Miliband's plans have upset the private sector but also angered rail unions.
Miliband’s plans have upset the private sector but also angered rail unions
This week Ed Miliband plans to appease both right and left by announcing that the state will be allowed to bid for rail franchises as and when they come up for renewal.
However, as is typical of the Labour leader, his plans have upset the private sector but also angered rail unions and some Labour MPs by ruling out complete renationalisation.
In a move that does nothing to discredit Peter Mandelson’s attack that Miliband and Labour lack a coherent direction, Labour would be better off listening to the 60 per cent of the British public who support phased renationalisation. That would mean franchises automatically being taken back into public hands when they expire.
At present, the East Coast Main Line, operated by Directly Operated Railways, is the only franchise under state ownership, and yet the line returns more money back to the state than any other train operator, despite receiving the lowest governmental subsidy.
A group of prospective Labour MPs including some in marginal seats, wrote an open letter to the Observer two months ago pointing to the success of the line as evidence that a similar model should be extended across the system.
Their point, and that of many others too, is that hundreds of millions currently lost in private profit would be available to fully reinvest into the network. The East Coast Main Line looks set to return £800m by the end of this financial year, all of which will be reinvested into improving the line for customers.
The current franchise system continues to hide behind the free market facade and the notion of competition and choice for travellers. In truth, however, customers don’t have as much freedom as they might wish when travelling, as more often than not there is one sole provider for their intended route.
This means that bidders need to merely win their franchise, and can then drive prices up to create lucrative profits for shareholders at the expense of customers.
At a time when we are meant to be encouraging greener means of travel, it seems absurd that the price of a rail ticket should heavily outweigh the cost of petrol per mile.
The proposal on the table from Miliband and Labour is also baffling in its own right. The idea that the government could be both the jury and beneficiary of any bidding competition is a paradox, and runs the risk of destabilising the industry.
Furthermore, it is estimated that it costs over £5m to set up a team of experts to bid for a franchise, so any public bidder would need to be prepared to raise, and possibly lose, that amount of cash.
In times of austerity, the potential for lost taxpayer’s money is increasingly bewildering.
If bold, Miliband could announce that all expired franchises will automatically come back under the auspices of a new GB Rail company. This could be paired with a fare freeze in sync with the party’s rhetoric on the cost of living crisis.
Many Labour MPs believe such a move would be a real vote winner, particularly in marginal seats in the South, chiming with those who must commute daily to work.
Moreover, given that few sympathised with the energy companies when Miliband made his promise to freeze energy prices, it’s doubtful that many will fuss much either if an industry that receives £4bn in state support each year – about a third of its total income – is taken back into public hands.
With increasing pressure from within and outside the party, it is odd that Miliband has stopped short of proposing full renationalisation. It is true that this proposal attempts to fit into his ‘One Nation’ rhetoric, but in reality, it unanimously angers both left and right, and completely fails to give the party a distinctive direction.
As I’ve argued before, Labour are stagnating by blurring what they stand for.
It is also possible that their reluctance for full nationalisation is due to the potential loss of a scapegoat, because such a move would completely eliminate their ability to blame the private sector when things go wrong. Instead, the blame would firmly be with them.
And yet, it is this kind of boldness that Labour need to embrace if they have hope of winning next year’s general election.
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