James Moore: Never mind buses, state ownership is what our railways require


James Moore
Tuesday 03 February 2015 00:26

Did you start the working week with a long, expensive and miserable commute? Well, take heart.

The Institute for Economic Affairs (IEA) says it can make things better: simply grub up the railways and replace them with super-fast bus lanes.

No, this is not an early April fool. The proposals will be released today in a report, “Paving the Tracks: A Better Use of Britain’s Railways”.

Moreover, there is method to the free-market think-tank’s apparent madness. In fact it makes a rather good case against rail privatisation, at least in its current form.

The report points out that the industry currently costs the taxpayer £6bn a year. Far from benefiting the commuter, all this largesse goes towards oiling the wheels, or rather the rails, of the rail operators at the expense of commuters, who get rotten value for money from the network of mini-monopolies – the Government likes to call them franchises – that provide rail services.

It is with the IEA’s proposed solution to the very real problem that we start to enter the realms of fantasy land.

Taking the success of Latin America’s rapid bus transit schemes as a model, it suggests turning London commuter rail lines into busways, arguing that travel times could be the same, if not shorter. Services could also operate more frequently. It even holds out the prospect of realising further savings in time (and perhaps money) through the provision of door to door bus trips. And (crucially) such a set up ought to facilitate competition that is currently lacking, taking us into the land of transport milk and honey.

Sound enticing? But here’s a question: instead of getting rid of the railways why not just start building busways anyway, and work at making the railways better while you do it?

The IEA is right to point out that current rail model is broken. But the solution is not to pull up the railways. It is to pull down their current structure and bring them back into state hands, by letting the franchises fall away when their terms expire.

The East Coast Mainline proved just how well a state-owned rail service could work in this country, if allowed to operate at arms length.

Another think-tank, Transport for Quality of Life, reckons up to £1bn a year could be saved by abandoning the current model with all its inefficiencies, such as the need to pay shareholders dividends and the cost of servicing rail operators’ debt – money that could be invested in the network and in providing lower fares.

It is almost surreal that while public bodies from overseas are able to buy and take dividends out of UK rail passengers to subsidise their own actives back home, UK public bodies are themselves barred from any involvement in the privatised railways.

Meanwhile polls consistently show that voters of all political hues support re-nationalisation – YouGov last year found 60 per cent in favour. If Labour wanted to find a policy to generate some enthusiasm in its programme, this wouldn’t be the worst place to start.

Consider oil lobbying with a cool head, Chancellor

You have to hand it to the North Sea oil industry. It has got very good at making a noise. The widespread misapprehension that it’s a busted flush must surely have been corrected by now.

The dramatic decline in the oil price means it is feeling the squeeze and it wants a bailout from the taxpayer. Well, it worked for the banks.

In this case the bailout would come in the form of emergency tax breaks (Oil & Gas UK has called for 30 per cent off the top as a starter). Without it the industry is doomed. Doomed! Hence the big powwow in Aberdeen attended by Nicola Sturgeon, Scotland’s First Minister and SNP leader, who’s recently been denying that the collapse in the commodity’s price would endanger the promises her party made for the economy of an independent Scotland.

What she will realise and what the industry well knows is that the oil price is cyclical. At the current price many marginal, and some not so marginal, exploration projects will be shelved. Investment will be cut. So will jobs. Down the line this will lead to capacity constraints, and the price will start to rise again.

The North Sea is not Saudi Arabia. It is an expensive place from which to extract oil and some operations start to feel distress at $60. Others, however, can manage well enough with it as low as $20 a barrel. Talk of a doomed industry is a tad overstated.

That’s not to say that the industry doesn’t have a case. Some operators face tax rates that are as high as 80 per cent, and may go under without action.

But the Chancellor should assess it with a cool head. The logical way to proceed would be to offer reliefs now which could be clawed back later when the price is higher.

The same principle was supposed to be applied to petrol prices. Only that one was supposed to work in reverse, with low oil prices accompanied by higher taxes at the pump, which would be reduced when the converse applied.

Unfortunately the Chancellor, despite having his deficit reduction targets destroyed and an NHS in crisis, chose not to apply it, presumably with the aim of creating a political trap for his opponents.

The trouble with emergency tax breaks generally is that they can be quite hard to take away, even when the economics of a situation make them irrelevant. Especially when they’re given to well-funded industries with well-paid and effective lobbyists.

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