Thursday 10 October 2019

Tory rail privatisation and the secret £50 billion+ black hole of debt

When Britain's rail network was privatised in 1994 not only were the routes chopped up into a confusing mess of different franchises, the tracks were carved off into a separate private company called Railtrack.

Railtrack didn't last long because their sickening business model of minimising maintenance and repairs soon led to a number of serious rail crashes, with the Hatfield crash (4 deaths, 70+ serious injuries) being the final straw that eventually led to the renationalisation of the tracks.

Letting a bunch of profit-obsessed shysters run the rail network into a dangerous state of disrepair in order to maximise their profits was an absolutely dreadful idea, so Railtrack was renationalised and rebranded as Network Rail in 2002. Since then the number of serious accidents on the UK rail network has fallen dramatically.

The problem of course is that the cost of maintaining the rail network to decent safety standards and funding upgrades to the system massively exceeds what Network Rail receives in government subsidies and rent from the profiteers who run the privatised rail franchises.

If Network Rail increased their prices to cover the true cost of maintaining the tracks and upgrades to the system, the franchise profiteers would never be able to run their franchises at a profit, so in order to allow them to continue profiteering at the public expense Network Rail provides access to the tracks at miles below the true cost.

How much below cost?

In 2017-18 Network Rail spent £5.6 billion more than it made, bringing the total debt up to an astonishing £50.4 billion.

This £50 billion+ black hole of debt is the true cost of the Tories' shambolic rail privatisation agenda, and because Network Rail is a publicly owned company, it's classified as public debt.

Neoliberal economic insanity has resulted in the accumulation of £50 billion+ in public debt so that private rail franchises can wring a few hundred million in annual profits out of the rail network!

Racking up £50 billion+ in debt so a bunch of franchise profiteers can make a fraction of a billion in annual profits at the public expense must be of the most egregious examples of a false economy ever seen.

This astounding black hole of debt should be a massive national scandal, but it's barely even mentioned in the mainstream media.

Most of the extremely sparse coverage on the subject over the last decade focused on the debate over whether this astonishing Network Rail debt should be counted as part of the national debt or not.

There have been virtually no efforts whatever to explain that such a massive and unsustainable debt is a damning indictment of Tory privatisation mania, and about as strong an argument as possible for renationalisation - because if the public purse is going to cover the cost of operating the tracks anyway, it should obviously receive the revenue from ticket sales rather than distributing the revenues to profiteers.

Since privatisation the UK rail network has received far more in government subsidies than it cost to run the entire network before privatisation, but on top of that Network Rail is hiding an additional £5 billion+ per year in their black hole of debt in order to allow the rail franchise profiteers to continue making profits at the public expense.

Creating a £50 billion black hole of debt to hide the operating losses from renting out the tracks at below cost is clearly a kind of secret subsidy to the franchise profiteers.

And to top it all off, nearly all of these franchise profiteers are now partly or wholly operated by the state rail companies of other nations like Germany, France, Italy, the Netherlands, Hong Kong, China, and Singapore.

The UK public has racked up an astounding £50 billion+ in debts in order to allow the state rail companies of other countries to make artificial profits at the expense of the UK public purse!

The Tory rail privatisation agenda has resulted in an absolute shambles of a system, and an astounding black hole of debt that the public are kept in the dark about.

So next time you hear someone banging on as if rail privatisation has been a roaring success, ask them to explain the £50 billion+ in Network Rail debt, and when they can't, tell them it's high time for the complete renationalisation of the entire rail network.

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Unknown said...

Excellent piece Tom.
Good to see you back.

Anon said...

You do know that all eu countries are in the process of breaking up their state railways to comply with eu law (the fourth railway package) and with that in mind, renationalising our railway is against eu law!

Unknown said...

Not true. Firstly the state aid rules have a specific exemption for transport and second the fourth railway package only introduces the idea of competition rather than banning state ownership. After 2023 private operators have to be able to bid for rail services but unlike our current setup the state isn't banned and can tender a bid themselves.

I'm sure you probably know this though as your post is crafted in classic "look, Brexit does what lefties will want" manner while paying only a passing resemblance to fact.

Unknown said...

Anon the liar.

Steve w said...

Great stuff Thomas, missed you, keep em coming.

Anonymous said...

Network rail isn't private, and a large bit of their debt comes from late trains and having to pay companies that run their trains on the rail. Late trains can happen through suicides, lines getting torn down (which can happen through extreme weather, or poor maintenance of the lines), bird strikes to the overheads and causing them to trip out and much more. To read that network rail isn't public owned is quite frankly ridiculous.

Unknown said...

Paragraph 3 of the article states clearly that network rail is publicly owned.

Peter said...

Anon. The EU is about levelling the playing field for operators across ALL the networks. it does not NEED privatisation but does need separation from government so subsidies are clear. So the likes of Italy created a private company for the network and a private company for the service and then made both of them report to and abide by government department.

Nick Kelly said...

In fact the railways on the Island of Great Britain (The railways and the majority of the bus services in Northern Ireland are still run very efficiently by the state ) is probably the most the most rigidly state guided/managed railway system on the planet. As prior to the abolition of the Strategic Railway Authority(SRA) There was always someone between the railway and the government.Before 1923 it was the private companies. After 1923 up to 1947 it was the Big Four. Then from 1948 until 1996 you had BR. Then you had a number of organisations the last of which was the SRA. Following its abolition the Department for Transport(DfT) took over the day to day management of the various franchises and management contracts.
In many ways this is the worst of all possible worlds as the state via the DfT has gained virtually complete control of the system. As noted earlier it many of the opperator are in fact State Railway Companies from other countries! By and large the "Private Sector" has been driven out of the franchise process! It is a complete and very expensive mess (I have been told that in truth the total debt is more like £70 billion!) Anyway whatever at the end of BR the total debt was around £6 billion!
Ho Hum note that no other railway system on the planet has adopted this model I Wonder Why Not!

Hugh said...

So why do we want to spend money running franchise competitions (as well as the inefficiencies of separating track and train) just to satisfy the EU?

George Carty said...

Isn't one thing that must be remembered about railways is that no passenger railway has ever made a profit from ticket sales?

Even the privately-owned railways of the past made their profits not by selling tickets, but by selling or letting homes they built on cheap rural land which they had connected to the city with their railway lines: "Metro-Land" connected to London by the Metropolitan Line was the most famous development of this type.

Anonymous said...

Privatise profit and socialise debt. Only a good idea if you're the one profiting. Luckily government ministers had a long history of knowing exactly how to do that.

Thatcher's regime was vindictive and corrupt. We portray ourselves as a country somehow 'above' corruption but we simply know how to do it better. Take Thatcher for example. when he nationalised British Shipbuilders was being shut down and sold off a company called Trafalgar House asset stripped it and ensure that the company's sites could no longer be used for their original intended purpose, no effort was made to sell 'as is' the assets were stripped quickly and huge amounts of profit were made. This would be bad enough, allowing a single company to make a fortune that could, at the very least, have gone to the Treasury at a time when Britain was on it's knees prior to having been saved by the North Sea Oil revenues coming on stream. But what makes it worse, makes it CORRUPT is that Margaret Thatcher's husband, Dennis, was a director of the company. so his wife shuts the industry down, ensures it can't be sold and then passes it to her husband to strip and unjustly enriches herself in the process. She then offshores her capital to ensure she pays no tax on her ill gotten gains. This is corruption British style. All this while the taxpayer paid off the debts left by the company. She should've been arrested for this.

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