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CBI questions Labour’s rail intervention
From the Financial Times of Fri, 18 Jul 2014 16:21:44 GMT
LONDON - AUGUST 4: Rail tracks are seen outside of Paddington station August 4, 2003 in London. Due to the risk of the tracks buckling on some lines if the heat reaches more than 30 degrees Celsius, Network Rail has lowered the maximum speed on those lines from 110mph to 60mph. Temperatures are expected to break the British record of 37.1 degrees Celsius by the middle of the week. (Photo by Bruno Vincent/Getty Images)©Getty

John Cridland, the head of the CBI employers’ federation, has questioned the wisdom of Labour’s plans to part-nationalise the railways, suggesting the existing system does not require radical reform.

Mr Cridland told the Financial Times that train operating companies, such as FirstGroup, Stagecoach and Virgin, had been able to invest in new capacity and to improve standards.

“I think the private market in rail has worked for consumers,” he said. “What is the current system not delivering?”

Labour is expected to agree the shake-up on Sunday at its five-yearly national policy forum in Milton Keynes, where grassroots members, MPs and union leaders gather to thrash out next year’s manifesto.

They are expected to rubber-stamp a motion promising to “learn the lessons of East Coast” – that main line service that was taken into state hands half a decade ago – by legislating to create a new public sector operator to challenge the private companies on a “genuinely level playing field”.

Mr Cridland’s comments will be shrugged off by some Labour figures as the inevitable corporate reaction to the proposed reforms, which would see a state-owned operator bidding against private rail companies for franchises. “John Cridland hasn’t seen the details of the proposals,” said one party aide.

But they are the latest of a series of criticisms by business figures wary of Ed Miliband’s promises to intervene.

Mr Cridland said that after last year’s Labour conference there had been a string of announcements “that led to the overall view that the Labour party felt the need to intervene in markets” outside the normal competition framework.

He now welcomed the pro-business tone adopted by Labour this month with speeches by Ed Balls, shadow chancellor, on corporate taxation and Lord Adonis on regional growth.

Labour’s structural changes would involve the creation of a new “strategic planning body” for rail, sitting above Network Rail. A quango answerable to parliament, it would act as arbiter over future franchise contests.

Another new body would give passengers a legal right to the cheapest tickets and annual caps on fare rises.

Mr Cridland said any public sector bidder for franchises would have to operate on a strictly neutral playing field, adding: “The in-house bidder has to have no advantage.”

Roger Ford, an analyst at the Rail Business Intelligence newsletter, said the government would need to hire new officials to operate the state-run bidder.

“To set up a bidding team would be a big challenge, and could only be done by hiring the consultants who already support the existing bidders,” he said. “This whole exercise suggests that the Labour party doesn’t understand the working of the privatised railway.”

Jon Hart, a partner in infrastructure at Pinsent Masons law firm, said challenges for British railways included high ticket prices, service quality and a looming capacity crunch. “Setting up a public franchise company won’t, on its own, provide a solution to these issues,” he said.

Labour will suggest that not-for-profit groups could also compete to run rail franchises. It will argue that it is wrong that foreign state-run railways can bid to run British franchises – while Whitehall cannot.

While full nationalisation will be debated on Saturday in Milton Keynes, union leaders have agreed to sign up to the proposals. “The dinosaurs will be allowed to have our say, but then we will be symbolically defeated,” said one union official.

Mr Miliband will use his speech on Saturday at the policy forum to say that under his leadership the party is neither New Labour nor Old Labour.

Avoiding all mention of the railways, he will promise that Labour will bring in a higher minimum wage, an end to the abuse of zero-hours contracts, a freeze in energy bills and the “restoration” of the National Health Service.

This could be achieved while still “balancing the books” in the next government, delivering a surplus in the current budget, he will say.

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