Time to renationalise?

[Flying Pig]

Originally Posted by Alan Fry

I think what should happen is that all the TOCs, FOCs and ROSCOs should be taken over by Network Rail.....

Why ? Network Rail doesn't know anything about running railway services. They're just an infrastructure maintainer, and a pretty awful one at that.

That would be rather like handing over the running of the Bank of England to its painting & decorating department.

FP

[Ringo]

Railways needed nationalizing post WW2 as they had been run down and stripped by private owners. Without state intervention the nation would have fell apart without the key transport mechanism - railways. The government had to act for the greater good of the nation.

The 19th century rail magnets hyped up investment bumph of the new wonder transport, as did Thatcher with Railtrack. They would invest and get small investors along as the fall guys. The railway would be built and they would buy land adjacent to the railways before and under construction of the railway. After completion they would cash in, even if they never made money and drew out it never mattered, and leave the capital debt of railway construction to the small investors. Dividends were never paid.

The rail companies were then left with lucrative land they bought for pennies. The railway lines hyped land prices. They could charge high rents around the railways. That is how the legalised scam worked. That is what happened with the Bishops Castle Railway. The administrators ran it for 70 years. The landowners around the railway gained because of the economic growth the railway brought, not what they particularly did.

Thatcher said the railways and coal mines (most output went to power stations) were not making a profit. She did not have the intelligence to see that they were creating economic growth. The massive gap in the governments 18th century accounting system did not detect the money leaking away via a massive sluice, the LAND market, as landowners creamed it off. The sluice should have been closed and the money captured and cycled back into the mechanism that assists in creating the growth in the first place - transport. This sluice is still wide open.

Private monopoly Railtrack was bound to fail, as the private railways failed in the mid 20th century falling into the arms of the state, as they did in 1948. The taxpayers picked up the tab as the rail companies went off with thousands of acres of lucrative increased value land. Railtrack was a repeat of the 19th century rail rip-offs, but created and backed by a modern Tory government. thousands of small investors lost a lot of money on failure. Instead of the private rail magnets preying on the small investors, it was the government.

Rail Networks, like Metros, Create Economic Growth

Many have no idea what influence rail networks have on a community - they are a part of the economic growth of a community and sometimes the key aspect, as in rapid-transit rail in cities. Full metros create economic growth all around.

Real Gains From Railways is in Land Values

Look at British rail magnet George Hudson in the early to mid 1800s. He made his money from the increased value of the land the railways created, not charging for tickets. He knew where the money was made with railways - it was not in running them.

Hudson had his own construction company and bought up land in prime spots where his railways went. He knew before others where his railways would go and where the stations would be. He creamed it off in increased land values and charging high rents, and allowed the railways to fall into disrepair as ticket prices were just enough to maintain the network in the long run, with the government having to take it over it was so neglected. Private profit and the debts socialised with us picking up the tabs.

Some people misguidedly say we should privatise all railways, and all to do with them - so they can cream it off again, and yet again the taxpayer picks up the debts in the end. And they then blame public ownership as being useless and inefficient, when all the taxpayer did, or will do, is pick up the shambles - as usual. And the private sharks make off with the gains.

Politician, Morrison at the same time as Hudson wanted the French system of public ownership and renting the lines, or time on the lines, and use the rents to maintain the infrastructure. He was overridden by a lobby by Hudson. The railways eventually declined to the point of being ramshackle all over the country. We are going to make all the same mistakes again.

The Current Tax System is Destructive - Encourages Free Riders

The difference between a highway robber and a free riders is that the free rider does not have to draw a gun to take what belongs to others.

[Ringo]

We do not need nationalization. We need to close the open gap in the funding circle where money pours out. Firstly we have to understand some economic basics. Economic growth created by a community, pubic & private, soaks into land and crystallizes as land values. That is where the land values come from, not the landowners. When a house raises in value, it is not the bricks that rise in value. The land and the capital (the bricks) have to be split to gain understanding. The capital depreciates, like a car. The land appreciates as community created economic growth soaked into it creating the values.

Transport infrastructure is a major aspect in that economic growth creation. Taking community created land values (wealth locked into land) and using that to fund transport the funding circle is complete. Hong Kong, Singapore, Japan, etc do this. Hong Kong built a whole new metro by not using taxes on people's incomes, just reclaiming wealth the community created that was locked into the land. In short socially created wealth was socialized and used for social purposes. Privately created wealth was left alone. It works brilliantly.

The cost of the Jubilee Line extension was £3.4 bn. The land values around the lines and stations rose by £14 bn. This wealth created by the rails and tunnels was not cycled back into the costs rail and tunnels. Landowners took windfalls.

Close the London Tube tomorrow for good. Land values would drop like a stone as economic growth, assisted by the underground rail network, is not created. People would leave the city in droves. The fats urban rail tracks as essential in economy of London.

Railways are generally self-financing. However we use an 18th century accounting system that does not recognise where economic growth crystallized and doesn't know how to capture this wealth to pay for the transport that greatly assisted in that growth creation.

Use the right funding mechanism, reclaiming the values in land, and the UK can have the finest rail network in the world - which would be self funding. This mean no cities or regions need go with begging bowls to the DfT in London to extend, or update, their rail networks.

"The Far Eastern countries are densely populated: they cannot afford to waste space. The market-based tools they developed to deal with that pressure are revealing. Hong Kong and Singapore are rated at the top of the most comprehensive Index of Economic Freedom. Japan’s record is also not contested: she came from nowhere after World War II to create the secondlargest economy in the world. Comparing their transport policies with those of the UK and USA may help to sharpen the insights that have emerged in this study. We focus our analysis in terms of three hypotheses.

Hypothesis I: Taxpayer subsidies are an inevitable part of mass
transit systems

The durability of this assumption was affirmed by the spokesman for Britain’s Strategic Rail Authority. David Thomas (2003) claimed that there are only two types of income for rail projects: fares and subsidy. The demand for subsidies is rationalised by a political vocabulary that presupposes the inability of railways to pay their way. The collateral damage of this doctrine to the fabric of political institutions is significant. If subsidies are to be extracted from taxpayers and transferred to railways, government has the right to control the industry One consequence is the touting of solutions that are selfdefeating. Take the case of the need to increase fares to pay for infrastructure. This proposition was advanced by Richard Bowker as chairman of the SRA. He argued that upkeep of the rail network rests too heavily on taxpayers and that ‘passengers should pay more’ (Bream, 2004). To raise fares closer to the actual cost of rail travel would be likely to price more passengers off the railway.

This would render rail companies even less able to cover their operating costs, let alone the costs of capital, and consequently increase the demand for more subsidies.

Hong Kong rejects the subsidy mentality. Is this the product of a philosophy of public finance that does not favour taxes that deliver deadweight losses?

Hypothesis II: Efficient railways are those in public ownership

The House of Commons Treasury Committee, after reviewing a decade’s worth of evidence in running privatised railways, endorsed this view in The Future of the Railway. The view was shared by the head of the Rail, Maritime and Transport Union, who claimed that rail privatisation was ‘an act of vandalism that tore apart our national railway network and handed it in 113 pieces to the private sector to bleed dry’ (Crow, 2003). In the British circumstances, there was force to his claim that separating the ownership of tracks from the operation of the trains ‘would be an act of dangerous folly – and that the only way profits would be made by the private sector was by taxpayers and passengers subsidising them’.

But had the nationalised British Rail (BR) been a paragon of operational efficiency? Transport Minister Kim Howells told the House of Commons Transport Committee that BR had been ‘an appalling service’. It had employed some managers who were ‘rubbish’. An eight-year-old child could have come up with better cost estimates than those managers, he asserted.

Japan’s railways may provide evidence to help us resolve some of the contentious issues. Her rail network is a rich mixture of public and private enterprises, and the latter have not prejudiced the ability of the Japanese to operate an efficient economy.