The U-turn is a difficult manoeuvre to perform on rails, but Chris Grayling has managed it. The transport secretary did not look comfortable on Wednesday, informing the House of Commons that the east coast mainline would be brought under government control. He tried to present renationalisation as something other than a 180 degree reversal of previous policy. He emphasised the temporary nature of the measure and underlined his belief in the superiority of private enterprise over state control. It was still a volte-face. The line has been run as a franchise by Stagecoach and Virgin since 2015, but unprofitably. The operators promised to pay £3.3bn to run the line for eight years. Within three, they have breached the terms of their contract. It is a familiar pattern: private providers making unrealistic bids, confident that the government must play backstop if they fail, which they did last year. The challenge then facing the transport secretary was to settle on a form of intervention that was politically acceptable to rail users and ideologically palatable to himself and his party.
The two requirements pulled in opposite directions. A straight bailout would look like a reward for failure, transferring taxpayers’ money to corporate bunglers who should foot the bill for their own incompetence. Mr Grayling has been at pains to point out that the franchise holders are paying a price – in terms of damaged reputation and forfeited cash (around £200m). But he has been equally reluctant to accept that the line might be better off in public hands. This has been an ideological hurdle. Mr Grayling is a dogmatic free-marketeer, allergic to the idea of public sector management in anything that might also be privately run. The east coast mainline conundrum forces him to swallow something he finds intellectually discomfiting: private sector failure invites public ownership as a legitimate alternative.
Having the state run things is not controversial, outside certain rarefied Conservative circles. Network Rail, the company that maintains track and associated infrastructure, is an arm’s-length body attached to Mr Grayling’s department. Opinion polls show high levels of support for renationalisation of the railways and utilities, reflecting first-hand experience of unresponsive, overpriced services. That doesn’t prove that state ownership would be better but it makes it reasonable to consider the option fairly. Some of the UK’s privatised services are already provided by state-supported companies, but the states in question are France and Germany. The taboo that preys on Mr Grayling’s mind is quite peculiar to British Conservatives.
It is also unsupported by history. The most successful recent period in the operation of the east coast mainline was the phase of public ownership between 2009 and 2015. Then, too, the service had been renationalised in response to private franchise failure, in that instance in the hands of National Express. There was no pressure from customers to reprivatise, nor was there an economic case. The nationalised service earned around £1bn for the Treasury. But the Tories felt compelled to give the failed franchising model yet another try. The government plan now is for the east coast mainline to be handed over to a “public-private partnership” in 2020. Mr Grayling insisted on Wednesday that Virgin and Stagecoach would suffer no penalties in future competition for rail franchises. Yet they should pay a price for failure. National Express was banned from bidding for future rail franchises by Labour.
Mr Graying is striving to resurrect something as close as possible to business as usual, and as soon as possible. That would be a missed opportunity. The more imaginative route would be to allow the east coast line to continue under public ownership on an open-ended basis, repeating the experiment of 2009-15, to see if the former success is replicated. Ministers might set aside ideology and judge different models for rail ownership on the evidence of their performance and financial sustainability. But that is not Mr Grayling’s style, nor is it a distinguishing attribute of many of his colleagues. When it comes to the politics and the economics of running a railway, sadly the Conservatives have a one-track mind.