2018-05-16 Privatization

On Wednesday Chris Grayling, the Transport Secretary, made a very un-Tory announcement – he was taking the East Coast Mainline railway back into public ownership.  The line, which runs from London to Edinburgh via Peterborough and York, had been making a profit for the taxpayer when it was in public ownership, but the Conservatives sold the franchise to Virgin and Stagecoach in 2015.

There was no need to re-privatise the line.  The previous Labour Government had renationalised the East Coast Mainline operation because National Express had failed to make a profit out of it and had been forced to give it up.  The Government had to step in, otherwise we wouldn’t have had any trains on one of the most important routes in the UK.  Conservative doomsayers had all assumed that a public sector railway operation would be bound to make a loss, but in fact it was profitable and effective in the public sector and there was no reason why it should not have stayed that way.  The only reason for selling the franchise to Richard Branson and his partners was ideological – the Conservatives cannot bring themselves to believe that the public sector can be better than the private sector at anything.

In fact, of course, the only reason the railways were nationalised in the first place, back in 1948, was because the private sector had been unable to operate them profitably.  And it wasn’t just true in Britain – France and Germany and a whole host of other countries were also forced to nationalise their railways.  It’s ironic that in the UK the trains are mostly operated by state-owned companies – they’re just not owned by our state! I can see no logic or justification for allowing the French, or German, or Dutch Railways to operate the rail franchises in our country.  If they’re going to be owned by a state, it should be our state.

A railway is a natural monopoly. It’s not like an airline where genuine competition can force companies to be more efficient. If I want to travel from Ipswich to Edinburgh by train, I can’t decide to use one rail company rather than another. Now the Conservatives have acknowledged that the East Coast Mainline can only be effectively run by a public sector company, there is no logical reason not to accept that the whole railway system would be better if it were publicly owned.

After privatisation, Railtrack maximised its returns to shareholders, leaving the railways dangerous.  With publicly owned Network Rail now providing a safe physical railway, there is no good reason why the various operating franchises should not be taken back into public ownership when they expire, so that the whole system can be re-unified.  Labour will not spend public money on ending the franchises early, because there are other things that we need to invest in, but once the franchises have run their course we should take back ownership of our railways.

And there are other things we need to take back ownership of.  We all need water, we can’t choose who supplies our water, and I can see no reason for anyone else to make a profit out of letting me have water, whether that’s a British shareholder or a French company or an American hedge-fund.

I don’t want to spend my time deciding who to buy my electricity from.  There might be some justification in letting private companies run the power stations, and offering their output to the national grid, but the actual electricity should be delivered to our houses and sold to us by a public company.  There is absolutely no difference between one kilowatt-hour of electricity and another, and there is no justification for charging people different amounts dependent on which “special offer” they have signed up to.

There is only one major mains gas supplier in the UK. It is a monopoly.  It should be public.  And so should the prisons.  And so should the hospital cleaners.  And so should the nurses.

We need a vibrant private sector in Britain, making things, selling them to us in competition with each other, and providing optional services which we might or might not choose to buy.  But we also need Health and Education and public utilities which are natural monopolies and which we cannot choose – before 1979 all governments recognised that these things were best delivered publicly, owned by us, and I believe it is time to take them back.