LABOUR NATIONALISES THE RISK AND PRIVATISES THE REWARD IN £100M NATIONAL EXPRESS BAILOUT
Birmingham Local Conservatives have accused Labour of putting ideology ahead of common sense after taxpayers were left to pick up the risks and liabilities of National Express West Midlands ahead of Labour’s move to bus franchising.
The West Midlands Combined Authority is taking over National Express West Midlands after its parent company Mobico decided to exit the region’s deregulated bus market.
The deal values the assets being transferred at around £102 million and will see the public sector take control of the business, its operations and employees.
Birmingham Local Conservatives say Labour politicians portraying the intervention as a triumph for public ownership are disguising the reality: Labour has created a situation in which taxpayers are being forced to buy a business largely in order to wind it down as franchising is introduced.
Under Labour’s franchising plans, the Combined Authority will ultimately specify routes, fares and timetables and contract private operators to run the services.
That means taxpayers are taking on the buses, staff, infrastructure and liabilities of the existing National Express operation immediately before much of the operation is replaced by contracts which National Express itself will be free to bid for.
Mobico itself says the transaction “significantly de-risks” the company from the possibility of losing market share during franchising and provides a clean transfer of its operations, employees, cost base and other liabilities.
Cllr Robert Alden, Leader of Birmingham Local Conservatives, said:
“Labour politicians are desperately trying to spin this bailout as some great victory for municipalisation. The reality is rather less glamorous: taxpayers are spending a huge amount of money taking on a business, its costs and its risks just before the existing operating model is dismantled anyway.
“I don’t blame National Express for acting in the interests of its shareholders. It is a private company and that is precisely what people would expect it to do. The question is why Labour has engineered a situation which means handing so much of the risk to the taxpayer instead".
“Labour has simultaneously pushed up the cost of employing people, handled the transition to franchising in a way which encouraged the dominant operator to de-risk its business, and then presented taxpayers with the bill when the entirely predictable consequences arrived.
“They have nationalised the risk while leaving the private sector able to compete for the reward.”
The Conservatives say the arrangement becomes even harder to justify when National Express is expected to be able to compete for contracts under the future franchised network.
Having transferred its existing operations, employees, cost base and liabilities to the public sector, National Express can potentially bid to operate services using buses and infrastructure ultimately provided or backed by taxpayers.
Birmingham Local Conservatives warn this could also distort the market against smaller operators who have not had the benefit of transferring their existing commercial risks to the public sector.
Cllr Timothy Huxtable, Birmingham Local Conservative transport spokesman, said:
“This isn’t some great act of municipalisation. Labour isn’t buying the buses so that the public sector can permanently operate them. It is buying an entire bus company as a bridge to a franchising system in which private companies will once again be paid to operate the routes.
“So taxpayers take the risk now and then taxpayers pay operators to run the services afterwards.
“Meanwhile National Express has been allowed to de-risk ahead of franchising and can potentially return to bid for routes without carrying many of the overheads and liabilities it previously faced.
“Smaller operators won’t necessarily enter that competition from the same position. Labour needs to explain how this creates the competitive market that franchising was supposed to deliver rather than handing the incumbent a taxpayer-subsidised head start.”
Birmingham Local Conservatives say the saga is particularly galling for Birmingham taxpayers given the history of public spending on National Express infrastructure in Perry Barr.
As part of the regeneration of Perry Barr ahead of the 2022 Commonwealth Games, the former National Express depot was moved to release land for redevelopment, with substantial public money going towards replacement infrastructure. Now the taxpayer is buying it back again!
Now the move towards franchising means the public sector is once again having to fund the depot infrastructure required to operate Birmingham’s bus network.
WMCA has already approved almost £20 million for a new East Birmingham bus depot, with Birmingham City Council required to contribute at least £14.93 million towards its construction.
That follows WMCA’s acquisition of the Acocks Green depot and West Bromwich depot bus park for more than £8.1 million, plus approximately £900,000 of remedial works. Remarkably, those properties were then approved to be leased back to National Express with an initial 12-month rent-free period.
Cllr Alden said:
“Birmingham taxpayers could be forgiven for wondering how many times they are expected to pay for bus depots.
“Public money helped move National Express out of its old Perry Barr depot for the Commonwealth Games regeneration. Now taxpayers are putting millions more into depot infrastructure as Labour restructures the bus market yet again.
“At every stage the commercial operator has understandably protected its own interests. At every stage it is the taxpayer who seems to be asked to write another cheque.
“This isn’t evidence that the private sector has failed but evidence of politicians repeatedly making expensive decisions without thinking through what comes next.”
The intervention also comes after Labour Government decisions significantly increased employment costs for businesses.
Employer National Insurance increased to 15%, while the threshold at which employers begin paying it was cut from £9,100 to £5,000. The National Living Wage has subsequently risen to £12.71 an hour.
For labour-intensive businesses such as bus operators, those decisions inevitably increase the cost of providing services.
Cllr Huxtable added:
“Labour cannot keep loading costs onto employers, creating uncertainty through a ham-fisted transition to franchising and then acting surprised when a commercial company decides it would rather hand the risk back to the public sector.
“National Express is doing what its directors are supposed to do: looking after the interests of the company and its shareholders.
“It is Labour politicians who are supposed to be looking after taxpayers.
“Instead of asking whether there was a cheaper and less risky way of getting from the existing network to franchising, they have reached instinctively for public ownership and a taxpayer-funded bailout.
“That is ideology over common sense and once again Birmingham and West Midlands taxpayers are being left carrying the risk.”
Birmingham Local Conservatives are calling for the full financial case behind the acquisition to be published, including the liabilities being transferred to the public sector, the expected total cost of maintaining and replacing the acquired fleet and infrastructure, and an assessment of whether alternative transitional arrangements could have protected bus services without transferring the same level of commercial risk to taxpayers.
They are also calling for clear safeguards to ensure the forthcoming franchising process provides a genuinely level playing field for smaller operators competing against National Express and other major bus companies.
