The other railway network

The consequences of Network Rail’s accumulated debt burden for the public purse are politically dire, because rail is going to need a bailout, according to Michael Moran, one of the authors of the CRESC report on UK rail privatisation.

[LSE policy blog, 26 June 2013]

A troublemaking report from the Centre for Research in Socio-Cultural Change (CRESC) has been upsetting the powerful again. The Great Train Robbery: rail privatisation and after has a great deal to say about the business models that now underpin the disastrous system of rail privatisation in the UK, but it also reveals a pattern that will particularly interest the readers of a politics blog. It shows that the initial vision offered by privatisers of a transparent and democratically accountable set of privatised markets has turned out, in reality, to be something very different: the politics of rail privatisation involves backstairs lobbying, manipulation of the terms of public debate by well resourced private interests and a blurring of the divide between the public and the private.
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Demonising dividends and value extraction by operators like Richard Branson certainly fixes on a problem with the politics of the privatised system. But it is akin to the demonization of individual bankers after the financial crash: it fails to fix on the fundamental faults of the system. The biggest fault is the determination, under the privatised system, to operate a for profit rail network with not enough money in the fare box; and behind that, the business model of charging users which does not capture social functions and external benefits like land and property values. A simple example which anyone can verify from their own experience is the way investment in new public transport lines can transform house prices of property with access to those lines. For instance, the investment in Crossrail, which cost £16 billion, is projected to boost property values within one kilometre of the project by £5.5 billion.
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At the dawn of privatisation we were promised not only a new business model, but also a new political model: one where backstairs manipulation of policy (for instance by Ministers) would be replaced by the transparency of open contractual competition and public regulation. Instead we have a mixture of crony capitalism, a world populated by well paid lobbyists and well networked insiders, and smoke and mirrors accounting which makes it impossible for normal citizens to penetrate what is going on.