The Privatization and Renationalization of the UK Railway System
The train system in the United Kingdom was nationalized in 1948 by the Atlee government, but it was privatized in 1993 by John Mayor. For many years, there has been a struggle to get the system into the public's hands. Plaid Cymru and Green are currently the only leaders campaigning for the renationalization of the railway network. Because of the high prices and their dissatisfaction with the railway management, the majority of UK citizens believe it should be renationalized. The past privatization of the of the railway system created the effect of a monopoly implying that the companies could furthermore increase the prices since there will be no competitor in the market.
Why the Railway Should Not Be Renationalized
The railway system demands ongoing investments that the government can’t afford unless they resort to external borrowings. Making sure that the railway system is operational and up to date will demand a substantial and significant investment. It is clear that all these investments cannot be made by the use a public purse as the politicians have suggested. The current business environment is quite demanding; as the political and legal and congestion pressure to reduce the level of gas emission increases operational costs which will draw much money from the public funds. Although the users of the railway services complain that fares are too high, they still use the service despite the alternatives transport services such as road and air. This implies that the services provided by these options are not more preferred. The consumer should understand that the cost of maintaining the railway network to remain efficient are too high therefore the price they pay for the service is in line with the running costs (VOSZKA, 2016).
The Impact of Privatization on the UK Railway System
The privatization of the United Kingdom railway was undertaken with the aim of reducing the need for the public subsidies. The aim of privatization was to improve efficiency in operations. The old railway structure that was run by the government was designed to deal with the operating constraints rather than offering affordable services to the United Kingdom citizens. This implies that renationalizing the railway network now will lead to similar problems that existed before the railway was privatized by John Mayor. The government should embark on subsidizing the sectors so that operational costs which will, in turn, lead to the decline in fare (“Why not... nationalize the railways? - BBC News”, 2017).
The Challenges of Renationalization
The renationalized sectors are also likely to likely to suffer the moral hazard which arises whenever institutions are insured against the negative of the particular firm’s inefficient behavior. The renationalized railway sector will have a limited source of raising capital that is required for investment and even modernization because it will have to compete with the government departments such as defense, health, and education. This will result in underinvestment in this sector. The railway technology keeps on evolving a fact that implies that institutions must have the necessary capital to update its technology as soon as it emerges. Renationalization will mean that the parliament must approve the funds before they are channeled to this sector. This can indeed lead to delays in the acquisition of the current state of technology leading to inefficiency.
The Progress After Privatization
The railway sector has made significant progress from the time it was privatized. For example, the segment acquired the modern high-speed trains that have highly facilitated efficient transport. The attempt to nationalize the will derail this progress. Public-owned institutions tend to be inefficient. The managers of these institutions are not required to meet efficiency objectives that have been put forth by the state. The industries that are owned by the state are protected by competition implying that their level of effectiveness will be low. The attempt to nationalize the railway sector will be a step back. The government should, however, reform its policies, for instance, the tax policies so that the railway sector remains with enough revenue for investments.
The Economic Implications
At present, the public sector in the United Kingdom is overweighed, and the nationalization of the railway sector will mean that it will be a burden to the economy (“Why not... nationalize the railways? - BBC News”, 2017). At present, most of the public sectors are simply flourishing at the expense of the private sector. Antinationalization of the railway sector will mean that more funds have to be set aside to cater for its general operation this means that the public expenditure will have to rise. In the long run, it will become unsuitable and expensive to the taxpayer. The sector should thus be left in the hands of private investors who have the necessary funds to finance this sector (Leeds, Von Allmen, & Schiming, 2006). Any attempt to nationalize the railway sector will significantly discourage the private sector meaning that the rate of investments will greatly reduce. The fear of nationalization will make the private investors shun away from this sector for fear of making losses.
The Role of Competition and Government Regulation
Renationalization of this sector will mean that there will be less intervention in these economic affairs. Nationalization of the private institutions will lead to economic danger since leaves the government as the only master of the economic affairs. The government is supposed to act as a balance-wheel and regulate the entire sector, and if anything that is contrary to the law happens then, the government can be looked at for redress. Nationalization will kill the spirit of competition; this can indeed lead to inefficiency that the government might not be able to solve putting in mind that it is the sole owner (Mason, 2017).
The Challenges of Management
Renationalization of the railway sector is likely to lead to costly management. In many cases, the management is often unwieldy and complicated. In these institutions, they exist paid persons and department this can indeed slow down the decision-making procedure because various departments must coordinate. In the case of conflicting views, it will be impossible to make the quick decision. This can be hazardous to this sector putting into consideration that this an important sector in the economy.
Conclusion
In conclusion, the rising number passengers, the financial burden of HS2 and ballooning implies that our railway is approaching a crisis point. At present increasing, the subsidies by the government is no longer a viable idea. Improving efficiency is what should be emphasized but not renationalization. The government should also encourage competition between the train operators just as it is witnessed in the Middle East. Trying to put the politicians in a sector that was privately owned can be the greatest mistake as it will only benefit the vested interests.
References
Leeds, M., Von Allmen, P., & Schiming, R. (2006). Economics (1st ed.). Boston: Pearson Addison-Wesley.
Mason, R. (2017). Jeremy Corbyn to announce rail nationalization plan. The Guardian. Retrieved 3 May 2017, from https://www.theguardian.com/politics/2015/sep/20/jeremy-corbyn-rail-nationalisation-policy-labour-conference
VOSZKA, É. (2016). NATIONALIZATION OR PRIVATIZATION? THE FRAGMENTATION OF THE MAINSTREAM. Annals Of Public And Cooperative Economics, 88(1), 91-120. http://dx.doi.org/10.1111/apce.12140
Why not... nationalise the railways? - BBC News. (2017). BBC News. Retrieved 3 May 2017, from http://www.bbc.com/news/uk-politics-22700805
