Economics and Business
Given the problems outlined so far, how can passengers hold the railways to account? Partly in tacit recognition of huge passenger dissatisfaction, the rail industry has introduced a range of compensation schemes for delays. However, train operating companies pocket the difference between the compensation provided to them by Network Rail and the huge amount of compensation unclaimed by passengers, and this provides little incentive for improvement. Compensation culture also encourages passengers to see the broken railways as a personal, consumer rights problem, rather than a structural problem with collective impacts. Compensation does not fix the railways. For that, collective political organisation by passengers is required. Passenger campaigns have enjoyed some success over the years, most notably in making rail line closures politically toxic. However, the more traditional campaigns tend to be characterised by voluntarism and conservatism. They bring undoubted improvements to the railways, especially in the upkeep of smaller stations, but are ineffective in forcing more fundamental change. Recently, a range of smaller movements have achieved victories, some of which have cost the rail establishment dearly. These point to strategies and approaches – such as fare strikes and integrating campaigning across public transport modes – which, on a grander scale, could start to force the rail system to be fixed.
The Introduction introduces the setting for the book – a delayed train from London Euston – and the characters the author meets on the way. Meeting the other passengers reminds the author of the key questions that Britain’s broken railways poses to passengers, which this book seeks to answer. Before delving into the answers, the book provides a whistle-stop run-through of the railways’ history, which helps set up the exposition of recent developments in the main body of the book. This considers the railways’ evolution from private steam-operated services competing with each other (principally) for freight traffic, to the consolidation of the system as rapid expansion and competition proved economically unviable, to temporary nationalisation under war governments and, later, the creation of British Rail, as the railways became a secondary, state-subsidised transport system, subservient to investment in, and use of, roads by motor traffic. The Introduction ends with the privatisation of British Railways in the mid-1990s. Throughout, it is demonstrated that all post-war governments have had a problematic relationship with railway subsidy, and the unrealistic desire to make railways operate on commercial lines has mired rail policymaking to this day, leading to a rolling and ever-increasing crisis of provision.
This chapter discusses the prospects for fixing Britain’s rail system. It begins by noting that current elite thinking on reforms has nothing to say about what the purpose of the railways is in early to mid-twenty-first-century Britain. It is only with a clear idea of that in mind that we can possibly understand what the most appropriate levels and systems of funding and management should be. The chapter argues that, in order to maintain relevance, the railways will have to play their part in averting climate catastrophe, while also reducing social inequalities, in a ‘just transition’. This can work only if rail is seen as dependent on and part of a wider transport system that needs to decarbonise, and serves the needs of the economy in which it functions. That can only be achieved by a new public body that is responsible for coordinating a just transition across transport modes and sectors – a National Climate Service. Transport decarbonisation means a mixture of demand reduction, ‘modal shift’ and the closing down of transport systems that are impossible to decarbonise. The rail system will need to step in to replace journeys made by the most polluting modes. The railways must be fully electrified and must expand to meet demand (although expansion is limited by the ‘embodied carbon’ of construction). They should be made much cheaper to use. These changes are unlikely without big social movements, which are needed to wrest political power from the privatising policy elite which broke the railways in the first place.
Chapter four suggests that Keynesian-style demand management may have been wound down but, in its place came various manifestations of pseudo or privatized Keynesianism. These both cut Treasury expenditure and stimulated economic activity without immediate public costs. To enable such developments required outside experts and networks that spread across the top business consultancies, accountancies and investment banks. So emerged a group of financial fixers, intermediaries who moved between private and public and back again.
Pseudo Keynesianism came in several forms. In the 1980s it was privatizations, council house sales and North Sea Oil. For Labour in the 2000s, the golden elixir was PFI (Private Finance Initiatives) that allowed huge public investments to be made off-balance sheet. For both Labour and Conservatives, there were three more ‘magic money trees’: deregulated finance, enabling a large new source of private credit creation, puffed-up housing markets, and then QE (Quantitative Easing). As far as the Exchequer was concerned, all these initiatives generated income and stimulated economic activity without showing up as public spending. The hidden down sides were an ever-growing accumulation of long-term individual, corporate and government debt, and a stagnating economy that encouraged financial market trading and rentier behaviour rather than productive investment.
Chapter five looks at the Treasury doctrine of internationalism. If one replacement for state economic management was the financial sector, another was international business knowhow and investment. Previously, Britain had done exceedingly well out of free trade and exploiting imperial preference. From the 1980s onwards, the globalisation credo was adopted once again by Treasury officials, Thatcherites, and New Labour ministers alike. Everything was done to open up the UK economy, to encourage international investment and big foreign multinationals to set up shop.
In some cases, like car manufacturing, industry and exports were revived very positively. But overall, the story has not been so successful. Such an open economy approach did not help home-grown business innovation and expansion. Instead, more and more of UK finance, industry and real estate came to be owned by often transient non-UK multinationals and financiers. As international ownership of UK companies has increased, so manufacturing capacity and profits have been relocated abroad. Investment, productivity and home-grown supply chains have declined. It’s easier to buy, break up and sell off a company in the UK than almost any other advanced economy. Come Covid, despite having a world-leading life sciences sector, Britain didn’t have a UK-based manufacturer capable of mass-producing PPE or vaccines on home soil.
The chapter begins by showing that fares have increased massively since privatisation, but the extent of that increase has been partially obscured by the government’s decision to use the largely defunct RPI measure of inflation for the purposes of fare regulation. According to standard measures of inflation, rail fares have risen even more steeply than is officially admitted. This is as a result of deliberate government policy, which has pushed the costs of privatisation onto passengers The rail industry deliberately hides ways to get cheaper flexible tickets from view. Instead of promoting these options, train operating companies have invested in beefing up security to prevent ‘fare evasion’. This has caught many passengers who have made innocent mistakes with ticket purchasing in a trap, which demands that they pay hefty fines to avoid criminal prosecution. Given these problems, the rail industry is looking at reform to simplify the ticketing system. This seems welcome until one considers the small print, the effect of which will mean even higher fares for passengers on the lowest incomes. Finally, the privatisation of rolling stock has significantly increased the costs of providing rail services, adding yet more incentive for ticket price rises. Despite this, successive governments have eschewed the most financially sensible policy – of public, not-for-profit, rolling stock provision.
In recent years, the railways have been marred by long-running strikes, which have impacted significantly on rail services. The most impactful of the strikes have been a result of rail trade unions seeking to prevent the reduction of staff employed in running services, especially on-board staff such as guards and conductors. Since the mid-2000s, the majority of train operating companies have attempted to install ‘driver-only operation’ – services run without guards. To some, the militant response of the main union – the RMT – represents a bygone era of trade unionism and impacts unfairly on passengers. But this is to disregard important aspects of railway history and politics. Indeed, one of the principal motivations of privatisation was to decrease the collective organising power of rail workers, by fragmenting their bargaining power through outsourcing and franchising. However, despite being a disaster for many rail workers, privatisation has not been as successful in attacking the workforce as was originally hoped, and this is in no small part thanks to the democratisation of the RMT and its subsequent increased willingness to organise strikes and strike ballots. When rail workers go on strike, the rail companies they work for are compensated by the government for any loss of revenue that results. This explains the longevity of strikes – the determination and collective organisational capacity of rail workers has been up against the vast financial resources of the state. The chapter ends by showing that guards are very important for maintaining the accessibility of services.
This chapter addresses the problem of train service punctuality and reliability. It begins by showing that one of the main causes of delays is insufficient investment in infrastructure. Furthermore, it shows that privatisation was an exercise in attempting to bring private finance into the provision of infrastructure to replace public investment. This, however, led to a financial disaster in two parts: firstly, with the collapse of the privatised infrastructure provider Railtrack after the Hatfield rail crash, and secondly, following the renationalisation of its successor, Network Rail. Although the two companies were structured very differently, they shared a common fundamental fault – they both needed to reward private providers of finance, which only served to increase the costs of infrastructure provision in the long term, thus starving the railway infrastructure of the investment it needed to expand to meet demand. The chapter then goes on to show that another major cause of delays is shortages of train crew, arguing that the system of franchising, created by privatisation, is largely to blame. Franchising encourages train operating companies to cut labour costs, which leads to fewer staff being available than are needed to run services. Finally, the fragmentation of operations that privatisation creates leads to operational incoherence, which further adds to the likelihood of service delays.
The fourth chapter delves into the increasingly central role of the asset management industry in policymaking and in practice, namely within an essential new site of green capitalist effort: the booming ‘sustainable finance’ industry. If the focus of the book is skewed toward actors in the Global North, it is because, unjust as this reality is, the sites of power shaping green capitalism remain primarily within Northern governments, firms, non-governmental organisations, and Northern-dominated international institutions like the International Monetary Fund and World Trade Organization. Moreover, most international finance and exchange is governed by the legal systems of just two jurisdictions, New York State and England, whose respective capitols play host to most of the world’s powerful financial and legal firms. It is, therefore, to a large extent within these two sites that the programme of green capitalism is being defined and legally encoded, and where efforts to contest it should, at least for the time being, be directed.