Off the rails: Should railway companies be renationalised in the national interest?

A group of 15 Labour MPs have issued a public statement this morning, expressing concern about elements of Labour’s policy agenda, and urging a change of course in three key areas, according to LabourList.

The letter – signed by MPs on the left of the Parliamentary Labour Party – calls for an alternative to Labour’s current deficit reduction plans, public ownership of the railways and a return to collective bargaining and employment rights in the workplace.

Here’s the statement in full, which outlines the signatories preferred alternative approach:

1 An alternative to the continuation of austerity and spending cuts till 2019-20

All three main parties, tragically, seem to agree that deep spending cuts must continue to be made until the structural budget deficit is wiped out in 2019-20, even though wages have already fallen 8% in real terms, business investment is still below pre-crash levels, unemployment is still 2million, the trade deficit in manufactured goods at over £100bn is now the largest in modern history, and household debt is now over £2trillion and still rising.

The Tories want to continue with these cuts because it gives them political cover to achieve their real objective which is to shrink the State and squeeze the public sector back to where it was in the 1930s.

It isn’t even as though the deficit is being reduced by these savage cuts. Because the reduction in the government’s tax revenues as a result of shrinking incomes exceed the spending cuts, the deficit (which is still nearly £100bn) is likely to rise, not fall, in 2014-15 and in future years.

There is an alternative way out of endless austerity. We need public investment to kickstart the economy out of faltering growth and to generate real job creation and rising incomes.

It can readily be funded. With interest rates at 0.5%, a £30bn investment package can be financed for just £150m a year, enough to create more than a million real jobs within 2-3 years. And even without any increase in public borrowing at all, the same sum could equally be funded either through the two banks which are already in public ownership, or through printing money (quantitative easing) to be used directly for industrial investment rather than for bond-buying by the banks as hitherto, or through taxing the ultra-rich by a special levy.

2 Returning rail franchises when expired to public ownership rather than subjecting them to competition

The essence of rail reform must be to reverse fragmentation, to reintegrate the system under public ownership, and to run it in the public interest. At present Britain has the highest fares in Europe. The additional costs of privatisation to public funds are estimated at more than £11bn, or around £1.2bn a year, so that the costs to the taxpayer are now three times as much as under British Rail.

Since 2010 rail fares have increased 25%, yet at the same time more than £200m a year has been paid out in dividends to shareholders or overseas state-owned rail companies which now hold two-thirds of the current rail franchises. Over 80% of the public want the railways re-nationalised, which must include a significant proportion of Tories.

The most obvious and simplest way to achieve this is by letting the rail franchises expire and then taking them back into public ownership at no cost whatever to the taxpayer. To subject them to a public bidding competition with private bidders is not only wholly unnecessary but sends out the wrong signals, as though we’re not confident of our own ideology. The Tories certainly didn’t offer a competitive option when they forced through privatisation!

Anyway, the franchise process, so far from being economic, encourages the gaming of wildly optimistic passenger number projections and this, combined with huge legal contract complexity which is bureaucratic and wasteful both in time and money (except for the lawyers and accountants), has led in the past to franchise failures and operating chaos, most notably on the East and West Coast lines. From past experience public ownership has consistently worked better, and we should not gratuitously throw obstacles in our own path in getting there.

3 The need for the restoration of collective bargaining and employment rights as a check against excessive corporate power

When the Thatcher government came to office in 1979, 82% of workers in the UK had their main terms and conditions determined by a union-negotiated collective agreement. The latest figures now show that the coverage is down to just 23%. One very significant result is that the share of national income going to salaries and wages has fallen dramatically from 65% in 1980 to 53% in 2012 – a loss to employees of some £180bn!

This has happened partly from the collapse in trade union membership from 55% of the workforce in 1979 to 23% in 2012. But it has also happened partly as a result of the anti-trade union laws introduced in the 1980-90s and partly because the state has withdrawn support for collective bargaining as part of the free market ideology of de-regulation of all markets, including the labour market. It is somewhat ironic however that de-regulation of the labour market requires the tightest regulation of one of the key players in that market, the trade union movement.

An incoming Labour government should choose to enhance the role of trade unions because trade union rights are human rights, a trade union presence creates more just and equal workplaces, and trade union collective bargaining is more redistributive than statutory wage setting and will assist on the road from austerity. We should therefore actively promote sectoral collective bargaining and strengthen the rights of trade unions to recognition, and of their members to representation.

Diane Abbott
Dave Anderson
Katy Clark
Jeremy Corbyn
Fabian Hamilton
Kelvin Hopkins
Ian Lavery
John McDonnell
Michael Meacher
Ian Mearns
Grahame Morris
Linda Riordan
Steve Rotherham
Jim Sheridan
Chris Williamson

Follow me on Twitter: @MidWalesMike

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