Jeremy Corbyn

Sorry Corbyn, consumers aren’t as sold on nationalisation as you’d like to think

One of the most remarkable features of the Conservative election campaign was the dog which did not bark.

There was no systematic attempt to undermine Jeremy Corbyn’s wholly implausible economic narrative. Magic Money Tree comments aside, Labour’s economic incompetence was allowed to pass almost unchallenged.

One part of Labour’s economic offer which really did strike a chord with the electorate was the promise to nationalise industries such as rail and water. To anyone with direct experience of the old British Rail or the Post Office (which made you wait six months to get a phone installed) this almost defies belief. But only those over 55 can remember.

The fact is that for a number of years there has been strong and consistent support in surveys for taking industries such as rail into public ownership.

In 2013, for example, the moderate Labour website Labour List commissioned an analysis by the poll company Survation. In terms of rail nationalisation, 42 per cent thought fares would be cheaper, compared to only 12 per cent who thought they would go up. Those believing the quality of the services would improve easily outnumbered those who thought it would get worse, by 38 to 14 per cent. There are many similar examples.

Economists are pretty dismissive of the results of surveys about hypothetical situations or choices. A key foundation of economic theory is the concept of revealed preference, to use the jargon phrase. Individuals are assumed to have reasonably stable tastes and preferences. These preferences are revealed not through answers to hypothetical questions, but through how they actually respond to changes in the set of incentives which they face.

In the National Passenger Survey, for example, 80 per cent of respondents routinely express satisfaction with their journey, compared to fewer than 10 per cent who are dissatisfied. But how does this translate into actual decisions?

Prior to rail privatisation just after the 1992 election, the peak number of passenger journeys made each year was some 1.1bn in the mid-1950s. Faced with rapidly rising road competition, the rail industry saw journeys fall steadily, to a trough of around 750m in the mid-1990s.

After privatisation, massive investment programmes have been carried out and, in the form of the train operating companies, there is now a distinct part of the industry whose priority is the consumer. Journey numbers rose, passing the 1bn mark in 2003, to the current level of 1.7bn, a figure not seen since the early 1920s, when road competition was weak.

So the revealed preference of consumers seems to be that they rather like the current structure. They actively choose to use rail in massive numbers.

Rather like a good Party member in George Orwell’s book 1984, the electorate seems capable of believing two contradictory things at the same time. This reinforces the importance of narratives in politics. Trying to treat voters as rational agents often ends in tears, as both Cameron and May have discovered.

Paul Ormerod 

As published in City AM Wednesday 14th June 2017

Image: Jeremy Corbyn by Garry Knight is licensed under CC by 2.0

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ELLIE EVANS

Partner

e: eevans@volterra.co.uk
t: +44 020 8878 6333

Ellie is a partner at Volterra, specialising in the economic impact of developments and proposals, and manages many of the company’s projects on economic impact, regeneration, transport and development.

With thirteen years experience at Volterra delivering high quality projects to clients across the public and private sector, Ellie has expertise in developing methods of estimating economic impact where complex issues exist with regards to deadweight, displacement and additionality.

Ellie has significant experience in estimating the economic impact across all types of property development including residential, leisure, office and mixed use schemes.

Project management of recent high profile schemes include the luxury hotel London Peninsula, Battersea Power Station and the Nova scheme at London Victoria. Ellie has also led studies across the country estimating the economic and regeneration impact of proposed transport investments, including studies on HS2 and Crossrail.

Ellie holds a degree in Mathematics and Economics from the University of Cambridge.