High-Speed Rail United Kingdom

Giving Away the Crown Jewels

The E.U. has agreed to allow the U.K. to bailout London & Continental Railways, owner of High-Speed 1

On Wednesday, the European Commission approved £5.69 billion in aid by the government of the United Kingdom for London & Continental Railways (LCR), the private owner/operator of High-Speed 1 (HS1). As writes Railway Gazette, “Each of LCR’s businesses will now be established on a sustainable commercial and financial basis, bringing the long-term guarantees and liabilities to an end and removing the need for ongoing public support.” But the U.K.’s action is more specifically designed to privatize what should be public infrastructure, and allow corporations to profit from a project whose finances have been insured from by the start by the British government.

HS1 opened its second and final phase to Eurostar trains in 2007, reducing travel time between London and Paris from 3h to 2h15, providing a link to Olympic sites for London 2012 and regeneration areas in the east side of the city, and redeveloping the St. Pancras terminal. At a cost of £5.8 billion, it is England’s first new main line since 1899 and the first true high-speed link in the country’s history. Its 109 km are the most valuable in the British rail system.

LCR was selected to construct the link between London and the Channel Tunnel in 1996, two years after the Eurostar made its first journey between England and the continent. For more than a decade, the yellow and white trains were significantly faster in France and Belgium than in the U.K., where they were constrained by the limits of ancient track. HS1 played an important role in moving England into the high-speed mainstream. But almost as soon as the project began, what was supposed to be a privately-sponsored project turned into a boondoggle as the British government was forced to guarantee £1.6 billion of bonds. By 2006, the government was supporting £3.7 billion of bond releases, making it the defacto owner according to the Office of National Statistics. Yet the private corporations that had invested in the line — including National Express, UBS, EDF, and Bechtel — retained their shares, giving the government decision-making ability but not potential profits.

Europe’s agreement this week will allow the government to divest itself of its investment in HS1 by canceling the debt of LCR, at a cost of £5.69 billion. Remember that the project itself only cost £5.8 billion to build. Now that the line has been built, the agreement will force LCR to split into three operations: an infrastructure branch, owning the right-of-way and tracks; a Eurostar branch, owning the British portion of the high-speed service; and a property branch, owning St. Pancras and other holdings along the line. The E.U.’s decision supports its neoliberal model, which unfortunately rejects the quite successful government-run railway system that has worked well in mainland Europe for decades and instead adopts the privately-run mess that has failed in the U.K. ever since John Major privatized British Rail in 1993. Mainland countries are on their way in that direction as well, opening rail links to international competition in 2010 and national competition in 2012.

Unfortunately, the U.K.’s decision to buy out its share of HS1 will simply perpetuate the problems that result when governments make public infrastructure private. Not only have taxpayers essentially paid for this entire project with their own funds, but they now will be giving profits to private corporations running the trains and the track. This comes in direct opposition to what happens in France and Belgium along the same Eurostar line. There, the government owns both shares in Eurostar and the tracks themselves, meaning that any profit resulting from their use goes back into the system, rather into the pocketbook of some CEO. A much better equation, if you ask me.

But what’s worst about this situation is that the U.K.’s government tried forcing private companies to pay for this line themselves, but they were incapable of doing so; the line was only completed after the government backed up their debt. Wednesday’s action allows private corporations to make an easy profit from a public investment.

This, unfortunately, is the face of so-called public-private investment today; huge corporations exploit the infrastructure needs of nations, canoogle the government into paying for new projects in round-about ways, and then put all of the profit in private hands. What a shame! I hope that we can show more judgement in decisions we make about American high-speed rail investments.

3 replies on “Giving Away the Crown Jewels”

What a shame. Privatization of infrastructure is a bad idea and should be discarded. Unfortunately, we have seen corporations doing the same thing in the U.S. Chicago under Daley has become an auctioning center for infrastructure be it expressways, parking garages, or airports.

This is all part of the plan under conservative governance- neglect infrastructure and starve the government of the funds needed to maintain it then use the poor state of infrastructure and the expense of improving it as an excuse to sell it to a private entity. Democrats have been a part of this plan as well because they aren;t very different than the GOP when it comes to transportation and economic policy.

This one’s a godawful mess. The British government isn’t even getting the “infrastructure branch”, and that branch doesn’t even own the critical station, St. Pancras. So this is even *worse* than the rest of the semi-privatised rail system.

In the rest of Britain’s rail system, the government, through fully-government-owned Network Rail, owns all the track and all the stations; only the trains and the running of the trains is privatized. This appears to work tolerably well, and private track ownership (“Railtrack”) was an unmitigated disaster.

For the donation of an amount equal to the entire cost of building the line, the government should damn well have gotten ownership of the line. This is just corporate welfare.

The UK has a crappy recent record with rail improvements, at least compared to France, Spain, Switzerland and Germany. The West Coast Main Line has been billions of pounds over budget, and services in London and the Southeast are decades behind Paris or large German cities. Even something as relatively simple as a tunnel to connect the terminii for the third-rail services south of the city, so they could be through-routed–nope, study everything, over and over, and do nothing. Crossrail is a joke compared to the S-Bahn in Berlin or Zürich, let alone comparison with Paris. The UK has spent 30 years doing everything possible to square a circle. Yes, ridership has rebounded, but the backlog of improvements is the longest in Western Europe, and UK fares are the highest in Europe. Considering that gas has been running a good $8 a gallon for the last few years, it’s stunning that it can still be more expensive to take the train than to drive. It’d be great to blame the lack of investment on Thatcher-era ideology, but it’s far more down to New Labour and its love for the public-private partnership. These things have very nearly bankrupted NHS trusts which used them to build new hospitals; somehow, the government knew that the real costs of PPP would routinely be a third higher than stated, yet it would be the NHS trust forced to cover the shortfall from its own resources. (A similar thing happened in suburban Toronto, when the Ontario government entered into a PPP to build the new hospital in Brampton, and the borrowing costs inflated the price by 30%.) The UK is stuck in a strange bizarro-world: instead of government investing in the country’s infrastructure, now there always has to be some angle, something that drags the private sector in. The LCR case is textbook–here’s the government using the private sector as a middleman, guaranteeing a profit to the private-sector partner, which means that not only is the taxpayer paying for the investment, but the taxpayer is also paying guarantee a profit margin to a private company. There is no sound economic reason for this, and if it costs more money, it either requires higher taxes or it increases public debt. It’s a racket, and in the UK, it’s become an obstacle to public infrastructure investment.

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