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Few subjects provoke more dogmatic belief, based on less knowledge, than how to run a railway. Labour naturally sees the collapse of the Virgin East Coast franchise as a heaven-sent opportunity to proclaim once more its faith in nationalisation as the answer to every discontent.

Conservatives should not be bounced into accepting this ignorant and erroneous view. For the collapse of that franchise could equally well be seen as a demonstration that nationalisation does not work.

Stagecoach, which owns 90 per cent of Virgin East Coast, has announced a loss of £259 million on the franchise. That is as it should be: if a private company overbids for a franchise, it pays the price.

But why did the line not prove profitable? A key reason is that Network Rail failed to deliver the improved infrastructure which was promised as part of the deal, which would have enabled additional services to be run, and would have resulted in extra revenue for the operator.

And Network Rail is already in public hands. As Michael Holden, who ran the East Coast line when that was last in public hands, pointed out last autumn in RAIL Magazine, while demolishing the case for nationalisation:

“Network Rail is fundamentally a public sector business, and has been ever since the Office for National Statistics determined in December 2013 that it should be treated as such. The importance of this decision was much overlooked at the time. I remember Sir Patrick McLoughlin, who was the Secretary of State for Transport at the time, saying to me on the day that the decision was announced that he felt it was largely an accounting issue, and should not have any significant impact. I told him straightaway that I thought it was a colossally significant decision which would have major repercussions down the line. Even today, these are still only just becoming apparent.

“The immediate impact has been to bring Network Rail under much closer governmental control than either it or its predecessor (Railtrack) ever was. Ministers are able to instruct the chief executive of Network Rail directly, and do so frequently – either explicitly or else implicitly through nods and winks.”

Not that Network Rail is necessarily able or willing to follow those instructions. For it is the kind of bureaucracy where instructions fed in at the top often get thwarted, or muted, before reaching the people who might actually carry out the work.

And Network Rail has a quite often irreproachable reason for not doing what it is asked to do. It can say this would simply not be safe, or only if done to the most expensive imaginable specification.

The recent safety record of our railways is good, and Network Rail deserves credit for that. There have also been impressive, indeed highly visible and very expensive, improvements to the infrastructure, as can be seen when one passes, say, through Reading Station.

But Network Rail often makes electrification an almost impossibly expensive investment, and shows that nationalisation, meaning rule by politicians and officials, is by no means a panacea. Nor can one consider the Department for Transport a glowing advertisement for the politico-bureaucratic approach. The ludicrous fare structure with which the industry is burdened is not the fault of the private operators.

And those operators deserve much of the credit for the enormous improvements in services, and increases in traffic, which have occurred since the days of British Rail, an organisation devoted to the management of decline, which came to be regarded as unavoidable.

In the difficult circumstances with which he was faced, Chris Grayling, who wrote about his decision on this site yesterday, has probably chosen the least bad option. But it would be absurd to conclude from this example that it would be better to bring all the franchises into public ownership.

The Corbynite cry of “back to the Seventies” would be a disaster for the railways, which are just now in the most fruitful era of growth since they were built. Private initiative, investment and management remain an utterly essential element in carrying forward these improvements, and Conservatives must not be afraid to proclaim this.

133 comments for: How nationalisation helped to bring about the failure of the East Coast rail franchise

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