Middlesbrough to London

Ben Houchen - Tees Valley mayor - and his cabinet have secured £20 million grant for the purpose of increasing the capacity of Middlesbrough Train station. This is a worthwhile investment, and comes with the ambition of a direct line to London. Connectivity is key to increasing productivity and improving our economy, both locally and nationally, and improving the lives of the population, and it's a pleasant change of pace to see the North secure infrastructure investment.

However it is unclear how much this investment will benefit the people of Middlesbrough, and indeed how a direct line to London could improve lives. If this infrastructure was available to the wider public then there would be no question, but rail transport is by no means available to the wider public. The cost of rail travel is prohibitive - one only has to look at the cost to get from Middlesbrough to Manchester to grimace at the potential cost of a train from Middlesbrough to London - and it's becoming increasingly more so thanks to the unnecessary and unreasonable inflation of price tickets; inflation based on a measure the Office of National Statistics has disavowed.

The principal reason for these price increases is the Government's long-term (which is to say a goal that has survived several successive governments) belief that the taxpayer should not subsidise rail travel, and that increased costs should be borne by the people who benefit from the service. This seems intuitively fair, but it does a great disservice to our society. For one thing, the practical effect of this is to exclude low and middle income families from regular and easy transport. While it would be an exaggeration to claim that easy transport is a human right, it must surely be the case that we believe that all residents of Britain should have easy access to the Britain beyond their own towns. If that requires subsidisation, then surely the people of the United Kingdom are willing to contribute some to ensure that none of their fellow citizens aren't freely able to move across the country. Our country is not founded simply on rough individualism, but an understanding that the cooperation of our society is what has allowed us to thrive.

This leads into a second practical concern; cooperation of our society has allowed us to thrive. The absence of such cooperation prevents such success. Increased transport capacity - available to all - has clear economic benefits. Quite simply, when people and labour are more freely able to move, more work is able to be done. People can travel further to jobs further from their homes, bringing wages back to spend in the local economy and creating value through services or products where they work. More spending in the economy means more wealth, which means people are more able to spend to improve their lives and their family's lives. It means that we do better, and live better.

One might hope that the market would be self correcting, and that while rail companies are able to increase train fares by up to RPI+2%, companies would seek to gain an advantage over competitors by not hitting this ceiling year after year. If this is the case then additional tax and state control is not only unnecessary, but hinders the development of lower costs. But, of course, we see that this is not the case. At the end of every year, the government publishes the maximum raise in train fares, and we are all aware that this value is the value by which train fares will increase. This is only to be expected; people living in Middlesbrough and working in Leeds aren't able to decide to take the train from Glasgow to Edinburgh regardless of how much cheaper the travel would be, and it's likely that they're going to have to use the train from Middlesbrough to Leeds regardless of the increased cost. Once a rail company owns a franchise, there is no market incentive to not squeeze customers for every penny that is legally allowed, because competition here is just not analogous to competition in most markets. In this case, adding taxpayer subsidisation is simply putting taxpayer money in the hands of companies already making a profit that have no desire or inclination to reduce prices, regardless of how costs have changed.

This isn't a new concern. People - particularly the young who don't have the experience of British Rail's failures - have begun to again seriously consider the renationalisation of railways. This renationalisation is easy to make the case for, particularly when looking at the success of the East Coast line under state supervision, and it's failures under private supervision. Renationalisation, as John McDonnell has noted, could be done freely, if patience is practiced, since the government could simply not offer franchises up for tender and retain control.

But to explicitly renationalise the railways would be to throw the baby out with the bathwater. British Rail was, by all accounts, a disaster. The young should not so quickly dismiss the experience of those with recollections of massive delays and cancellations and dismiss that as poor recollection and blindness to the problems of today. Rail fares did in fact increase quicker under state control than under privatisation in the long run, and uptake of rail transport grew massively as services became more reliable and became higher quality. While it is true that rail transport increased across Europe in the same time (likely due to effects such as increased cost of car travel and other exogenous factors), the effect in the UK was incredibly pronounced, to a degree where it would seem that privatisation did have an effect on the increase in uptake.

If the state can do a better job of running a rail franchise (i.e. the East Coast line), then it should. Equally, if a private company can run a rail franchise better, then it should. There exists a mechanism for determining which company will best run a franchise that we use whenever a franchise comes to tender; the state should be able to compete on an equal level. The state would be able to compete with all the benefits that a nationalised service can offer: a service beholden to customers rather than shareholders, and having no fiduciary responsibility to make a profit, and would have better access to National Rail, owners and operators of the train tracks in the UK.

These benefits are clearly not enough to sustain a high quality service as the country saw with British Rail. However these benefits coupled with the consistent threat of replacement by a higher quality provider would be. A state owned franchise would be subject to the same competitive forces that any other rail franchise are, and hence subject to the same forces that should be driving higher quality.

Further to this, an ambitious state owned group, if successful, could similarly operate as a private company overseas to provide extra revenue, so as to reduce the cost to taxpayers and fare-payers in the UK. This is a model that's been adopted by many European states (states that are notably larger and have notably lower rail fares), and it is in fact the case that some rail franchises in the UK are owned by the German state provider of rail services.

It is not clear whether this would lead to an eventual state monopoly of the rails, or if it would lead to higher quality and cheaper services from private providers competing with a state that has the advantages of not being a company. Ultimately, however, this wouldn't matter. In this framework, a state owned group could guarantee prices directly tied to cost for a given franchise as part of its bid, and providers would have to respond to this with pledges of their own to remain competitive. The net effect should be that the government would be able to subsidise over-costly rail fares in the knowledge that rail fares would be better reflecting genuine changes in cost rather than increased dividend payments.

The rail system at the moment is broken, but we should not forget that it was broken before. Previously, lethargy under a monopoly lead to suboptimal services; currently, profit maximisation and a lack of genuine competition has done the same. Reform is needed, and reform to a system in which the obvious advantages of state ownership are forced to appear via a competitive process - which we already have in place - would be a place to start. Then we might be able to afford the trip from Middlesbrough to London.