit the TOCs supposedly syphon of in profit being put back into improvements which I think is a complete fallacy! How would putting the railways back in public hands automatically make them better, sell it to me......

If it was back in public hands:

1. A very complicated system dependent on a large number of different companies would be abolished, instead involving 3 maybe? (Passenger operations, infrastructure and freight operations?) I'm an engineer by profession and I know that complicated systems are less stable and ultimately collapse

2. The amount of different companies involved, all requiring management, contracts, profit, monetary transfer, liaison etc. would be drastically (if not completely) decreased, increasing overall time and financial efficiency

3. The franchising bidding would no longer be in the equation, saving £5m (was that the figure) per bid per franchise

4. It could bring back the potential for R&D (within rolling stock, infrastructure, operations etc.) within the industry in this country, hence gaining useful skills within the industry that have been lost

5. We in Britain would be providing our train services, rather than relying on being dependent from money/expertise from mostly foreign countries, which would save on skills being lost and make us more self-sufficient, and possibly bringing back a bit of pride (I at least would feel far more proud of a nationalised, British railway)

6. A vital service that the country requires will not be being run for a profit, but for the sole purpose of providing that service, which, I at least, feel is far more moral

7. The apparently little bit that is currently going away as profit would now be being reinvested, and a little bit is better than nothing at all

They're some of my reasons for supporting nationalisation at least

 

[Xenophon PCDGS]

With current zero hours contracts employers can dispose of employees for any reason at any time with essentially no chance of redress. In other words, if an employee brings up problems with dodgy working practices or sharp practice with regards to pay and conditions they will be disposed of immediately.

What percentage of the working population are employed on zero-hours contracts ?

 

[HSTEd]

What percentage of the working population are employed on zero-hours contracts ?

Well the figures keep growing, first it was supposed to be two hundred thousand, then it was a million and now we are seeing figures of three or four milion. They are drastically outpacing other types of contract in 'job creation'.

REmember that this is very heavily tilted towards retail and light industry however.

 

[muddythefish]

How will "organised labour" see the continuing growth in all the British industries ? Does the TUC have a master plan not yet revealed ?

Haven't got a clue. But organised labour might be able to wrestle some of the fruits of growth out of the hands of the wealthiest.

Time for a debate about the yawning and growing gap between richest and poorest over the past 30 years ?
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With current zero hours contracts employers can dispose of employees for any reason at any time with essentially no chance of redress.

In other words, if an employee brings up problems with dodgy working practices or sharp practice with regards to pay and conditions they will be disposed of immediately.

Any future Labour govt should outlaw zero hour contracts which are just a licence to exploit workers.

 

[Xenophon PCDGS]

Haven't got a clue. But organised labour might be able to wrestle some of the fruits of growth out of the hands of the wealthiest.

Is that instead of using the TUC master plan to start from scratch and see the fruits of their forward-looking plans grow to the level that currently ensues ?
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Any future Labour govt should outlaw zero hour contracts which are just a licence to exploit workers.

Perhaps anther way that a future Labour government could aid the poorest in British society could be to close down all the pay-day loan organisations and those ones running loan-shark organisations.

But best of all, close down everyone of the "Bingo" organisations who advertise on TV that are specifically aimed at women. A £10 down input seems to be the par for the course...I am sure that £10 would be better spent on food.

 

[ainsworth74]

The Rebuilding Rail report.

Interesting, thanks

 

[tbtc]

Passenger numbers are also rising in Northern Ireland, where the railways remain in public ownership. It's funny how you always cite the rise in passenger numbers as "proof" of privatisation's success but fail to mention the massive increase in subsidies that taxpayers are contributing to the privatised railway (contrary to Tory promises that subsidies would fall).

Genuine question - has subsidy increased in Norn Iron in the same time period?

A lot of the reasons why railways have become more expensive in Great Britain seem (to me) to be costs that'd have increased regardless of privatisation/ nationalisation (fuel has gone up in price by much more than inflation, the costs of final salary pensions for staff has gone up significantly since the mid'90s when companies were taking "contribution holidays", insurance costs have skyrocketed...).

Whilst I appreciate that privatisation means some money leaving "the industry" and has made some things more complicated (and therefore more expensive), I think that a lot of the costs that have gone up are costs that would have gone up anyway - which is why I'd be interested in whether Northern Ireland's railways have managed to keep subsidies down or not.

Only by the right wing press.

Like the electricity, water and gas industries, sensible folk regret the day the railways were sold off to the private sector.

I wouldn't underestimate Ed Miliband by the way.

Miliband is an interesting one - the energy policies didn't seem *that* radical (a cap on increasing prices for fourteen months, IIRC, nothing like "renationalising")...

...it was portrayed in the press as some kind of dangerous socialism, messing with the precious free market etc...

...but it struck a chord with the public (admittedly, it was a fairly easy target to aim for - easier to understand the increase in fuel bills being very high, a lot harder to understand why some other things increase though)...

...then David Cameron realised that curbing the "free market" in energy was the way forward and came in with his own ideas (despite dismissing Miliband's ideas when they were announced).

The ideas about giving people on Zero Hours contracts some kind of rights similarly seems fairly unradical - but has been criticised in the press for being some kind of '70s throwback.

It's not the kind of politics that's going to get a lot of people excited, and I can't see millions of people rushing out to join the Labour Party, but the reaction to his attempts to smooth some of the "rough edges" of capitalism seems disproportionate (any suggestion from Miliband gets journalists bashing out articles along the lines of "OMG - RED ED WANTS TO BRING BACK THE 1970s").

I'm not saying that nationalisation is the way forward (and I do appreciate that there are various shades of grey between "full nationalisation" and what we have now), but I think that the general public mood at the moment would be for more public control (partly because it's a populist move, partly because TOCs are easy scapegoats) though the railway can be a lot more complicated than many people appreciate (including me)!

 

[fowler9]

What percentage of the working population are employed on zero-hours contracts ?

An almost infinitely higher percentage than want to be on them.

 

[Xenophon PCDGS]

An almost infinitely higher percentage than want to be on them.

You answered that query with all the expertise of one of our Members of Parliament....

 

[fowler9]

You answered that query with all the expertise of one of our Members of Parliament....

Ha ha, well I've never met one who has been delighted to be gifted with such flexible working practices.

 

[HSTEd]

The way people talk about the 70s it sounds like it was like Mad Max.

From discussions with people alive at the time it appears to have not actually been as bad as people seem to think today.

 

[DownSouth]

Incidentally, in an idle moment recently, I decided to "channel-hop" by the use of the TV remote control and then stopped as on what I took to be an American programme called "Everyone loves Raymond", I was amazed to see what I thought was Ed Miliband in the lead role, until the character began to talk.

Because what he said made sense, or because his voice was deep and masculine?

 

[Xenophon PCDGS]

The way people talk about the 70s it sounds like it was like Mad Max.

From discussions with people alive at the time it appears to have not actually been as bad as people seem to think today.

May I invite you to view the most excellent "Four Yorkshiremen" sketch.