Rail network heads for meltdown

The Faustian bargain between New Labour, the state and capitalist corporations is collapsing around the government’s ears and nowhere more so than in the rail industry. Led by the debt-ridden National Express, many companies that hold the rail franchises sold to them by the government are close to pulling out of their contracts because they can’t make enough profit to pay their way.

Although the railways were privatised by the Tories, New Labour quickly embraced the notion of public-private partnerships with even greater enthusiasm than its predecessors. An astonishing one-third of all “public services” are now in the hands of the private and voluntary sectors, with total contracts valued at more than £80 billion a year.

Determined to eliminate state subsidies year by year, New Labour has sought the highest bids for rail franchises. In August 2007, National Express agreed to pay £1.4 billion over seven years and four months for the East Coast franchise. GNER had been unable to keep up payments, despite offering much less. Only 18 months into the new franchise, National Express is looking for a get-out clause – or more money from the state.

The East Coast line, which links London with Edinburgh via York and Leeds, carries 17 million passengers a year and employs 3,100 staff. But passenger numbers are falling because of the recession (combined with the ludicrously rail fares). The transport group has £1.2 billion in debts. It has already made 700 workers redundant in the last six months.

Other companies are in similar difficulties, says the rail union RMT, which has warned of a meltdown on the rail network. If the National Express franchise collapses the firm could also be stripped of its East Anglia and c2c franchises. There are also question marks over Stagecoach’s South West Trains franchise and Arriva is facing heavy losses on its Cross Country line.

The rail debacle comes the wake of the fiasco on the London Underground, where Metronet, one of the companies contracted to modernise the system, pulled out last year. Private funding of the project was insisted on by Gordon Brown when chancellor. It has virtually bankrupted the network and led to soaring fares. There are similar stories to be told in areas like school and college building.


Now the government is trying to repeat the policy with the part-privatisation of Royal Mail. It wants a global corporation like TNT to take a share in the business to provide the investment to “modernise” the postal service, with all that would mean in terms of job losses and rising charges.

Bob Crow, the RMT general secretary, is right when he says: “What we have now is sub-prime companies running essential public services and that’s the consequence of rail privatisation. Rather than reading ransom notes from these companies RMT will be stepping up the political and public campaign to get shot of them.”

Crow wants the government “to step in now and begin the process of renationalisation” and warns that it would be “political suicide” to bail out National Express. New Labour is, however, committed in blood to the pact with the devil of global capital that it made long before it even came to power in 1997. This deal says that the government will deploy the state, using taxpayer resources, to further the ambitions and profits of the corporations, both economic and financial.

The global crisis of capitalism has exposed all sides of the once cosy arrangement that drove forward the globalisation of the economy. Banks are broke, corporations can’t make profits and the state itself is staring bankruptcy in the face. Capitalism isn’t working, from whichever angle you look at it from, and the development of alternative economic AND political models, in theory and practice, is the priority.

Paul Feldman
AWTW communications editor