Tuesday, July 18, 2006

Its broke, but don't fix it.... that way

You might have though that the Conservative transport spokesman, Chris Grayling might not have wanted to "mention the rope in the house of the hanged man"; but no, he is determined to create a Conservative policy about railways. However, even he now accepts- apparently- that the Tories made a massive blunder in the way that they privatized the railway system of the UK. A dignified silence on their biggest balls-up might have been considered polite, but no, the Conservatives are determined to make good their error and should they ever return to power, then they will "fix the problem".

My God, you can tell that these guys have NEVER run a business.

Part of the problem was the enormous disruption and misallocation of management time that was devoted to adjusting to the private sector. So there had really better be a much better solution if we are going to have to go through all the disruption of installing another totally new system. The Tories are not really offering this- they are pretty much only offering the disruption. Merging franchises, extending them, and transferring all or part of the rail infrastructure to the operating companies may all be parts of a future change, but this is a change that should be brought about by the market, and not by government fiat. By all means allow the operating companies to buy assets, but this should be an organic and long term process.

In any event I am not convinced that extended franchises are a good idea at the present, but maybe after the next round, things might be reviewed.

And if all this sounds timid, consider this: investors like clear rules. At the moment we have system that the market understands. It is not the best way to do things, and setting out to do it now, we would not do it this way; but what the Tories propose is to totally change the capital structure and the funding needs of the operating companies. This would be highly disruptive, and it is by no means clear that it would be an improvement on what we see now.

So- my advice would be "leave well enough alone" and do not mistake activity for achievement.

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