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Author Topic: Labour could renationalise railways in five years  (Read 1183 times)
Lee
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« on: September 22, 2018, 12:43:23 pm »

From the BBC:

Quote from: BBC
The rail industry could be completely renationalised within five years if Labour wins the next election, the shadow chancellor has suggested.

John McDonnell said he was looking at whether break clauses in contracts could allow rail franchises to be taken into public hands before they expired.

He is planning to create a new unit in the Treasury to oversee the party's wider nationalisation plans.

It would advise on issues such as possible compensation for shareholders.

Mr McDonnell was asked about the party's nationalisation plans in an interview with BBC Radio 4's Today programme ahead of Labour's annual conference in Liverpool.

The party's 2017 manifesto included a pledge to bring private rail companies back into public ownership as their franchises expired.

However, some franchises are set to continue for many years and the party has said it could use break clauses in contracts to take control sooner.

Asked whether it was possible all the franchises could be in public hands in the first term of a Labour government Mr McDonnell said: "I think that's possible. That's why we're working through the detail now of how that can be done.

"And if you look at what's happened over time a number of these franchises have been handed back anyway."

His broader plan is for Labour to establish a Public Ownership Unit to develop legal and financial plans to bring private industries into the state sector, and set out a timetable for action.

It would advise on how much compensation shareholders would receive and help decide which Private Finance Initiatives (PFIs) should be nationalised.
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ChrisB
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« Reply #1 on: September 22, 2018, 02:30:51 pm »

Not while they support Brexit it won't happen
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Charlie (in Gloucester)
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« Reply #2 on: September 22, 2018, 03:22:38 pm »

It will never properly renationalised (i.e Intercity, Regional, South East etc) it will just be publicly owned.
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ChrisB
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« Reply #3 on: September 22, 2018, 03:35:25 pm »

That indeed is the definition of (re)nationalisation. Owned by the State. It does not need to return to its original state
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Timmer
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« Reply #4 on: September 22, 2018, 04:43:40 pm »

So to Labour I ask.....ooooze gonna pay for it?Huh

And I say that as no fan of the current shambles of a set up we have now but most of that comes from the nationalised department that is the dft. Why would you want to give them even more power when they canít even run a train set properly?
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TaplowGreen
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« Reply #5 on: September 22, 2018, 06:04:44 pm »

So to Labour I ask.....ooooze gonna pay for it?Huh


A question Labour were unable to answer this morning - as usual - along with how all the other wonderful things they are promising are going to be paid for  Roll Eyes
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bignosemac
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« Reply #6 on: September 22, 2018, 06:37:35 pm »

Labour have giving general costings for their nationalisation plans. More detailed costings would come in a manifesto.

There will, I expect, be modest increases in tax rates for middle and higher earners, and large businesses. Better enforcement of tax collection is needed too.

The difficulty will come from doing this during the prolonged depression after brexit.
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ChrisB
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« Reply #7 on: September 22, 2018, 06:55:27 pm »

They have said that rail renationalisation would be cost neutral. The 'profits' that the TOCs make will completely cover the costs! Yeah, right
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TaplowGreen
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« Reply #8 on: September 22, 2018, 08:37:48 pm »

They have said that rail renationalisation would be cost neutral. The 'profits' that the TOCs make will completely cover the costs! Yeah, right

It's the usual Labour economic illiteracy.

To be honest however, for as long as Corbyn is Leader it's all immaterial, he & his acolytes make them unelectable. Quite easy to promise the Earth in those circumstances.
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ellendune
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« Reply #9 on: September 22, 2018, 08:43:03 pm »

They have said that rail renationalisation would be cost neutral. The 'profits' that the TOCs make will completely cover the costs! Yeah, right

It's the usual Labour economic illiteracy.

To be honest however, for as long as Corbyn is Leader it's all immaterial, he & his acolytes make them unelectable. Quite easy to promise the Earth in those circumstances.

There is no reason why a phased renationalisation should not be cost neutral.  

Network Rail is already in the public sector, and the franchises can be put in the public sector like LNER as and when they come up.  

Rolling stock leasing is another matter. They are already paying many of these charges through the TOCS. Potentially new stock could be purchased outright rather than leased as TfL have started doing. Similarly existing  stock could be bought back. In both cases the interest charges on a government loan will be lower than those paid by a leasing company so their costs should be less even without profit (Many recent rolling stock delays have been caused by manufacturers not being able to get finance, which suggests it will have been expensive).

I have not heard what they were going to do about freight and open access passenger services, but potentially those would be the only ones they need to buy that they are not already paying for in some way.    

 
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Lee
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« Reply #10 on: September 22, 2018, 09:04:31 pm »

If the definition of nationalisation is "Owned by the State", then I think there would be a debate to be had were we get to a state where every "franchise" were either a direct award or an LNER-style arrangement and Network Rail were effectively in the public sector, as to where "privatisation" ends and "nationalisation" begins.
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sikejsudjek3
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« Reply #11 on: September 23, 2018, 08:49:00 am »

Labour economic illiteracy. Oh look not so. Labour have spent less and repaid more than the Tories. You don't hear that much in the Tory press though. Here are the figures.
http://www.taxresearch.org.uk/Blog/2016/03/14/labour-have-borrowed-less-and-repaid-more-than-the-conservatives-since-1979/

Cost ? Well we know that many franchises are in trouble. What happens when they become unprofitable ? They hand them back to the state (because of course the Tories can't have private business taking risks that's only for the tax payer as per the IET purchase). So many franchises will cost nothing to renationalise. In fact the Tory model of reprivatisation with few private sector bidders left is far more costly.

So no, Labour is not proposing huge expenditure, is not economically illiterate and not unable to put large parts of the rail network back into the public sector. Lets remember that many of the private franchises are in fact public sector state railways of other EU nations that are simply charging us a premium to run our railways. Even the US has a state run railway.

In the 70's despite all the under investment we still managed to be a world leader in rail engineering with the HST (and would have been with the APT if Maggie hadn't cancelled it). Now after years of neoliberal policies from both New Labour and the Tories we have lost that - and we now see the result. Poor quality products, the loss of engineering ability in the UK, a poor and unreliable service with some of the highest fares in the world.

Yep - the Tory model is a disaster - and the people still voting Tory need to realise that most academic economists did not back the Tories austerity economics. They correctly predicted it would lead to a lot of needless suffering for the vulnerable with low growth for a decade. That is precisely what it delivered. The economy is NOT a corner shop with a necessity for a balanced budget. The fiscal system is a deficit based debt money system where 98% of all new money into the economy is created as debt. It is utterly impossible to pay the debt back under such a system - a point which seems to be not understood by many Tory voters.

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ellendune
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« Reply #12 on: September 23, 2018, 09:11:46 am »

The economy is NOT a corner shop with a necessity for a balanced budget. The fiscal system is a deficit based debt money system where 98% of all new money into the economy is created as debt. It is utterly impossible to pay the debt back under such a system - a point which seems to be not understood by many Tory voters.

Yes that is it exactly.  The current government's model is based on corner shop economics.  A corner shop does benefit by buying the cheapest product wherever it comes from. A corner shop must cut its costs to match its income or grow its income to match its costs. 

Macro-economics is slightly different. 

When I go to my local corner shop and spend £10 then and £5 is spent on wages and profit, then most of that £5 is spent in the local economy and much of that oes to pay more local wages of which most is spent in the local economy .... and so on.

So £10 spent actually grows the economy as a whole, but that does not feature in the corner shop's books.

When a government decides to buy the cheapest from abroad at the expense of its own industry then all that money goes somewhere else and it does not benefit the national economy. What is more if that results in unemployment then government will end up paying the workers to do nothing as well. So it is out of pocket!

Did I make all this up? No, I learnt it at university from a Professor of Economics. This is classic macro-economics. 

Of course this is no reason to prop up dead industries, but it is a factor that should be taken into account in procurement. Indeed - before anyone tells me it is not permitted by EU public sector procurement laws - it is permitted provided that criteria are clearly set out in the call for tenders! It is just that the UK Treasury who controls government procurement does not let departments do this! It just goes for cheapest.

Now in Preston Lancs the local council has got together with other local public sector purchasers to promote buying local where possible (e.g. school and hospital catering etc) working within the rules. And they have been able to demonstrate a benefit to the local economy, just as classical macro-economic theory suggests. 

Government stimulating the economy with public works is nothing new. One of the reasons that new road and rail construction was so popular in the 1930's and now was that it is highly labour intensive, so almost all the money is paid out in wages and so gets recycled. 

The reason that tax cuts for the rich are less effective is that they tend to keep the more of the money or spend it on imported luxury goods.

It has suited Conservative politicians from Thatcher onwards to try and present government like a Corner Shop. It does however help sell the idea of small government and that austerity is a necessary evil. But as you will see this is not good macro economics. Of course you can go too far and wreck the economy, but most countries where this has happened it was due to corruption and/or a national culture tax avoidance and evasion.

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broadgage
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« Reply #13 on: September 23, 2018, 01:52:52 pm »

Whilst public finances are not directly comparable to a corner shop, IMHO government spending financed from borrowing or by printing money should not be too excessive or inflation will result.

We do not want to end up like Zimbabwe, Venezuela, Argentina, and other workers paradises. All have suffered from rapid inflation.
It is an article of faith among the leaders of such countries that inflation is caused by wicked capitalist profiteers, and not by government policy.
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TaplowGreen
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« Reply #14 on: September 23, 2018, 04:43:17 pm »

I know that not everyone in this forum uses Twitter, but for those that do/are able to, here's an interesting debate/thread from "Rail" magazine


https://twitter.com/RAIL/status/1043886719844659201

(Click on the box with Nick Brown's name)
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