Derailed: how the trains are in deep crisis

Anybody who has tried to organise a strike knows just how draconian Britain's anti-union laws are. First there is the nonsense of the compulsory postal ballot, conducted to a strict set of procedures to avoid a legal challenge.

Once the ballot is over there's still the possibility of a court injunction often granted for the flimsiest of reasons by some doddering judge. Having cleared all legal obstacles there's nothing to stop the employers sacking striking workers by claiming breach of contract.

It appears, however, that these dictatorial laws don't apply when capitalists take industrial action. Recently the rail regulator decided to investigate the £175million earned each year by the train leasing companies which supply train operating companies, like Virgin, with rolling stock.

The regulator argued that three companies, controlling 90% of the total market, were abusing their near monopoly position to 'prevent, restrict or distort competition' and referred the matter to the Competition Commission. The three companies were outraged. After all, Britain's rail network has become such a source of profit for so many companies, why should they be singled out for such harsh treatment.

They immediately downed tools, refusing to fulfill a Virgin order for 106 carriages unless the government gave assurances that leasing rates will not be altered. The biggest leasing company, Angel, also uttered dark threats about not guaranteeing new train leasing deals and the risk to future investment in rolling stock.

Hypocrisy

Now if this was workers taking action court orders would fly, funds would be sequestrated and the papers would be full of stories about mindless militants. Well, we're not about to see headlines in the Mail about capitalist militants creating rail misery.

Nor are the government about to confront the leasing companies and force them to fulfill orders and reduce charges. Especially not, given that we're talking about powerful concerns like the Royal Bank of Scotland, which owns one of these companies.

All of which leaves leasing companies in a powerful position. As things stand, a chronic shortage of rolling stock already threatens to throw the industry into crisis. The leasing companies' action has only worsened the situation. The shortage has forced the government to tell the bidders for the lucrative East Midlands and West Midlands franchises to cut planned services, with the Cross-Country and East Coast Mainline franchises, also due for renewal this year, likely to be similarly affected. Free from government sanctions the leasing companies have the whip hand.

With passenger complaints about overcrowding hitting an all time high and passenger numbers expected to rise 30% over the next few years, the government cannot afford further cuts to capacity. So a government climbdown is in the air with hints that any investigation into train leasing companies would take at least take two years and would in no way be binding on the government. The signs are that the threat to disrupt the supply of rolling stock has succeeded and leasing companies will be allowed to get on with making a healthy return on their investments.

However, this dispute goes beyond the excess profits of three train leasing companies to the very heart of the problem - rail privatisation. The leasing companies are so powerful position because they hold a monopoly. To break that monopoly the government would have to not only confront these companies but also find alternative providers of rolling stock.

And given the vast sums of money needed - leasing companies have invested some £5billion - the only realistic alternative provider would be the train operating companies who could purchase their own rolling stock instead of leasing them. This would create numerous problems. The leasing companies would be up in arms and the train operating companies would no doubt demand greater subsidies; but it doesn't end there.

The operating companies would also demand that the period they hold franchises be considerably extended to justify the investment in trains. However, handing routes to companies to operate for decades would give them a monopoly with which they would certainly force higher state subsidies and ticket prices - precisely the practice the train leasing system was introduced to stop in the first place.

Monopoly

That this has only led to a leasing company monopoly is no surprise. The simple truth is that the railways, by their very nature, cannot be run according to free market principles. No matter how you try to inject competition into the railways you always get monopolies using their position to extract ever larger amounts of government money.

The sensible solution would be to accept that the railways, like health and education (but for different reasons), are better run by the state than the private sector, and take the system back into public ownership. This, however, would mean Labour dropping its ideological commitment to the all conquering market forces and confronting the companies currently running the system.

This Labour is loath to do. Instead it continues pouring in public money to pay private companies to run a system that isn't working. This strategy was inherited from the Tories who privatised the railways purely on ideological grounds without any real idea of how it was going to work. In fact, this lack of a joined up strategy for how a privatised railway would work held the Tories back from privatisation for many years. Had the rail unions posed a threat there is little doubt that privatisation would have come far earlier.

It should be remembered that privatisation for the Tories was as much about breaking the organised working class as it was about setting the public sector free of the 'dead hand of the state'. Thatcher had already, by the mid 1980s, inflicted a number of defeats, severely undermined union organisation on the railways. She had been able to shut the train manufacturing arm of British Rail (BR) with over 100,000 job losses, helping to halve rail union membership within a few years.

Had she not been ousted as Tory leader, there would certainly have been more cuts and more jobs losses. Some Tories wanted to reduce the network to just the West and East Coast Mainlines and the southeast commuter lines. But with the menace of the organised working class out of the way, privatising the railways on ideological grounds without a clear idea of how it could work made even Thatcher hesitate. It took John Major to go where the 'Iron Lady' feared and privatisation went ahead in 1993 with the first privatised train entering service in 1996.

The proud Tory boast was that, once privatised, the railways would no longer need public subsidy. This was little more than ideological pig-headedness based on a simplistic belief that market forces had some magical power to somehow make the railways highly profitable and much more efficient. As privatisation went forward it often seemed the Tories were making it up as they went along; with disastrous results. Soon the government was forced to throw large sums of money at the railways trying to get the ill-conceived plans to work.

In the first 18 months of privatisation the state subsidy rose from £1bn to £2bn. This was not for investment but to bribe BR managers into setting up companies or acting as consultants to create alternative structures to BR. These first years saw an obscene feeding frenzy as managers rushed to cash in. To hide any failings, an army of slick marketing people were drafted in to bang on about re-branding and customer care in a reorganisation exercise based on gloss over substance. The hope seemed to be that making staff walk about with fixed smiles, dressed in a clown's outfit of a uniform, would fool passengers into accepting deteriorating services.

This was a transitional period, however. As the profit potential became obvious big companies began buying out the small time ex-BR management companies. As the size of the companies running the railways grew so did their profits, as they extorted more and more money from the state. The state subsidy rocketed to £4bn by 2005 while efficiency and safety standards plummeted. A string of high profile crashes was the downfall of Railtrack, but far less publicised was the abysmal performance of the operating companies.

On the East Coast Mainline, profitable under BR, the GNER soon demanded a subsidy of £400million a year just to keep the service going. In 1992, the year before privatisation, BR got 90% of arrivals on time; by 2004 this had dropped to 80%.

Naive theory

Naive free market theories that market forces would make the railways more cost effective simply don't work. On average, costs have doubled under privatisation compared to nationalisation. Some costs have rocketed even higher. Modernising the West Coast Mainline costs £16.68million per mile, compared with only £1.8million per mile, in today's prices, for the East Coast Mainline under nationalisation.

The multinational construction companies which have taken over from BR are making money hand over fist. Just how much can be judged from the fact that it only cost the French state run railways £10.84million per mile to build a brand new high speed line.

'Iron Law'

The 'iron law' of supply and demand that the Tories appealed to when arguing that a more efficient railway would increase demand and allow subsidies to be slashed, has not worked either. Someone obviously forgot to explain the theory to the operating companies. As revenue from increased passenger use has risen costs, and demands for more subsidies, have mysteriously rocketed, which shouldn't happen according to my economics text book.

In the 1980s fares covered 76% of costs while today they cover less than 42%. The more cynical might be forgiven for thinking that train operating companies are ripping off both public money and passengers alike. Given the total mess the railway system is now in, it might have been a good idea for Labour to blame it on privatisation and return to the sanity of a state run railway as quickly as possible.

Sadly Blair, and now Brown, are stricken with the same ideological blindness as the Tories. Rather than blame privatisation they have consistently blamed the way the Tories went about it and have spent the last ten years trying to get it to work.

Thus far there have been three restructurings which have failed miserably. The reality is that Labour have no more idea of how to make a privatised railway work than the Tories. Their long term strategy is the same - keep throwing money at private companies based on a touching faith that in the end the private sector somehow delivers.

No doubt the government will get over its latest problem with the train leasing companies. But the storm clouds are gathering. Even the more conservative estimates predict that rail costs will rise between 15% and 28% in the next few years. With passengers already sick to death of high prices and overcrowded unsafe trains, unrest can only grow.

Revolt

There is every chance of more passenger protests like the fares strikes that have already occurred. Further, the RMT, though now numbering only 60,000 members compared to 240,000 before the Tory butchery, is a potentially powerful force as it has retained high levels of workplace organisation.

It's not beyond possibility that rail workers will join forces with passenger groups to attack government polices.
Lastly, and tragically, the replacement of Railtrack by Network Rail has done nothing to improve safety and the system remains an accident waiting to happen. So it's quite possible that this or a future government will be forced to drop the free market dogma and renationalise the railways.

This would be welcome, not least because it would further loosen the ideological stranglehold that free market policies have on so much of British society. An integrated state run railway would also deliver a better cheaper and safer service as well as bring much needed job security to a workforce which has suffered so much since privatisation.

For anarcho-syndicalists, while we support re-nationalisation, it can never be an end in itself. It would improve working conditions but it would never end worker exploitation. Further, the railways are central for an alternative transport system to the car. And if the catastrophic effects of global warming are to be avoided we require a far more radical shake up of the transport system than the state is capable of.

New vision

It will take a new vision of transport that can only come through imaginative economic planning of the sort that can be achieved under workers control. As part of that vision the railways will be run to benefit society as a whole, and not for the individual gain of a handful of capitalists.

This article originally appeared in Direct Action no. 39 Summer 2007, the magazine of the Solidarity Federation-the British section of the International Workers Association.