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Rail: frustration grows with Britain’s fragmented network

Jonathan Ford and Gill Plimmer in The Financial Times

Craig Johnstone checked tickets and train doors for more than 30 years. But if the job did not change, the uniform did: five times he donned new colours bearing fresh slogans as a different company took over running the Leeds to Manchester and Carlisle service. 

“Every uniform gets a little tighter — and I can’t fit into the old ones,” he says. “They change the roles and description and then they change them back again. That’s all the rail operating companies do. It’s continuous change, but all that changes are the colours and the corporate brands.” 

Change was supposed to mean more than just a new cap and blazer when John Major’s Conservative government released its plan to split up British Rail in 1992. Then UK ministers outlined a vision of private companies bidding for franchises and bringing fresh ideas, dynamic management and innovation. 

“More competition, greater efficiency and a wider choice of services more closely tailored to what customers want,” proclaimed the 21-page white paper that drove forward a privatisation that had been too controversial even for Margaret Thatcher, his predecessor, to risk.

Two decades on, passenger numbers have more than doubled since the last year under British Rail. The UK network saw 1.7bn passenger journeys in 2016-17, against 735m in 1994-95. After decades of decline, Britain’s trains are busier than at any time since the first world war. 

But behind the numbers lies a conundrum: how much of this is due to the benefits of privatisation, rather than demographic factors such as the shift to the suburbs, increasing urban congestion and a rising population? 

Privatisation has certainly led to more train services. According to an EU study in 2013, the UK’s trains and tracks are now more intensively used than any other developed European market bar the Netherlands, and this has undoubtedly contributed to the growth in passengers. 

Investment is up too; it is running at around four times the £1.6bn a year it averaged in the late 1980s, with £925m coming from the private sector last year, mainly to fund new rolling stock. 

“Privatisation reduced the malign influence of HM Treasury which wouldn’t allow a proper investment programme,” says Lord Freud, a former banker who advised on rail privatisation. 

But it is not obvious that two decades of private ownership have led to similar advances in service quality or have made the network more financially sustainable and secure. 

“It’s very hard for people to travel around and not suffer from the cracks in the system,” says Christian Wolmar, a train historian. “It’s everything, from knowing who to buy a ticket from to the signalling failure that delays the train to the lack of information when your train is cancelled. It’s hard to know which is worse — fragmentation or privatisation — but I’d probably say fragmentation.” 

The break-up of the network is perhaps the most hotly debated legacy of the sell-off. Instead of pushing British Rail into the private sector as a single regulated monopoly akin to water or electricity, the government chose to break it into three components of track, rolling stock and train operators, and then to sell it in no less than 100 pieces between 1995 and 1997. 

This process has not made the network cheaper to operate. The cost of running the UK’s railways is 40 per cent higher than it is in the rest of Europe, according to a 2011 government report by Sir Roy McNulty, the former boss of UK aviation group Short Brothers who has long experience in transport regulation. 

“The train you catch is owned by a bank, leased to a private company, which has a franchise from the Department for Transport to run it on this track owned by Network Rail, all regulated by another office, and all paid for by taxpayers or passengers,” says John Stittle, a professor of accounting at Essex university. “The complexity is expensive.” 

Since privatisation, the bill has mainly been shared between the taxpayer and the passenger. The contribution from the state has almost doubled from £2.3bn in 1996 to £4.2bn in real terms in 2016-17, despite a conscious decision in recent years to push more of the cost on to users’ shoulders. Ticket prices have risen: they are now 25 per cent higher in real terms than in 1995 and 30 per cent higher than in France, Holland, Sweden and Switzerland. The latest average rise in fares of 3.4 per cent, announced on New Year’s Day, was greeted with outrage. 

Privatisation was supposed to unleash efficiencies that would justify the returns private operators demand for their services. So why, more than two decades in, have the UK’s railways not delivered more? 

Despite the vastly expanded usage, the network’s costs have not obviously come down relative to its income. According to the 2011 report, unit costs per passenger kilometre were roughly 20p in 2010, much the same as they were in 1996. 

One reason, suggest the critics, is that privatisation never really took root. The network’s 2,500 stations and 32,000km of tracks were initially vested in a listed company, Railtrack, which collapsed in 2001. The infrastructure has since been back in public hands under the guise of Network Rail. 

Fragmentation, meanwhile, has encouraged each part of the system to prioritise its own profits rather than collaborating to improve the system. “It’s an adversarial relationship with Network Rail,” says one director of a rail franchise. “We call them blame departments. People who sit around at Network Rail and the train companies deciding whose fault it is.” 

Indeed, the subsidies in effect insulate the operators from those extra expenses the network incurs. While it cost £4.1bn to provide maintenance and renewals work on the system in 2016-17, the train operators paid £1.5bn to access the nation’s tracks. This is half of what they paid at privatisation, even though those tracks are now far more heavily used. 

Of the parts of the sector that remain in private hands, it is the train operators that are now the subject of fiercest contention. Although the data on quality are mixed, with the UK performing better than some European countries in terms of punctuality and reliability, there is a perception that service is poor despite all the public subsidies. 

Journeys are often uncomfortable: 23 per cent of customers commuting into London at peak hours have to stand. According to the consumer group Which?, delays of at least 30 minutes afflicted more than 7m journeys last year. 

Critics argue that train operators are able to make returns, and pay themselves dividends, despite contributing very little in the way of risk capital. While operating margins of 3 per cent are not high, the train companies paid nearly all the £868m operating profits between 2012-13 and 2015/16 as dividends — £634m in the four year period. 

The train operators have few tangible assets and almost no exposure to business risk. Indeed, their franchise agreements frequently offer revenue protection should there be an economic decline or changes in London employment levels — the two biggest drivers of passenger numbers. 

What the private owners mainly deliver is marketing nous; promoting services and experimenting with timetables and branding. While more than a third of ticket prices are set by the government, they have freedom to set the remainder at levels they believe the market will bear. 

So deep is the dissatisfaction that one group of long-suffering customers who will pay up to £4,696 this year for a season ticket on the poorly performing Southern service between London and Brighton, just an hour away, created a musical dubbed “Southern Fail”. Following a series of strikes, the satirical website The Daily Mash said Southern had decided to “replace the timetable with an avant-garde poem”. 

As with other privatised monopolies, competition was supposed to ensure lower prices and sharper services. But in recent years this has faded, raising questions over the legitimacy of the franchising system. A third of train operating companies now hold their franchises by so-called “direct awards” from government, rather than auction. 

Successive governments, out of an apparent desire to keep the private sector onside, have been reluctant to wield their powers against poorly performing franchises. Only one train operator has ever been stripped of its contract — Connex for poor performance in south-east England in 2001 and 2003. Three more have walked away after overbidding for contracts, with minimum penalties. 

Last month, the government allowed Virgin Rail and Stagecoach to terminate their East Coast line franchise three years early, saving them the need to write a £2bn cheque to the government under previously agreed revenue growth forecasts. Yet with only a handful of operators bidding for franchises, the duo may end up operating the line again — on more profitable terms. 

Lord Adonis, a Labour peer who recently resigned from the National Infrastructure Commission, called the “bailout” a “scandal” that “threatens to undermine the legitimacy of the whole franchising system”. He argues that the government should keep a state-owned operating company in reserve, to demonstrate to franchisees that it can reassume their obligations if they fail. 

When National Express handed back the keys to the East Coast line franchise in 2009, it was renationalised under an arm’s-length government body called Directly Operated Railways. Nevertheless, during the following five years under state control, it increased ticket sales, returned about £1bn to the taxpayer and delivered record levels of customer satisfaction. 

The rolling stock — which is leased to the train operators for about £1.5bn a year — is still largely owned by three companies: Angel Trains, Porterbrook and Eversholt. Each is in the hands of financial investors, each with convoluted multi-tiered, overseas ownership structures, sometimes making tracing the flow of money difficult. Eversholt is owned by a Hong Kong company with a Cayman Islands subsidiary; Angel mostly by Luxembourg-based investors; and Porterbrook by another consortium of international investors. 

The Competition Commission concluded in 2009 that the rolling stock companies could have cost the taxpayer as much as £100m a year by overcharging operators on leasing rates. More recently, the government has attempted to procure some new trains directly using complex private finance initiative deals — which cuts the rolling stock companies out of the process — although that too has been criticised as poor value for money by public spending watchdogs. 

The government’s micromanagement of procurement has also slowed the pace of ordering, meaning the average age of rolling stock has almost doubled since 2008 to 21 years — roughly the same age as pre-privatisation. 

There is a growing consensus among both executives and industry experts as well as the public that Britain’s unique attempt to create competition on Britain’s rail network has not delivered. 

While it has led to more services, and encouraged more users to pay higher prices, it has not unleashed the productivity improvement necessary both to upgrade the network and stabilise the network’s finances. 

Over the same period, for instance, London’s state-owned metro network, Transport for London, has grown just as quickly and delivered much more state-of-the-art investment.  

This has brought forward calls for more chopping and changing. To deal with the problems of co-ordination and planning, Chris Grayling, the transport secretary and an advocate of private sector involvement, is pressing for formal joint ventures between private franchises and Network Rail on some routes, so that eventually operators can take more responsibility for the tracks. 

Another option — advocated by some franchise holders — is to ape the way Transport for London commissions services from the private sector, taking the revenues and responsibility for service delivery, while contracting out bus and train provision on tightly specified terms. 

Some argue there is a simple solution: reunite track and train in the only feasible manner, a return to public ownership. 

Jeremy Corbyn, the opposition Labour leader, has proposed putting the franchises back under state control as they expire and commissioning trains directly from manufacturers. An October poll by the conservative think-tank Legatum found nearly three-quarters of the UK population agreed with him. 

Labour’s critics, however, say that its plans would do little to solve the well-known failings of Network Rail. “The thing that makes me laugh is how people have forgotten how they used to hate BR,” says Lord Freud. “It was a national laughing stock.” 

As for Lord Adonis, he argues that further revolutionary change is pointless and “no simple ownership change can fix the railways”. 

But back in Carlisle, Mr Johnstone, who now works for the Northern franchise currently run by Deutsche Bahn-owned Arriva, supports a return to state control. “If you scrape the paint off, eventually you get to British Rail. But before you get to British Rail you get to the last time Arriva had the franchise about three coats in,” he adds. “If you keep painting them they won’t make it through the tunnels — there’s that many layers of paint on them.”

The pendulum swings against privatisation

Evidence suggests that ending state ownership works in some markets but not others


Tim Harford in The Financial Times


Political fashions can change quickly, as a glance at almost any western democracy will tell you. The pendulum of the politically possible swings back and forth. Nowhere is this more obvious than in the debates over privatisation and nationalisation. 

In the late 1940s, experts advocated nationalisation on a scale hard to imagine today. Arthur Lewis thought the government should run the phone system, insurance and the car industry. James Meade wanted to socialise iron, steel and chemicals; both men later won Nobel memorial prizes in economics. 

They were in tune with the times: the British government ended up owning not only utilities and heavy industry but airlines, travel agents and even the removal company, Pickfords. The pendulum swung back in the 1980s and early 1990s, as Margaret Thatcher and John Major began an ever more ambitious series of privatisations, concluding with water, electricity and the railways. The world watched, and often followed suit. 

Was it all worth it? The question arises because the pendulum is swinging back again: Jeremy Corbyn, the bookies’ favourite to be the next UK prime minister, wants to renationalise the railways, electricity, water and gas. (He has not yet mentioned Pickfords.) Furthermore, he cites these ambitions as a reason to withdraw from the European single market. 

Privatisation’s proponents mention the galvanising effect of the profit motive, or the entrepreneurial spirit of private enterprise. Opponents talk of fat cats and selling off the family silver 

That is odd, since there is nothing in single market rules to prevent state ownership of railways and utilities — the excuse seems to be yet another Eurosceptic myth, the leftwing reflection of rightwing tabloids moaning about banana regulation. Since the entire British political class has lost its mind over Brexit, it would be unfair to single out Mr Corbyn on those grounds. 

Still, he has reopened a debate that long seemed settled, and piqued my interest. Did privatisation work? Proponents sometimes mention the galvanising effect of the profit motive, or the entrepreneurial spirit of private enterprise. Opponents talk of fat cats and selling off the family silver. Realists might prefer to look at the evidence, and the ambitious UK programme has delivered plenty of that over the years. 

There is no reason for a government to own Pickfords, but the calculus of privatisation is more subtle when it comes to natural monopolies — markets that are broadly immune to competition. If I am not satisfied with what Pickford’s has to offer me when I move home, I am not short of options. But the same is not true of the Royal Mail: if I want to write to my MP then the big red pillar box at the end of the street is really the only game in town. 

Competition does sometimes emerge in unlikely seeming circumstances. British Telecom seemed to have an iron grip on telephone services in the UK — as did AT&T in the US. The grip melted away in the face of regulation and, more importantly, technological change. 

Railways seem like a natural monopoly, yet there are two separate railway lines from my home town of Oxford into London, and two separate railway companies will sell me tickets for the journey. They compete with two bus companies; competition can sometimes seem irrepressible. 

But the truth is that competition has often failed to bloom, even when one might have expected it. If I run a bus service at 20 and 50 minutes past the hour, then a competitor can grab my business without competing on price by running a service at 19 and 49 minutes past the hour. Customers will not be well served by that. 

Meanwhile electricity and phone companies offer bewildering tariffs, and it is hard to see how water companies will ever truly compete with each other; the logic of geography suggests otherwise. 

All this matters because the broad lesson of the great privatisation experiment is that it has worked well when competition has been unleashed, but less well when a government-run business has been replaced by a government-regulated monopoly. 

A few years ago, the economist David Parker assembled a survey of post-privatisation performance studies. The most striking thing is the diversity of results. Sometimes productivity soared. Sometimes investors and managers skimmed off all the cream. Revealingly, performance often leapt in the year or two before privatisation, suggesting that state-owned enterprises could be well-run when the political will existed — but that political will was often absent. 

My overall reading of the evidence is that privatisation tended to improve profitability, productivity and pricing — but the gains were neither vast nor guaranteed. Electricity privatisation was a success; water privatisation was a disappointment. Privatised railways now serve vastly more passengers than British Rail did. That is a success story but it looks like a failure every time your nose is crushed up against someone’s armpit on the 18:09 from London Victoria. 

The evidence suggests this conclusion: the picture is mixed, the details matter, and you can get results if you get the execution right. Our politicians offer a different conclusion: the picture is stark, the details are irrelevant, and we metaphorically execute not our policies but our opponents. The pendulum swings — but shows no sign of pausing in the centre.

The Air-India privatisation: Privatisation is not reform

Kannan Kasturi in The Economic and Political Weekly

The decision to privatise Air India comes at a time when the government’s “reform” credentials are being questioned by big business. All information publicly available points to a continuing improvement in the performance of the airlines. Between 2011–12 and 2015–16, the last year for which official financial results are available, the airline showed a steady improvement in terms of its operational profit/loss as well as its passenger load factor. The corporate business press is lauding the government’s privatisation decision, hailing it as the resumption of “reforms” which has come to mean more disinvestment and privatisation. It is hard to understand how mismanaging public assets and then selling them is “reform.”

The government appears to be on the fast track to privatise Air India (AI), the country’s flag carrier airline with the union cabinet giving its approval soon after a recommendation from the Niti Aayog. The chief executive officer (CEO) of the NITI Aayog revealed that it took only 15 days to come up with the report recommending total privatisation of the carrier. The Aayog did not see any need to consult the stakeholders of AI—employees, management or even the Ministry of Civil Aviation (MCA).

The last time a plan for privatisation of India’s public sector airlines had been mooted—only to be quickly abandoned—was during the tenure of the National Democratic Alliance (NDA) government of 2000–04 (PAC 2014: 154). The years following this were extremely traumatic ones for both the Indian Airlines and AI and after their merger in 2007, also for the merged entity, with a rapid deterioration of its finances.

In April 2012, the government signed a 10-year restructuring plan with the AI. Since then, as required by the plan, it has been continuously monitoring the performance of the airline. Repeated statements by the MCA in Parliament over the years, the last as recently as on 9 March, have testified that the government is largely satisfied that the AI is progressing as per the turnaround plan (MCA 2017a). Against this backdrop, the Minister of Finance Arun Jaitley’s highlighting of AI’s debt and market share as reasons to proceed with its privatisation, is to say the least, curious.

So what caused AI’s finances to deteriorate rapidly till 2012?

The Making of a Crisis

AI and Indian Airlines had been running profitably till 2005–06. However, their future had already been compromised by then.

During the period 1998–2004, no new planes were ordered for AI or Indian Airlines. This was at a time when competition was increasing from private airlines which were rapidly expanding their fleet. The NDA government was keen on privatising Indian Airlines and did not take decisions on the proposals for fleet expansion by Indian Airlines and AI (PAC 2014: 141, 154).

Fleet expansion proposals were finally approved by the government (now of the United Progressive Alliance—UPA) in 2005–06. The orders for new aircraft would have been large ones considering that they came after a long interval. However, even here, the government interfered with the erstwhile AI to its detriment. An AI (pre-merger) board approved proposal for 28 aircraft in January 2004 which was revised to 68 aircraft by November 2004! The total estimated cost of the aircraft on order by the two airlines was over ₹41,000 crore and the only equity infusion planned was ₹325 crore for Indian Airlines. The acquisition was to be funded by debt to be repaid through revenue generation (CAG 2011: viii).

With the two airlines in a precarious situation, the government in its wisdom carried out their merger in 2007 at one stroke. The unions representing airline workers and staff were not consulted. From all accounts, it appears that it was an ill-thought-out act for it would have been difficult to find synergy in the two organisations. The two airlines flew different types of planes and hence the skills of pilots and engineers were different. They had different ticketing systems, and a different organisational culture. The merger imposed huge immediate financial costs and severely affected the morale of the employees.

Between 2007–08 and 2012, AI chalked up increasing losses each year. This along with loans taken to pay for the 111 planes on order added up to a huge debt. By April 2012, when the government finally signed on a turnaround plan for AI, the annual operational loss of the airline had increased to around ₹5,000 crore and its accumulated debt had reached nearly ₹43,500 crore. It was then operating on a capital base of ₹3,345 crore (AI 2012).

Even while the AI was struggling with aircraft shortage, the government went ahead and increased bilateral entitlements (including interior points of call in India) with West Asian countries much beyond the dictates of mutual traffic. At that time, the AI was not even able to utilise its existing quota on what were its most profitable routes. The West Asian carriers used sixth freedom traffic rights (the right to fly from one foreign country to another foreign country after stopping in one’s own country) to transport people from India to Europe and the United States (US) via their West Asian hubs, eating into AI’s share of passenger traffic in/out of India to these countries (CAG 2011: xii). The lack of planes to fly within India resulting from the delay in ordering new aircraft also had an effect on the AI’s passenger share within the country. The national carrier’s share of domestic passengers dropped from 23.1% in 2005–06 to 13% in 2011–12 (DGCA 2017).

Work in Progress

As part of the turnaround plan, the government agreed to restructure some of AI’s debt to reduce the interest burden and also infuse capital to cover the cost of new aircraft. This was however conditional on AI meeting specific performance targets every year. The infusion of capital, had it happened immediately, would have helped it in its turnaround initiatives. Instead, the government went for piecemeal recapitalisation on an uncertain schedule.

Subsidiaries were created for maintenance repair and overhaul (MRO) and ground handling services. An old criticism of AI was that it employed too many people and hence was inefficient. With the creation of the subsidiaries, the manpower employed per aircraft became comparable to other private airlines.

Between 2011–12 and 2015–16 (financial years), the last year for which official financial results are available, the airline showed a steady improvement in terms of its operational profit/loss as well as passenger load factor—the percentage of seats on offer that were filled. In 2015–16, the airline made a small operational profit, two years in advance of the turnaround milestone. Its low cost international airline subsidiary, Air India Express and its ground and cargo handling services company, AISATS also made profits (Table 1).

AI’s financial results for 2016–17 are not officially available but indications are that there will be a significant improvement over the previous financial year in EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization) (Ghosh and Ghosh 2017). In answers to questions raised in the Lok Sabha, the MCA stated that AI was expected to improve its revenues in 2016–17 by 10%, revenue passenger km (RPKM) by 6.8% and passenger load factor by 6.2% (MCA 2017b). The provisional estimate for 2016–17 (financial year) was an operational profit of ₹1,086 crore and a net loss of 1,989 crore (MCA 2016a). Though AI continues to make a net loss because of interest outgo on debt which in 2015–16 was about ₹4,000 crore, the secretary, civil aviation, went on record in October 2016 to state that he expected a net profit by 2018–19, ahead of the turnaround plan which projects net profits only by 2021–22 (Mishra 2016). All information available publicly points to a continuing improvement in performance.

However, for AI to remain competitive in the longer term, steps need to be taken about its huge debt that has been a drag on the airline. Leaving aside low interest aircraft loans, the outstanding debt is around ₹30,000 crore, 90% of it is from public sector banks and financial institutions (MCA 2016b). The airline has prime real estate assets which it has found difficult to sell because of bureaucratic delays. If the government were to provide assistance in restructuring the debt, selling AI’s real estate assets and speed up infusion of the remaining capital of about ₹6,000 crore promised as part of the turnaround plan, the airline should be on a good wicket.

Chequered History

The basic credo of supporters of privatisation is that the state should withdraw from the provision of all services (and production of all goods) which private corporations are able and interested in providing (producing). The only exception to this would be a “market failure” which render private players incapable of providing (or unwilling to provide) these services. The argument in support of such a belief is that state-controlled enterprises cannot function as efficiently as private corporations.

How does this argument stand up against the actual performance of India’s airlines over the last two decades?

Several early players such as Damania, Modiluft, Natural Energy Processing Company (NEPC) and EastWest folded up, some under a cloud. Air Deccan, the second largest airline in India in 2007, ran into losses and was ultimately taken over by Kingfisher Airlines. Kingfisher became defunct after borrowing ₹7,000 crore from public sector banks. Sahara was taken over by Jet Airways. Spicejet went close to bankruptcy in 2014–15 stopping operations and stranding passengers without notice and has come back only after a large equity infusion from a promoter.

In 2003–04, before the emergence of competition from low cost carriers, Jet Airways accounted for 44% and the public sector airlines together 43% of domestic passenger shares (DGCA 2017). An IMRB survey in October 2004 rated the Indian Airlines as the “most preferred airline”, above Jet (Sen 2009). The low cost carriers had a huge effect on the full service carriers of that period—IA (AI), Jet and Kingfisher. Kingfisher became bankrupt in 2012. Jet was able to survive only after equity infusion by Etihad of Abu Dhabi in 2013. The government appears to have played a role in the rescue by increasing the bilateral entitlements of Abu Dhabi (the number of passenger seats each way between India and Abu Dhabi), which coincided with the Jet–Etihad deal (Phadnis 2013). In 2017 till May end, Jet’s share of domestic passengers was 15.4% and AI’s was 13.3%, the rest being taken by low cost carriers (DGCA 2017). Jet and Indian Airlines (now Air India) have had a similar fall in share of passenger traffic within India after the entry of low cost carriers.

The finance minister has used the low passenger share to deride AI publicly to create public opinion in favour of its privatisation. The fact is that in 2015–16 compared to 2012–13, AI has flown 29% more passengers within India and increased its passenger load to 78.9% from 68.3%. During this period, the AI’s “available seat kilometres” increased only by 6% (DGCA 2017). What this points to is that its passenger share has been limited by the number of aircraft it has available to fly. As the MCA itself revealed in Parliament, there has been no capacity induction into the AI while private airlines have added substantial capacity. Between 2013–14 and 2015–16, AI’s capacity share in the domestic market came down from 17% to 15% (MCA 2016c). Its market share has come down because of decreasing capacity share. The government must own its share of responsibility for this situation.

If the measure of “efficiency” of an airline includes efficient use of capital and labour and providing services without disruption, then looking at the two decades of turmoil in the airline industry, it is hard to accept that private airlines in general have been necessarily managed efficiently.

Unsustainable Debt

Extending the discussion of efficiency to India’s private corporate sector as a whole, it is useful to delve into what has been termed the “twin balance sheet problem.”

Over the years, India’s private corporations have borrowed heavily from banks to grow their businesses. Some of these businesses have failed and others are not generating enough revenue to service their debt. The banks who have lent them money have lost interest income and are in danger of having to write off their debts. It is estimated that three-fourths of all corporate lending could be from public sector banks (Chakravarty 2016).Public sector banks bear the brunt of the bad loan problem.

The government has stonewalled attempts to get the banks to name the bad debtors among private corporations. However, piecing together information from different sources, one finds that more or less all of India’s large industrial houses are involved.

A 2012 Credit Suisse report featured 10 large manufacturing houses—Lanco, Jaypee, GMR, Videocon, GVK, Essar, Adani, Reliance (Anil Ambani), JSW and Vedanta—with high levels of debt that they would find hard to service. A follow-up by Credit Suisse in 2015 found that the financial condition of these groups had deteriorated despite their attempts to sell assets to pare debts. These groups accounted for 27% of all corporate loans from the banking system (Sanjay 2015). In August 2016, the government stated in Parliament that the top 10 corporate groups owed public sector banks and financial institutions ₹5.7 lakh crore (PTI 2016). The businesses of these groups span areas extending from military hardware to steel, coal, power, oil and gas, roads, airports, railways and ports.

In June 2017, the Reserve Bank of India (RBI) identified companies of three groups from the list—Lanco, Essar and Jaypee—and nine other companies which together owed ₹1.75 lakh crore to banks to be dealt with under the bankruptcy code. It is estimated that at least half the debt will have to be written off by the banks.

In the telecom sector, the debt of India’s top seven telecom companies—Bharti Airtel, Vodafone, Idea, Reliance Communications, Reliance Jio and Tata Teleservices—increased by 20% in 2016–17 to ₹3.6 lakh crore and all the companies (except for the new entrant Reliance Jio) have problems servicing their debt (Sarkar 2017). The State Bank of India has the largest exposure to the industry and its chairperson has pleaded with the government to help the industry by deferring spectrum payments, providing duty waivers and reducing the goods and services tax (GST) rate in order to prevent its loans from imminently becoming non-performing assets (NPAs) (TNN 2017). While the incumbent operators blame Reliance Jio for their debt servicing problems, the latter points out that these companies were working with insufficient equity, relying too much on debt financing (PTI 2017).

A recent example from the power sector involves three large corporate houses—Tata, Adani and Essar. All of them won competitive bids based on tariff and set up power plants in Gujarat using imported coal. Their contracts have no provisions to link tariff with coal prices and the companies are running at a loss after coal prices increased and are unable to service their debt. The government is reportedly putting together a rescue package where the companies will be brought under state ownership (Dutta 2017).

The above examples do not capture the enormity of the bad debt problem. During the period 2013–15, public sector banks wrote off ₹1.14 lakh crore of debt (Mathew and Narayan 2016). Several additional lakh crore will likely be written off in the coming years. Eventually, the banks will have to be “bailed out” by the government through capital infusion.

The unsustainable debt of so many private corporations across a swathe of sectors periodically requiring government rescue—including debt write-off by public sector creditors—hardly speaks well about the innate superior efficiency of the private sector.

Timing of Privatisation Decision

Why has the government announced the decision to privatise AI—a decision taken in great haste—just at a time when the airline is on the verge of becoming profitable?

The decision comes at a time when the government’s “reform” credentials are coming under question. These “reforms” which were eagerly anticipated by business leaders and foreign investors have got derailed and include making land acquisition easy, relaxing labour regulations for large factories and doing away with the obligations of banks to lend to the “priority sector” (farmers, small businesses, etc). The government’s inability to make a major dent in the “twin balance sheet problem” has severely affected new lending by banks to the private corporate sector. All this has affected the sentiment of business towards the government.

The announcement of the privatisation of the AI, considered a “soft target” by the government, is perhaps aimed at reversing this state of affairs. As a business newspaper editorialised,

(T)he privatization of Air India will boost investor sentiment in a big way as it demonstrates the government’s willingness and ability to take the reforms process forward. (Mint 2017)

Case against Privatisation

Private investors are interested in the AI because it is an operationally profitable airline with a large fleet of mainly new aircraft, a profitable low cost international carrier like Air India Express, a profitable ground handling services venture, valuable immovable assets in land, offices, hotels and hangers; skilled human resources in the form of a large number of pilots and engineers; the only MRO set-up in India, prime slots at airports in the country and around the world, membership of Star Alliance, etc. The AI is also the largest Indian carrier of passengers across the country’s borders.

The privatisation of AI is only possible if the government writes off a significant part of its debt. This debt accumulated for the large part until 2012 has acted as a millstone around the airline’s neck and delayed its return to profitability. There are various proposals being mooted to once again restructure AI to make its main business—that of flying passengers—attractive to potential buyers. Whatever restructuring is done, there is no getting away from the fact that its debt has to be written off.

The responsibility for this debt rests squarely with the government and is due to its many omissions and commissions in the past—delayed acquisition of aircraft, late capitalisation of the airline, interference in decisions related to aircraft acquisition, the ill-thought-out merger of the AI and Indian Airlines and not providing a level playing field to the national carrier on international routes.

If the government extends the same benefits to the public sector airline (that it wants to for a possible private owner by writing off part of its debt), it will be able to forge ahead. However, given that the airline is close to becoming profitable, it appears that even assistance with restructuring of its debt to public sector banks and sale of its properties will help it to reach profitability and manageable levels of debt.

Publicly owned airlines can also be run efficiently. Singapore Airlines is an example. An efficiently run public carrier can bring stability to air transport services and provide the right competition to private airlines. It can also fulfil objectives that are not dictated by the exigencies of maximising profit—like providing essential coverage to underserved areas or unscheduled services to the Indian diaspora during an emergency— as it does now.

The corporate business press is lauding the government’s privatisation decision, hailing it as the resumption of “reforms” which will consist of more disinvestment and privatisation. It is hard to understand how mismanaging public assets and then selling them is “reform.” Only those who see opportunities for profit in such sales can pretend that these are reforms.

The real reform that India needs is in the manner that public sector enterprises are managed. This reform must ensure at a minimum that there are well-defined policy guidelines for these enterprises available in the public domain, that the enterprises are compensated for costs incurred in implementing specific government policies not in line with their commercial objectives, that there is professional management in place and that this management is shielded from interference from politicians and bureaucrats.

The present government came with the claim of providing “good governance.” There is no reason why this should not extend to the management of public sector enterprises.

Labour party's hypocrisy on Corbyn

George Monbiot in The Guardian


Where are the nose-pegs this time? Those who tolerated anything the Labour party did under Blair tolerate nothing under Corbyn. Those who insisted that we should vote Labour at any cost turn their backs as it seeks to recover its principles.

They proclaimed undying loyalty when the party stood for the creeping privatisation of the NHS, the abandonment of the biggest corruption case in British history, the collapse of Britain’s social housing programme, bans on peaceful protest, detention without trial, the kidnap and torture of innocent people and an illegal war in which hundreds of thousands died. They proclaim disenchantment now that it calls for the protection of the poor, the containment of the rich and the peaceful resolution of conflict.

Those who insisted that William Hague, Michael Howard and David Cameron presented an existential threat remain silent as Labour confronts a Conservative leader who makes her predecessors look like socialists.

Blair himself, forgiven so often by the party he treated as both ladder and obstacle to his own ambition, repays the favour by suggesting that some should vote for Conservatives who seek a softer Brexit. He appears to believe that the enhanced majority this would deliver to Theresa May might weaken her. So much for the great tactician.

Yes, Jeremy Corbyn is disappointing. Yes, his leadership has been marked by missed opportunities, weakness in opposition and (until recently) incoherence in proposition, as well as strategic and organisational failure. It would be foolish to deny or minimise these flaws. But it would be more foolish still to use them as a reason for granting May a mandate to destroy what remains of British decency and moderation, or for refusing to see the good that a government implementing Corbyn’s policies could do.

Of course I fear a repeat of 1983. But the popularity of Corbyn’s recent policy announcements emboldens me to believe he has a chance, albeit slight, of turning this around. His pledge to raise the minimum wage to £10 an hour is supported by 71% of people, according to a ComRes poll; raising the top rate of tax is endorsed by 62%.

Labour’s 10 pledges could, if they formed the core of its manifesto, appeal to almost everyone. They promote a theme that should resonate widely in these precarious times: security. They promise secure employment rights, secure access to housing, secure public services, a secure living world. Contrast this to what the Conservatives offer: the “fantastic insecurity” anticipated by the major funder of the Brexit campaign, the billionaire Peter Hargreaves.


I would love to elect a government led by someone competent and humane, but this option will not be on the ballot paper.


Could people be induced to see past the ineptitudes of Labour leadership to the underlying policies? I would argue that the record of recent decades suggests that the quality of competence in politics is overrated.

Blair’s powers of persuasion led to the Iraq war. Gordon Brown’s reputation for prudence blinded people to the financial disaster he was helping to engineer, through the confidence he vested in the banks. Cameron’s smooth assurance caused the greatest national crisis since the second world war. May’s calculating tenacity is likely to exacerbate it. After 38 years of shrill certainties presented as strength, Britain could do with some hesitation and self-doubt from a prime minister.

Corbyn’s team has been hopeless at handling the media and managing his public image. This is a massive liability, but it also reflects a noble disregard for presentation and spin. Shouldn’t we embrace it? This was the licence granted to Gordon Brown, whose inept performances on television and radio as prime minister were attributed initially to his “authenticity” and “integrity”. Never mind that he had financed the Iraq war and championed the private finance initiative, which as several of us predicted is now ripping the NHS and other public services apart. Never mind that he stood back as the banks designed exotic financial instruments. He had the confidence of the City and the billionaire press. This ensured that his ineptitude was treated as a blessing, while Corbyn’s is a curse.

I would love to elect a government led by someone both competent and humane, but this option will not be on the ballot paper. The choice today is between brutal efficiency in pursuit of a disastrous agenda, and gentle inefficiency in pursuit of a better world. I know which I favour.

There is much that Labour, despite its limitations, could do better in the next six weeks. It is halfway towards spelling out an inspiring vision for the future; now it needs to complete the process. It must hammer home its vision for a post-European settlement, clarifying whether or not it wants to remain within the single market (its continued equivocation on this point is another missed opportunity) and emphasising the difference between its position and the extremism, uncertainty and chaos the Conservative version of Brexit could unleash.

It should embrace the offer of a tactical alliance with other parties. The Greens have already stood aside in Ealing Central and Acton, to help the Labour MP there defend her seat. Labour should reciprocate by withdrawing from Caroline Lucas’s constituency of Brighton Pavilion. Such deals could be made all over the country: as the thinktank Compass shows, they enhance the chances of knocking the Tories out of government.

Labour’s use of new organising technologies is promising, but it should go much further. No one on the left should design their election strategy without first reading the book Rules for Revolutionaries, by two of Bernie Sanders’ campaigners. It shows how a complete outsider almost scooped the Democratic nomination, and how the same tactics could be applied with greater effect now that they have been refined. And anyone who fears what a new Conservative government might do should rally behind Labour’s unlikely figurehead to enhance his distant prospects.

The choice before us is as follows: a party that, through strong leadership and iron discipline, allows three million children to go hungry while hedge fund bosses stash their money in the Caribbean and a party that hopes, however untidily, to make this a kinder, more equal, more inclusive nation. I will vote Labour on 8 June, and I will not hold my nose. I urge you to do the same.

Whatever you think of him, Donald Trump is right on TPP and TTIP

Youssef El-Gingihy in The Independent

In a YouTube video of policy proposals released this week, President-elect Trump announced that the US would withdraw from the Trans-Pacific Partnership. This trade agreement encompasses the major economies of the Pacific Rim with the notable exclusion of China. Other policies included a hodge-podge of climate change denial through promoting fracking and coal, deregulation, infrastructure spending and measures against corporate lobbying.

There are mounting concerns about xenophobia following Trump's victory. The appointments of Breitbart's Stephen Bannon as chief strategist, the anti-immigration Jeff Sessions as attorney general, Mike Pompeo as CIA director (in favour of bulk data collection) and General Michael Flynn as national security advisor would appear to reinforce Trump's targeting of Hispanics, Muslims and other minorities.

Yet amid all this soul-searching, the key question liberals should be asking is why authoritarian nationalism is spreading across the West. The answer is relatively simple. Neoliberal globalisation has left millions behind both in the advanced economies and the global south over several decades. Wealth has been siphoned to the top. The economic fallout post-2008 has seen inequality widening, with many falling into poverty. The effects of austerity on southern Europe are a social catastrophe.

The liberal and social democratic parties previously representing working-class constituents have abandoned them and are captured by corporate power. The Democratic party under the Clintons and Obama as well as New Labour under Blair and Brown were emblematic of this process. The result has seen millions of voters turn to candidates positioning themselves as anti-establishment. Hence the success of the SNP, Ukip, Brexit and now Trump.

Free trade agreements are at the heart of the matter. Negotiations have taken place behind closed doors with corporate lobbyists. Transparency has been minimal. It is exactly this kind of undemocratic, technocratic managerialism which is prompting a backlash against elites. It is the same technocratic managerialism that saw the troika of the European Central Bank, the European Commission and the IMF impose unrelenting misery on southern Europe, rendering Greece as expendable. The troika even issued memoranda to be rubber-stamped by national parliaments.

Both the EU-US trade agreement, or Transatlantic Trade and Investment Partnership (TTIP), and the Trans-Pacific Partnership (TPP) are sold as reducing barriers to trade through harmonisation of regulations thus increasing growth. But harmonisation effectively means a race to the bottom with the lowest common denominator regulations being adopted. In fact, there are not many barriers left and the question is more of how growth is distributed. It is now clear that trickle-down economics is a myth.

Trump has stated that he is against TTIP and TPP, and may even reverse the North American Free Trade Agreement (Nafta). Many people do not understand what these trade agreements mean so let me spell it out. They promote trade liberalisation. This essentially means opening up public services to corporate takeover. They would likely make public or state ownership difficult. They would restrict the financial tools available to countries to regulate banks. They would also limit their ability to impose capital controls.

They would lock in privatisation through Investor-State Dispute Settlement clauses. This means that multinational corporations could sue governments if they took steps that harm their profits or even the future expectation of profits. This would take place through private, secretive courts rather than the normal law courts. In fact, precedents have already seen tens of countries sued by corporations for measures taken in the public interest.

The NHS is a good example. It is currently being privatised, paving the way for a private health insurance system. TTIP would mean that if a future UK government took steps to reverse this then they might well be sued. In effect, this acts as a deterrent against government actions harming corporate interests. This would apply not just to healthcare but to all public services, from education and broadcasters such as the BBC to public transport and utilities.

These trade agreements would also enforce enclosure of the commons through intellectual property rights. So drug patents would be extended to combat cheaper generic medicines. Patenting of the human genome would be enforced. Farmers might have to buy seeds from corporations. I don’t know about you, but that sounds like a dystopian world to me.

Neoliberal globalisation is not some irresistible force of nature. Economic protectionism may not exactly be progressive but the current status quo of wage stagnation and falling living standards is unsustainable. If steps are not taken to remedy the damaging effects of neoliberalism then the backlash will only intensify, likely leading to rising nationalism, fascism and global conflict.

Feet first, our NHS is limping towards privatisation

Polly Toynbee in The Guardian

A fish rots from the head, but the NHS may be rotting from the feet. Podiatry is not up there in the headlines, yet what’s going on in that unglamorous zone is an alarming microcosm of the downward path of the health service. This is a story of the NHS in England in retreat and the private sector filling the vacuum.

You know the big picture from the ever-worsening monthly figures: deteriorating A&E, ambulance and operation waiting times, and a steep rise in bed-blocking. As debts pass £2.5bn, the NHS feels the tightening financial tourniquet.

Now look at it through the prism of just one small corner, as seen from the feet up. Every week 135 people have amputations because diabetes has caused their feet to rot: their circulation goes and then the sensation in their feet, so they don’t notice damage done by rubbing shoes, stubbed toes or stepping on nails. Minor injuries turn into ulcers that if left untreated turn gangrenous, and so the toes, then the foot, then the leg are lost – horrific life-changing damage. Numbers are rising fast, with nearly three million diabetics. The scandal is that 80% of these amputations are preventable – if there were the podiatrists to treat the first signs of foot ulcers. But the numbers employed and in training are falling.

In his surgery, the head of podiatry for Solent NHS Trust, Graham Bowen, is unwrapping the foot of a lifelong diabetic to reveal a large missing chunk of heel, a great red hole nearly through to the bone. This man has already had some toes amputated. He has been having treatment with maggots, bandaged into his wound to eat the dead skin and help healing – and he is slowly improving. Everyone Bowen sees now is at similarly high risk. Small ulcers, incipient ulcers, the ones that need to be caught early (and cheaply) no longer get NHS treatment. “On the NHS we’re essentially firefighting the worst cases now,” says Bowen. “We are going through our lists and discharging all the rest of our patients.”

FacebookTwitterPinterest ‘On a 15-minute visit carers can’t check feet.’ Photograph: Andrew Bret Wallis/Getty Images

But not even all these acute patients get the same optimal treatments, due to the vagaries of the 2012 NHS Act. Solent, a community trust that covers mental health and a host of other services, is used by five different clinical commissioning groups (CCGs), including Southampton, Portsmouth and West Hampshire. Each has its own criteria for what it will pay for, and each is toughening those criteria. Depending on their address, some patients get the very best, others only get what their cash-strapped CCG pays for.

You need to know about diabetic feet to understand the difference in treatments: the conventional and cheapest treatment is a dressing and a removable plastic boot, and telling patients to keep their foot up for months. But patients who can’t feel their feet tend to take off the boot and hobble to make a quick cup of tea. “Ten minutes of putting pressure on the ulcer undoes 23 hours of resting it,” Bowen says, so it takes 52 weeks on average to heal ulcers that way. For £500 extra, a new instant fibreglass cast saves any pressure on ulcers and cures them within eight weeks.

Although the National Institute for Health and Care Excellence says this total-contact cast is the gold standard, most of Bowen’s CCGs won’t pay for it. I watched him putting one on a patient in under half an hour: after nine weekly replacements, that ulcer would be completely healed. For every 10 of the new casts, one amputation is prevented – and each amputation costs the NHS £65,000. Such is the madness of NHS fragmentation, divided between multiple commissioners and providers, all in serious financial trouble, that no one spends a bit more now for others to save later, even when the payback is so quick.

This clinic lost four podiatry posts to save money: though diabetic numbers soar, its budget has been static for five years. “Doing more for less,” he says with the same weary sigh you hear echoing through the NHS. As Bowen goes through the clinic’s books removing all but the most acute cases, he turns away diabetics whose problems should be caught early. He turns away others he used to treat: the old and frail who have become immobile due to foot problems; the partially sighted or people with dementia who have poor home care. On a 15-minute visit carers can’t check feet and find out if they are the reason someone doesn’t get out of bed, toes buckled in, leaving them needlessly incapacitated and heading for residential care sooner than necessary.

What happens to those he takes off his books? “They have to go private, if they can afford it. If not, then nothing.” He used to send them to Age UK, but lack of funds shut that service. Only 5% of podiatry is now done by the NHS so Bowen has set up TipToe, a private practice attached to his NHS clinic. It’s not what he wants, but it keeps prices low and all proceeds go to the NHS.

Alarm bells should ring here: how silently the NHS slides into the private sector. Labour leadership contender Owen Smith has flagged up his team’s research showing private practice has doubled since 2010. Now that many CCGs only pay for one cataract, how many go private for the second eye? As the Guardian’s health policy editor, Denis Campbell, has asked, how many more vital treatments will go this way?

Podiatry is the ground floor of the NHS hierarchy. The profession reckons the NHS in England needs 12,000 practitioners but only has about 3,000 – and that’s falling, despite so many high-risk diabetics needing weekly appointments. Next year podiatry trainees, like nurses, will no longer receive state bursaries, so fewer will apply. They tend to be older, with families, unable to take on a £45,000 debt for a job paying around £35,000 per year. Already student places have been cut by nearly a quarter in five years. Most of the 7,000 amputations a year are preventable. A shocking statistic: half of those who undergo amputations will die within two years.

Only in the details of what’s happening on the frontline can we understand the daily reality of Britain’s shrinking state. Step back and ask how it can be that a country still growing richer can afford less quality care than when it was poorer? Is that the country’s choice? As the NHS slides into the private sector, here is yet another public service in retreat.

Schoolmates used to ask me about Indian trains. I can now confirm British ones are worse

Nish Kumar in The Guardian

Protesters against Southern Rail in London last month: a 2015 poll revealed nearly 60% of the public supports public ownership of the railways. Photograph: NurPhoto/Getty Images





Last week Southern Rail staff went on strike, leaving thousands of commuters facing a slightly improved service. Southern’s non-stop calamities this summer have added support to the idea of renationalisation. This debate is something I watched with great interest. I’m a standup comedian who can’t drive. I have never learned. I don’t trust my hand-eye coordination. You’re looking at someone who once dropped a cricket ball on to his own head during a routine catching practice; I don’t think it’s a great idea to have me in control of a high-speed metal death robot.

So I rely on the train system in this country. And I can tell you from firsthand experience that our train system is a mess. Carriages are full of unhappy travellers packed together like sardines, who have inexplicably paid for the privilege of being incarcerated. Periodically, everyone has to flee for cover, either by lying across the laps of the passengers lucky enough to have a seat, or by climbing into the luggage racks on the ceiling to allow the optimistically named “buffet” cart to pass through just in case anyone wants to spend £50 on a packet of crisps or a single fruit pastille.

And it’s not cheap, either. Train fares have increased way out step with inflation, meaning the percentage of our salaries we spend on train fares is now six times higher than many of our European counterparts – and that’s if you plan ahead. If you want to travel from London to Manchester, and have not booked a ticket, be prepared to sell a kidney or stay at home. Frequent train travellers have to plan ahead, booking months in advance to avoid massive fares. But there is still the risk that you will turn up on the day and the train will have lost its seat reservations for no apparent reason, and you will end up wedged between the door and the bathroom. Other than a music festival, a train is the only thing you might have to buy a ticket for and still end up spending an hour standing next to a toilet.

I feel sorry for the commuters affected by the Southern Rail chaos, especially because I hail from Croydon and have experienced that mayhem firsthand. As if being from Croydon wasn’t bad enough. When I was growing up, and periodically going to India to visit my grandmother, my classmates would often ask me about the trains. There was an exotic fascination with people sitting on top of the carriages. v

I was once ejected from a Southern train for sitting in first class when the train was full. I informed the guard that, as the section was empty and I would have happily moved for people with first-class tickets, I didn’t see what the problem was. He said: “It’s far more serious than that – you have to keep that area clear in case people in wheelchairs get on.” I apologised and said: “I didn’t realise people in wheelchairs were allowed in that section.”

He replied: “Yeah – only if they have a first-class ticket. Otherwise we kick them off as well.”

Virgin Trains East Coast staff to strike in row over jobs

It’s interesting how far we have moved on in our attitude to renationalisation. In the 1980s and 1990s, we consistently elected governments that essentially based their economic policies on the boardgame Monopoly, where public services were flogged off to the highest bidder. We were in thrall to Rich Uncle Pennybags, the moustachioed, monocle-wearing mascot we now call Mr Monopoly. (This is clearly a terrible name, by the way. It’s like me changing my name to Grandpa Nishy Mouthjoker.)

But there has been a change in public opinion, if not in government policy. A 2015 poll revealed nearly 60% of us support public ownership of the railways. Last year, the East Coast service was reprivatised. The government had taken over the running of the line after the collapse of the previous private ownership and, in public control, it had become profitable to the Treasury and reported positive customer satisfaction. It is now run by Virgin Trains and, on Friday morning, staff announced strike action over two weekends in August. This means that I can’t get back to London from the Edinburgh Fringe. Once again, comedians are punished. Truly we are the most oppressed people in society.

Frustration with the trains is inevitable, given the daily difficulties commuters face. In France, a near fully publicly owned rail system managed to give its passengers fares far lower than the UK for almost exactly the same amount of public rail subsidy between 1996 and 2010. Furthermore, the French government has invested profits in private rail companies, which then invest in companies that run British trains. Including – surprise! – Southern. As we haemorrhage money, we are lining the pockets of Riche Oncle Sacs d’Argent.

Nationalisation might seem like the preserve of old-fashioned, duffel-coat-wearing, Red-Flag-singing socialists, but it also appears to be economically efficient. Labour adoped renationalisation as a policy at its 2015 autumn conference, and Jeremy Corbyn is trying to make this a key platform in his plans to be the next prime minister. Corbyn might be on to a winner here. Time will tell. Anyway, I had better head off – I’ve got to start booking some train tickets for October 2025.

Southern is a story of rail failure. But the real agenda is to crush the unions

This is the most farcical privatisation even by the comedic standards of British railways – and the aim is to defeat one of the last holdouts of organised labour

 

Illustration by Nate Kitch


 Aditya Chakrabortty in The Guardian


You work in an office, study at a further education college, want to visit your nan in her care home. Whoever you are, wherever you go, you rely on the trains to take you there. Except you can’t rely on them – not at all.

The only thing predictable about the service is that it’s always awful: the train you want is odds-on to be late or cancelled. If the next one is running, it’s so crammed you can’t get on. Every commute brims over with aggro. Wedged in overcrowded carriages, fellow passengers suffer panic attacks. The local newspaper reports how other commuters have missed work so often, they’ve lost their job; how students have missed exams or holidaymakers haven’t made flights.

Rail minister resigns as Southern commuter chaos continues



You read about a single mother forced to give up being a lawyer in London because dodgy trains mean she can never get home to put her son to bed. And you and everyone else are paying thousands each year for this shambles. To stand for dozens of miles and have extra hours, needless anxiety and gratuitous misery added on to your daily commutes.

If any of this sounds like you then my commiserations – for you are obviously a Southern Railway passenger.

At any other time, this summer’s chaos on the trains would have dominated the front pages. Even amid the turbulence of Brexit, it is still producing political ructions as big as the 50-foot hole that opened up under a south London track yesterday. This month, the transport select committee held an emergency sessionto find out why the service is in meltdown. Last week MPs staged an urgent debate in Westminster Hall, where they laid into Southern as a “joke”, “awful”, “terrible” and “rubbish”. Then they lambasted the government.

In turn, Claire Perry admitted she was “ashamed to be the rail minister”, but vowed to try to fix the situation “until I am kicked out”. The very next evening she quit. The new transport secretary, Chris Grayling, spent Monday hurriedly holding meetings on Southern, which is “top of [his] priority list”.

Britain is hardly short of political crises at the moment, but Southern surely counts as one. In an era of private-sector failure, this is one of the most extensive. Consider: Southern runs among the most economically important train services in the country. It manages 156 stations, covers 414 miles of track, and is responsible for around 600,000 journeys each day.

And it’s part of the largest train franchise in Britain, Govia Thameslink. Also known as GTR – majority owned by the Go Ahead group – it ferries commuters from across the south coast into London Bridge and Victoria. It takes tourists and business travellers to Gatwick and Luton airports. Its empire stretches from Peterborough to Tonbridge to Bognor Regis and Brighton. In a country that has, stupidly, bet everything on London, GTR is utterly crucial to the national economy.

And it does an appalling job. It cancels more trains than all the other rail firms in Britain put together. It boasts the worst record on significant lateness. It is the worst performing train operator of the lot. And it shows little sign of improving.

Its response last week to the cancellation of so many Southern trains was to issue a new timetable, removing one in six of its trains. Of all the oddities thrown up by rail privatisation, this must rank among the oddest: a train company in the business of running fewer trains.

Southern rail passengers protest at Victoria station, London, July 2016. Photograph: Matthew Chattle/Rex/Shutterstock

Perhaps the sheer stretch of GTR’s network is part of the problem, even though Perry claimed just two years ago that that would help it “deliver a step-change on key routes”. Running services into London Bridge during a botched overhaul hasn’t helped. And going by the evidence GTR has given to parliament, it also inherited investment-starved services. But GTR’s boss Charles Horton comes from failed franchise Connex. In his first interview in his current job, he advised passengers forced to stand to take a later or slower service. And with staff morale at rock bottom he has ended up in a huge clash with the unions.

Southern has been crippled by industrial action. Horton also regaled MPs with stories of “sick-note strikes”, although David Boyle – whose blogs on the Southern mess have become a must-read – has found no evidence to back that up. Boyle instead discovered that employees are so fed up they will no longer do voluntary overtime – leaving the company with too few staff for its advertised services.

But the fundamental problem must be the most farcical privatisation even by the comedic standards of British railways. Because this is privatisation in name only. GTR is paid billions by the government – which then takes their ticket receipts and even refunds customers if the trains are delayed. This makes it unlike any other train company in Britain – and gives GTR no incentive to attract more customers or to stop annoying them. In effect, Horton and his executives are government agents paid lavishly for failing to provide a service.

‘Southern cancels more trains than all the other rail firms in Britain put together.’ Photograph: Alicia Canter for the Guardian

We have a transport company that can’t really transport, and vast management fees paid to executives who clearly can’t manage. And the government acts as an apologist for a private company that’s meant to be providing a public service. Meanwhile, no apologies are forthcoming – in fact the boss of Go Ahead, David Brown, has just seen his annual pay soar above £2m, and the dividend payout to his shareholders has jumped to £37m. Someone is making a lot of money out of grotesque failure.

This is not just an issue for southern commuters, though – it’s a montage of everything wrong with business in Britain. Rather than strip GTR of its franchise, Tory ministers have instead made its conditions less onerous. Brown should be hauled in front of parliament to explain the chaos. Instead, he acts like an absentee landlord while officials at the Department for Transport say they couldn’t run the service as well as Southern does.

The question is why the government is going so easy on a failed train company. One answer comes from GTR’s dispute with the unions. The train firm wants to bring in driver-only trains, without guards to open and close the doors. The idea commands enthusiasm in Whitehall. It would certainly make rail management cheaper, if not safer.

But to strip trains of conductors requires the crushing of one of the last holdouts of organised labour. That’s not my extrapolation – it comes from DfT director Pete Wilkinson, who a few months ago told a public meeting, “We have got to break them [union members]. They have all borrowed money to buy cars and got credit cards. They can’t afford to spend too long on strike and I will push them into that place.”

Civil servants are supposed to be impartial, but this one wants to drive trade unions “out of my industry”. Mind you, Wilkinson has worked in Whitehall as well as in the City. He lives in Vienna but commutes to Britain. He’s a gamekeeper comfortable setting policy for the poachers. And he and his colleagues appear to be using Southern to take on the unions, in much the same way Thatcher used Ian MacGregor and the National Coal Board to break the miners.

An industrial dispute by proxy, a dysfunctional privatisation pushed by ideologues: our railways are in for an 80s revival for all the wrong reasons.