Major railways shake-up planned (UK) {Lab. undoing privatization damage?}

[AP]

Under the new plans, the government would be given more power, setting performance, safety and capacity targets, according to the Independent on Sunday.

It also would decide upon the cost of fares, the number of train franchises on offer and the industry's long-term strategy, the newspaper added.

The role of Network Rail also is being considered, though the government said it had no plans to renationalise the company that looks after infrastructure including track, tunnels and stations.

http://news.bbc.co.uk/1/hi/business/3802929.stm

Privatizing the railroads was one of the last HUGE transfers of wealth from the public to Tory cronies that happened before Blair took the reigns.

It looks like they're taking steps to return some control and wealth back to the public.

[Kagemusha]

1. Wealth?... 13 bil pounds in debt will go straight to the Treasury.

I read so in The Guardian just a few hours ago. Call it wealth if you like...

[AP]

2. The cost to society of a privatized, crappy mass trans system is way...

...greater.

[Kagemusha]

3. Then call it loss minimization.

I've noted your posts about economists and Zimbabwe's nationalization of land. All I can say is, there's not many good options to go around, just a matter of who endures the worst pain.

[AP]

4. It's wealth creation when you don't let corporations run a

monopolizable industry as important as the very control of the mobility of the working class for the concentrated profits they accumulate only for themselves.

When the government runs it at cost, or as a loss leader and allocates the costs and the benefits fairly you'll find that you create a lot of wealth other places -- you create opportunities for individuals to maximize their wealth and you find you have a wealthier society in which industries who are willign to compete find even greater wealth.

[muriel_volestrangler]

5. Eight years after they originally promised this

"Before Labour's landslide victory in May 1997 the party had a longstanding pledge to bring the railways back into public ownership. At the October 1996 Labour party conference, Tony Blair promised to restore "a unified system of railways with a publicly owned, publicly accountable British Rail at its core".

But in March 1997 Gordon Brown, then shadow chancellor, succeeded in getting the pledge dropped. He argued that the promise was made when the Conservative government planned to sell only 51% of Railtrack. It subsequently privatised it entirely. Mr Brown said the then £2bn cost of buying back a majority shareholding was too high."

http://www.guardian.co.uk/traincrash/Story/0,2763,201453,00.html

[AP]

6. They sat back and waited for the companies to breach their contracts so

that the government wouldn't have to pay twice for the railroads. They paid the first time by selling them for much less than they were worth.

In Kevin Phillips's Wealth & Democracy he writes all about how the US went through this. The government sold a lot of land to railroad companies for less than it was worth in the late 1800s, and later bailed out the companies by buying it back. The profiteeres were able to rip the taxpayers off twice.

I'm not clear however. Are these new controls triggered by breach of the contracts, or are they buying out they insuring the rail companies a profitable exit strategy?

[muriel_volestrangler]

7. No, there's no breach of contract involved here

Here's the couple of Independent stories from which this comes (Christian Wolmar is possibly the country's leading expert on railways):

Fewer trains, fares to rise, in shake-up of railways

Is this the end of the line for the privatised railways?

"Network Rail, the not-for-dividend company which took over from the defunct private Railtrack in October 2002, will determine the timetable and, controversially, take over the setting of safety standards for the industry, a role which was taken from Railtrack after the October 1999 Ladbroke Grove train crash.

The complicated system of penalties and compensation for delays between Network Rail and the train operators, which essentially shifts public subsidy from one company to another, is to be scrapped. Instead, both will have contracts directly with government. Train operators will work to much tighter rules, with no power to alter the timetable, and will be judged only on punctual running of trains, rather than a host of performance indicators.

In a highly controversial move, the regional network of passenger committees will be abolished, which appears to be an attempt by the Government to weaken any likely protests about cuts.

The document warns that cuts are highly likely. It says the 2004 Spending Review, due out in the next few weeks, "is bound to disappoint the rail industry and its users". Under the settlement for Network Rail's budget determined by the Rail Regulator, the company's spending is due to increase by £1.75bn in 2006/7 as it will no longer be allowed to borrow. The document warns: "We need to decide in SR 04 the extent to which we reduce the £1.75bn by some combination of fares increases and service-thinning or cuts". To dent that sum would require major line closures."

It's all horrendously complicated (still), but it looks as if the private, profit-making companies that now have a franchise to run the trains on a line will in future have much less freedom to decide what to do - the timetable will be set for them, and they'll be measured by whether they meet it. They will still, I presume, own (or lease) the trains and employ the staff. The Strategic Rail Authority, an independent body responsible for future planning, is to become part of the government.

Network Rail, the no-for-profit company which owns and maintains the tracks (and largest stations) might get renationalised. It was set up by paying the investors in the for-profit Railtrack a slightly lower figure than they paid for it at privatisation (but they had received lots of dividends in the mean time). Network Rail has debts that don't count as government debts at the moment; I think renationalisation would mean counting them as government debts, and come under more direct political control.

[AP]

8. So, how would you characterize it?

You can bet that if the Tories win the next election, and the trains aren't back in the control of the government to a sufficient degree and if they aren't running well enough, the governmen will make the taxpayer buy back the assets at an overinflated price (after selling them at below value to those same people).

It sounds like this is not what Labour is doing. The rail companies got away with paying themselves huge dividends, but don't look to be getting another windfall of taxpayer money.

What do you think is going on?