Osborne’s privatisation drive continues – railway stations next

25th February 2016 / Editors Picks, United Kingdom

Rail privatisation was promoted by the Thatcher government in the early 1990s in the UK with the usual promises of a better, cheaper service for rail users and a substantially reduced taxpayer subsidy. At the time it was argued that private rail companies would bring in fresh capital and an invigorated service through business and management expertise facilitating its transformation, while increased competition would drive both innovation and huge efficiency gains.

What actually happened was that there was a 300 percent increase in the public subsidy which substantially increased passenger numbers by nearly 60 percent. A free ticket for the shareholders it would seem.

The type of investment you would expect from privatisation would be known as ‘at-risk investment’. This is to say that the private company invests or speculates capital to accumulate more revenue through increased business as the customer agrees that the service is worth using.

What actually happened was that the public forked out nearly £11 billion in the year 2010-11 to these private businesses, whilst these private train companies forked out £380 million meaning that over 90 percent of cash invested in Britain’s public railways has come from the taxpayer one way or the other.

In 2013-14, the taxpayer handed over £3.8 billion by way of public subsidy with the top five grabbing £3 billion which allowed these organisations to make a profit of £504 million. Instead of reinvesting a large part of that profit, £466 million or 92.4 percent of it was handed back to shareholders.

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When the rail privatisation project was in full swing from 1995 all the way up to 2015, all tickets (regulated and unregulated) increased by an average of 117 percent. In contrast, wages have gone up around 24 percent in the same period having reached their peak in 2008 and fallen back somewhat since.

In the meantime, the cost of running the railways to the embattled taxpayer has increased 125 percent since 1990.

As if confirmation was required that a nationalised rails service would be better for the country, The Guardian reported fifteen months ago; “How infuriating it must be, then, for free-market ideologues that east coast (nationalised) depended on less public subsidies than any of the 15 privately run rail franchises. Indeed, the franchise has proved a lucrative cash cow for the state, bringing in around £1bn to the exchequer since 2009. East coast is an embarrassing success story for public ownership. Instead, it must be run by a tax exile and a Scottish businessman perhaps best known for campaigning against gay equality.”

And so it was sold off. No doubt increased subsidies will follow. But now there’s something new for George Osborne to flog off.

Network Rail is a ‘not for dividend’ company with no shareholders which reinvests its income in the railways and was moved onto the books of the government just 18 months ago, it is now apparent why. Network Rail is about to sell its largest railway stations to shopping centre landlords and developers in yet another privatisation drive. And this, it appears, is just the start.

When the stations are sold-off, the profits, like in all privatised operations will go to shareholders and not reinvested back into public safety and upgrades. Network Rail has its problems and one of those is debt. One has to consider what a private company can do to halt losses and generate profits when considering public safety as the main cause of losses. Clearly, the private for-profit operations have failed in the past.

Not all stations will be sold off but the shops within them are rented out. For instance, the concession model has been used at St Pancras station. This is run by HS1, which in turn is managed by Canadian pension funds on a 30-year concession, having paid £2.1bn for the privilege in 2010. The profits from that operation goes to funding Canadian state pension liabilities!

A recent review also included recommending selling off the entire Network Rail operation which manages 20,000 miles of track and 40,000 bridges and tunnels and demonstrates that selling off assets and public safety is one giant scam operation to siphon off billions of public money.

The government has appointed CitiGroup to handle the sale. This company was largely responsible for bringing the USA and therefore the rest of the world to its knees in the 2008 financial crisis after it required the biggest bank bailout in American history to resuscitate its insolvent remains. Since then, unapologetic in every sense, it is now involved in some of the most egregious financial crimes in the world.

CitiGroup also uses various tactics to ensure it pays no tax to the British treasury and has been fined £millions in the UK for its criminal activities.

Graham Vanbergen – truepublica.org.uk

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