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British Rail privatisation: a move towards neoliberalism, disguising an act of

depoliticisation, proven to be a failure for the taxpayer and consumer, but not

the political elite.

Introduction The main academic debate around neoliberalism is whether market based reforms lead to greater efficiencies and benefit all in the long run, even if there are short run costs. The Thatcher premiership (1979 - 1990) and follow up Major leadership (1990 - 1997) contributed to a paradigm shift, towards what Hay (2004) described as economic neoliberalism in British Politics. Thatcher operated “The New Right, whose economic beliefs, based upon neoliberalism” (Gibb, Shaw and Charlton, 2002, p. 757) were characterised by policies such as hollowing out the state, a move towards laissez-faire markets, privatisation and deregulation. In the 1980s and 1990s, a discourse prevailed that markets were the most efficient means of allocating resources; it was so dominant that every elected political party has held neo-liberal values since. This essay will argue that the privatisation of British Rail initiated by Thatcher and privatised under Major using the Railways Act (1993) was an act of depoliticisation in the name of neoliberalism that benefited the political elite at the cost of the taxpayer and rail consumers. Using Burnham’s (2001) definition, The British Rail privatisation can be viewed as an act of depoliticisation for the political elite as it removed the political character of decision-making, while retaining backdoor control over crucial economic and social processes. My research topic is linking the failure of the neo-liberal British Rail privatisation for the consumer and taxpayer to the political elite benefiting from depoliticisation. This area needs exploration as it shows the political elite are willing to ‘outsource’ important political decisions to the potential detriment of the taxpayer and consumer to sustain a “popular political project capable of providing a sufficient electoral base” (Hay, 1997, pp. 235–236). This is a bleak view of British politics, as it seems remaining in government could be more important to the incumbent than improving the lives of all citizens.

Literature review There seems to be general consensus among academics and research reports that privatising British Rail was a failure for the consumer and the taxpayer. Bowman (2014) is a known critic of the rail privatisation and focused research on fictitious claims that train operators produce a net gain for British tax payers. Another critic, Jupe analysed how “rail privatisation led to a large increase in both costs and subsidy” (Jupe, 2010, p. 347) compared to the state run British Rail. Separately, Crompton and Jupe (2007) examined the ultimate failure of Railtrack and its part of the privatised rail system between 1996 and 2001 and the setting up of the not-for-profit company Network Rail to replace it. Pollitt and Smith (2002) opposed the accusation failure for the consumer and taxpayer, claiming the consumer benefited through lower prices and the taxpayer through privatisation proceeds. I reject Pollitt and Smith’s economic argument as it does not analyse the huge spiralling costs for Railtrack after the Hatfield disaster in 2000, due to poor track management of the privatised firm. Therefore, their analysis simply ignores information around Hatfield which disproves their thesis. Furthermore, their analysis is based on data pre-2000, which is not representative of the long term affects on the taxpayer and consumer when compared to more recent works from Bowman, Jupe and Crompton. Burnham (1999, 2001 & 2011) is an important scholar for depoliticisation and has written many papers and journal articles identifying cases where it applies as a form of statecraft, notably as a Marxist he focuses on class issues. Hay’s (1997 & 2004) work on depoliticisation draws certain parallels with Burnham, such as a belief that “neoliberalism is itself a deeply depoliticizing paradigm” (Hay, 2004, p. 523). Hay’s constructivist research focuses more on the rationalist discourse that markets are the most efficient allocation of resources and how this makes discourse “technocratic rather than political” (Hay, 2004, p. 523).

Failure for the taxpayer The British Rail Privatisation under Major in 1993 saw the taxpayer get less value for money post-privatisation. The taxpayer provided government with funds for which it ran British Rail before it was privatised. The neo-liberal assumption was that net government support

for running the railways would decrease as private Train Operating Companies (TOCs) and Railtrack ran franchised routes and infrastructure respectively. The neo-liberal assumption is that markets would allocate resources more efficiently than government. Therefore, if private firms were more efficient than government, the amount of subsidy needed to run the rail network should have decreased. However, as Bowman notes, “Public funding did not disappear, but rather increased to be consistently higher in real terms in the 2000s than in the decade before privatisation, from £3718m in 1992/1993 to nearly £7415m in 2006/2007” (Bowman, 2015, p54). The gradual increase in government support displays how the British Rail privatisation, which promised to reduce state dependence, actually increased it and therefore can be viewed as a failure to for the taxpayer. Arguably, this case study example shows how neo-liberal theory that markets always produce the most efficient outcomes is not always true. Neo-liberals could counter my view by stating that the privatisation is yet to enter into the long run – however, neo-liberals do not define a specific time period as the long run, therefore we may never enter the long run. Furthermore, economist John Maynard Keynes expressed a similar view of the long run by stating, “in the long-run, we're all dead” (Houston, 2013).

Figure 1

Source: Bowman et al (2013)

Figure 1 displays the change discussed in the previous paragraph. Net government support adjusted for inflation has risen enormously since privatisation, while revenues have remained fairly constant. Admittedly, from the taxpayers’ point of view, government support between 1993 to 2001 seemed to marginally decrease or remain unchanged – which can be viewed as a positive. However, since the Hatfield disaster and subsequent collapse of Railtrack in 2000, the level of government support rose significantly to its highest levels in the data set. Figure 1 displays higher government support for every year after 2002 and therefore dispels Pollitt and Smith’s (2002) economic argument that the taxpayer benefited through privatisation proceeds. This analysis is important as it shows that the taxpayer pays more post-privatisation than pre-privatisation for essentially the same service. Failure for the taxpayer was not just linked to increasing subsidy levels for rail services, failure manifested itself “by the perverse linking of public subsidies and private dividends” (Compton & Jupe, 2007, p. 911) for the private firm Railtrack. Compton and Jupe (2007) found Railtrack paid out £134 million to shareholders, while the firm made its first loss of £530 million after the Hatfield disaster. Therefore, for the taxpayer, the pay-out to shareholders can been viewed as a leakage from the tax pot to private hands. This ‘leakage’ was a clear failure for the taxpayer as British Rail pre-privatisation operated without the need to pay-out public money to satisfy private shareholders; whereas post-privatisation during the Railtrack years, subsidies were being paid while Railtrack was making a loss and dividends were being paid out.

Failure for the consumer My analysis of the consumer will focus on rail passengers rather than freight users. The extent to which the British Rail privatisation has failed passengers not only depends on ticket price increases, but also the level of convenience – or inconvenience, as I will argue. It is difficult to compare pre-privatisation to post-privatisation ticket prices because there are multiple ticket types and lots of different journeys and routes available. However, there is some information available. The BBC (2013) publicised that peak time tickets have significantly increased in price above inflation, partly as season ticket holders had their tickets protected by the government – TOCs increased their prices on peak tickets

as they were unprotected. So, if the consumer is a regular commuter with a season ticket he/she has likely benefited from the limited price rises lower than inflation. Although, even season ticket holders were hurt by the privatisation as car parking prices were increased. The telegraph (2015) newspaper stated “Train companies are silently increasing ticket prices on 'unregulated' routes and at station car parks in defiance of official caps on commuter costs” (Palmer, 2015). While on the surface it appears rail season ticket consumers might have benefited from privatisation, TOCs have found alternative ways, to the detriment of the consumer, to raise revenues without physically elevating the protected season ticket prices. Finally, as peak ticket prices have increased above the rate of inflation, this can also be viewed as a failure for consumers. The independent newspaper (2011) summarised that “British train fares are the highest in the world” (O’Grady, 2011), this is a result of privatisation and is a failure for British train passengers.

Aside from price, rail travel became inconvenient and confusing. An article in the Guardian (2012) finds this confusion was caused because “the fare system [had] become so complex that on one route, London to Manchester, 34 different fares were found” (Huitson, 2012). This was not a unique case, but rather a national issue, due to a multitude of fare options causing confusion for consumers. Advance tickets offered the most competitive prices, at the cost of sacrificing the convenience for anytime travel, and were available to purchase over the telephone and online. The best way to compare advance ticket prices easily was online through third party ticket resellers, such as ‘takethetrain.co.uk’ or ‘thetrainline.com’. Two groups worst affected by advanced tickets were elderly people and tourists. The ONS (2015) measured online spending patterns by age, people over 64 accounted for 19% of online purchases for travel arrangements and only 42% of adults aged more than 64 purchased anything at all online. The lack of elderly people purchasing online meant that a large part of the population was locked out of getting the most competitive train ticket prices as the best deals (advance tickets) were usually only found online. Telegraph (2014) noted, ticket machines did not suggest the cheapest prices on the multitude of different ticketing options – this caused tourists to not pay the same price as other consumers. Elderly passengers and tourists have been left behind, being charged higher prices for ‘walk up fares’ than other consumers, simply due to their lack of computer skills and knowledge of the system. Privatisation has marginalised these two groups and therefore is a failure for those consumers.

Depoliticisation and the political elite

The privatisation of British Rail was “the last significant privatisation carried out by the Conservatives” (BBC, 2000) in the 20th century. The privatisation was justified by the neo-liberal rhetoric that market reforms benefit all in the long run through greater efficiencies. My case study appears to be in conflict with the discourse that markets always provide the ‘best’ outcome in terms of efficiency, as it has clearly failed taxpayers and consumers. If the privatisation failed the taxpayer and the consumer, the Major government must have had an ulterior motive. I suggest the ulterior motive was to depoliticise British Rail, rather than hope that the privatised rail network would reap the benefits of neo-liberal long run efficiencies.

The Transport Secretary Cecil Parkinson in 1990 at a conservative conference “told delegates: the question is not about whether we should privatise [British Rail], but how and when” (BBC, 2000). This kind of depoliticised rhetoric benefits the political elite as it removes the debate around political decisions. The privatisation of British Rail itself was a way for the conservative government to distance themselves from the highly political and unpopular decisions regarding ticket price increases and passenger convenience. Burnham (2001) suggests “social democratic governments” often “have struggled to attain a reasonable degree of governing competence” (Burnham, 2001, p.128). When the Major government privatised British Rail, it outsourced important decisions on ticket pricing, whilst retaining backdoor control. The government ‘protect’ season ticket prices to shield commuters, this makes an important section of the electorate believe that the government supports them, but when prices on unprotected tickets rise, the private TOCs get blamed. This situation has been engineered using the neo-liberal discourse and conveys, to the electorate, that the government is competent and capable. This was an attempt by the political elite to reduce their accountability. Therefore, the political elite benefited from the distancing effect of depoliticisation as a result of the neo-liberal move towards privatising British Rail while the taxpayer and consumer suffered.

Conclusion

Based on the evidence, the British Rail privatisation has failed both the taxpayer and consumer. The taxpayer had to contribute ever-growing subsidies above the rate of inflation to the rail industry post-privatisation compared to pre-privatisation, while dividends went to Railtrack shareholders. The consumer suffered various ticket price increases and a multitude of ticketing options that marginalised the elderly and tourists. The only clear winners of the privatisation were the political elite, through Burnham’s (1999, 2001 & 2011) and some degree Hay’s (1997 & 2004) depoliticisation, as they outsourced the responsibility for the railways while retaining backdoor control. This depoliticisation is exemplified when the government protected some ticket prices – further legitimising the government and gaining support of the commuter vote. Therefore, it appears the neo-liberal argument, used by Pollitt and Smith (2002), that market based reforms benefit all through improved efficiencies in the long run is not true in the case of privatising British Rail; at least, the privatisation has yet to benefit all, if it ever will.

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