Keeping track of reality

AT risk of being thought obsessed with the current state of Britain's railways, which I have written about before, I am returning to the topic this week. The reason for doing so is the decision by Railtrack, the company which owns the stations and the track on the country's railway system (but not the trains which use track and stations) to pay a dividend to its shareholders. This decision coincides with the announcement of massive losses for the company, the likelihood of "fines" for failing to meet performance targets, and a statement by the chief executive that the company will be seeking further large subsidies from the Government.

Not surprisingly, the decision to pay the dividend has been widely criticised. The argument for paying it as put by the company is that it is necessary in order to maintain confidence in the City and to preserve access to capital markets. In putting such a case the company is demonstrating astonishing insensitivity. It has, after all, shown itself to be remarkably inept at carrying out its duties and responsibilities in the wake of the Hatfield railway disaster last year, an accident which called into question Railtrack's ability to provide a properly maintained and safe railway system.

More fundamentally, the Railtrack row is only the latest in a series of events which provide a constant reminder that the privatisation of the railways by the previous Conservative Government was totally misconceived, and the Labour Government's failure to unscramble the mess is equally irresponsible.

At the heart of the matter is a refusal to acknowledge what can and what cannot appropriately be left to market forces, and indeed a refusal to acknowledge what the full implication of leaving something to market forces is. One does not need a deep understanding of market economics to recognise that a market offers risks as well as opportunities. Investors must take that fact into account. When things go well, they benefit. When they go badly, they take the consequences. If a company fails to attract investors, or fails to reward them because it is losing money, it will ultimately collapse.

It is clearly unrealistic to allow the maintenance and safety of a country's railway network to be subject to such market forces. Hence Railtrack's claim that it needs massive injections of government cash. The claim, however, makes nonsense of the concept of risk inherent in investment in a commercial organisation.

There is no reason why taxpayers should provide large sums of money to an organisation which is responsible for the railway system so that it can do the work it is supposed to do, and reward its investors into the bargain.

The fact is that markets work only when they are genuine; when there is genuine competition. In Britain, for example, the telephone system has been greatly improved by privatisation, because users have a genuine choice. If am not happy with what one telephone service provider offers, I can easily change to another (as in fact I did a month or so ago). Similarly, I can buy my gas and my electricity from different, and competing, companies.

There is no such competition in the case of railway infrastructure. Railtrack is a monopoly. Incidentally, in many cases the train service provided by different train operating companies is also a monopoly, because there is no alternative on a particular route, as fellow travellers found two weeks ago when trying to travel from Birmingham to Stansted Airport to catch flights, only to discover at the last minute that the service had been cancelled.

The obsession with the market, which led the Conservative Government to introduce such a crass system of privatisation, and which has so far prevented the Labour Government from doing anything about it, has led to enormous practical difficulties. It reflects an over-simplified - indeed idiotic - ideological belief that anything in the private sector must be better than anything in the public sector. The evidence of recent months demonstrates quite clearly that this is not true. The privatised railway network has failed to deliver anything like a decent service. It is, as they say, a hell of a way to run a railway.

The government which emerges from the current general election in Britain, whichever party forms it, will have to tackle the railway crisis as a matter of urgency. It is to be hoped that it will approach this task by examining the reality with a greater measure of intellectual rigour than has so far been displayed.

BILL KIRKMAN

The writer is an Emeritus Fellow of Wolfson College, Cambridge. E-mail him at wpk1000@cam.ac.uk

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