National Rail Shakeup

[Geo Ghost]

*Grabs tin hat*

Got any going spare?

[Kevo00]

And who is going to monitor this NFP to make sure that it spends public money wisely to provide the best service it can?

Given that BR only ran a surplus for one year between 1948 and 1997 (1973 I think), I don't believe that an NFP would generate the reinvestible surpluses that Alan suggests it would.

Of course, I know that he also wants to use road charging to create a wealth transfer from road to rail, but one thing at a time...

[beeb375]

Thank you, resident economist! Knew I could count on you

[teccuk]

And who is going to monitor this NFP to make sure that it spends public money wisely to provide the best service it can?

Given that BR only ran a surplus for one year between 1948 and 1997 (1973 I think), I don't believe that an NFP would generate the reinvestible surpluses that Alan suggests it would.

Of course, I know that he also wants to use road charging to create a wealth transfer from road to rail, but one thing at a time...

Well fine. But apart from a few lines, the railways still run at a huge deficit. Around or abouts 2.6 billion per year last time I heard a figure. So how is the corrupt, complicated, convoluted system any worse than the inefficient, badly marketed monopoly it replaced in economic terms?

It came to me this morning... the best idea would be out and out privatisation. 6-8 big geographical companies, publicly floated and the money used to pay of NR debt. Regulated in a similar way to water companies.

Of course they'd still probably still make a loss.

[Chris]

Of course they'd still probably still make a loss.

Well that would be a slight problem...

[61653]

Of course they'd still probably still make a loss.

Well that would be a slight problem...

However the industry is structured, there will always be a requirement for public subsidy for unprofitable but socially useful services. The trick of course is to get as much as you can for every £ of subsidy. On the one hand, the profit motive of TOCs drives cost cutting, and trickery such as padding timetables to avoid fines for poor punctuality... On the other hand removing the profit motive (according to the general consdensus of economists from about 1965 onwards) leads to waste, inefficiency, and an unmotivated workforce.

The railways recieve more in subsidy now than they did in the mid 90s just prior to privatisation, but then today's railway (though far from perfect) is far better than it was in 1992. Maybe not as interesting for enthusiasts, but then Pendolinos om every service would be pretty boring too!

[Chris]

However the industry is structured, there will always be a requirement for public subsidy for unprofitable but socially useful services. The trick of course is to get as much as you can for every £ of subsidy. On the one hand, the profit motive of TOCs drives cost cutting, and trickery such as padding timetables to avoid fines for poor punctuality... On the other hand removing the profit motive (according to the general consdensus of economists from about 1965 onwards) leads to waste, inefficiency, and an unmotivated workforce.

The railways recieve more in subsidy now than they did in the mid 90s just prior to privatisation, but then today's railway (though far from perfect) is far better than it was in 1992. Maybe not as interesting for enthusiasts, but then Pendolinos om every service would be pretty boring too!

Well that is the problem - teccuk was suggesting out and out privatization, similar to the Big Four, but as they would still make a loss you can't out and out privatize it as the companies would either collapse and have to be bailed out by the government or you would be left with little railway left. So it wouldn't really work as the out and out privatization would still have to be supported by the state.

[JamieLei]

One way around it, which is what TfL do with Overground, is to micromanage almost everything social (where routes go, train timetables, fares) but leave everything economic up to a private operator. LOROL can't change fares or propose new routes, but they can earn their profit by running maintenance as cost-efficiently as possible, trimming their human resources to the most efficient level (but still providing the first-till-last-train station staff TfL demand) and paying their drivers efficient 'market clearing wages'.

That way you get all your benefits of privatisation while losing none of the social aspects.

Singapore effectively run this tightly-controlled system with its duopoly of SMRT and SBS Transit. When the government only permitted menial fare increases this year, the operators found other ways to maintain profits, such as increasing advertising on trains and buses, and driving more fuel efficiently.

I do wonder what our resident economist thinks of the Overground management structure though.

[teccuk]

Ok.

Assumption: The railways will always require massive public subsidy:

1. You might as well re-nationalise then, then you can minimise the subsidy as BR and other EU companies have proven you can
2. Railways, except in specific circumstances are flawed as a concept. Privatise and let them sink or swim. (Maybe i get to implement my replace-the-railways-with-busways plan!).
3. The govt or PTE takes the revenue risk by specifying services, timings and prices etc. and contracts the operation out to private companies as happens on London Buses as JamieLei suggests.

Well done guys! 45 pages and we're getting somewhere!

[doktorhonig]

The same applies to roads.

[JamieLei]

Indeed.

Owen - got any figures about road subsidy?

[Chris]

But I thought that the amount people pay in road tax & fuel duty is greater than the road budget.

[Ameecher]

But I thought that the amount people pay in road tax & fuel duty is greater than the road budget.

Good, they can come and patch up some of the potholes on the M8/A90 then.

[JamieLei]

Nah cause England subsidises the Scots.

Wait till independence happens, then you'll have to pay for your own roads!

[Kevo00]

Thank you, resident economist! Knew I could count on you

well, you're very kind.

Well that is the problem - teccuk was suggesting out and out privatization, similar to the Big Four, but as they would still make a loss you can't out and out privatize it as the companies would either collapse and have to be bailed out by the government or you would be left with little railway left. So it wouldn't really work as the out and out privatization would still have to be supported by the state.

They would indeed still make a loss in some areas, or have to close large parts of the network. But even under the present structure, subsidy for Northern etc. is supposed to be slowly eroded down. I suspect that the day will come when we either have to use or lose our rural railways, however they are organised.

I think a fully privatised structure could work though, with socially desirable services subsidised. It works just fine in the bus industry and there would be the opportunity to strip out lots of the costs of contracting, such as the lawyers fees for drawing up contracts and the silly delay payments (and the associated delay attributors).

I do wonder what our resident economist thinks of the Overground management structure though.

The private sector as a contractor model does work well for London buses as well. But in the Overground case, who pays for putting a member of staff at each station and so on? That's fine where there is plenty of traffic but it doesn't fit everywhere. In any case, the government could adapt the present mainline system to manage everything social if they wanted to - franchise agreements specify all sorts of things, even where vending machines should be and what announcements should be made on trains.

[MjD]

Nah cause England subsidises the Scots.

Wait till independence happens, then you'll have to pay for your own roads!

I beg to differ!

Although there doesn't seem to be a definitive answer to this as it all depends on the oil around Scottish shores, if you take all the oil into consideration Scotland actually loses out by being in the Union. I personally think Scotland could survive with a devo-max situation only until there was no oil then we would need to come back begging.

[Chris]

Personally I think that on the whole most separatist issues are based on selfishness. For example Scotland doesn't want to share its oil, the Basque region in Spain doesn't want to share its wealth or resources etc. etc. Of course sometimes there are genuine reasons, such as the splitting of Sudan.

[teccuk]

I think a fully privatised structure could work though, with socially desirable services subsidised. It works just fine in the bus industry and there would be the opportunity to strip out lots of the costs of contracting, such as the lawyers fees for drawing up contracts and the silly delay payments (and the associated delay attributors).

I just spit coffee on the keyboard. Provincial bus services have seen reduction year on year since 1985. Bus fares have broken even the transport market's legendary elasticity. And the bus companies aren't even making all that much money. First see revenues of 3-4% and pre-tax profits in single digit millions for massive operations in major cities. Every round of is a big game of chicken as the operator tries to de-register just about profitable routes and the LA refuses to subsidise them... one party gives in or you lose the service. Bus route mileage continues to reduce. In Wales over half of bus users are using conssessionary fares. I could go on... but bus 'services' are really, really in a state and still receive massive subsidies, but on the quiet.

'Do the roads pay for themselves'. Will wait till tonight.

[orudge]

But I thought that the amount people pay in road tax & fuel duty is greater than the road budget.

Yes, I believe this is the case at present.

Of course, when the motorways were being constructed and so on, I daresay road expenditure greatly exceeded revenue from fuel tax and vehicle excise duty, but I don't have any figures to back that up - that's just a guess.

Nah cause England subsidises the Scots.

Scotland has its own transport budget, so which roads we choose to patch isn't particularly related to how much money transfers from Westminster (which does not equal England, remember).

Wait till independence happens, then you'll have to pay for your own roads!

Well, the SNP is very keen for this to happen (obviously) - they keep bleating on about how Westminster is "suffocating" Scotland by not giving us enough money to build all the things we want to build (e.g., the new Forth Road Bridge).

Anyway, personally I'm looking forward to the Aberdeen bypass being built, if only somebody would stick this dreadful NIABY* protester Mr Walton in a hole in the ground.

* Not In Anybody's Back Yard

[Dave]

Branding and marketing will be a very small budget in all rail companies - you don't see that many advertisements do you?

Passengers don't care what train they travel on as long as they travel on a train.