20 years on rail privatisation has a bad name – competition can save it? (Politics Home)

A new report from the Centre for Policy Studies sets out how rail privatisation can work better than it has thus far in terms of rising government subsidy and large fare increases. Lewis James Brown CPS (Monday 25 March).

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The 1992 White Paper on rail privatisation envisaged “more competition, greater efficiency and a wider choice of services more closely tailored to what customers want.” As we approach the twentieth anniversary of the Major Government’s decision to release the railways from government control many criticise the move as a disastrous experiment that has seen rail subsidies double in the last decade and fares increase to the highest in Europe, while productivity and service have suffered.

A new report today from Tony Lodge of the Centre for Policy Studies sets out why this need not be the case. Open access competition, while not currently encouraged by the Government in the passenger sector due to fear of higher subsidies, is proving a success in improving services to passengers on the East Coast Main Line (ECML).

While passenger sector franchises have become akin to government-backed monopolies, open access ECML operators Grand Central and First Hull Trains receive no subsidies and compete against the franchise. As a result, rail fares have fallen and passenger numbers are up. Stations on the ECML that enjoy competition have seen a 42% increase in passengers compared to 27% for those that do not. The autumn 2012 National Passenger Survey placed Grand Central top and First Hull second for passenger satisfaction (with the other open access operator Heathrow Express 4th).

On the contrary to fears of higher subsidies, East Coast/Directly Operated Railways, the interim operator of the ECML, paid the largest premium of all long-distance operators in 2011/12 at £187.7m, a significant increase on both previous years. This suggests that open access competition may actually be of benefit to franchise value.

The open access rail freight sector also provides a strong example of the benefits of competition. Today there are five registered rail freight operators in the UK; DB Schenker, Freightliner, GBRf, DRS and Colas. They do not receive a subsidy, pay for track access and compete. Operators know that they will go out of business if they do not compete effectively.

Competition in the freight rail sector has led it to be more productive, more efficient and increased investment. There has been a 50 per cent growth in freight traffic (in tonnes kilometres) since privatisation while the number of locomotives and wagons used has fallen. Meanwhile, freight staff productivity has risen by 10 per cent since the end of nationalisation, in comparison with a 35 per cent fall in the monopolistic passenger sector.

The collapse of the inadequate rail franchising system presents the Government with a great opportunity to enable more competition on the passenger rail network. As Tony Lodge calls for, the Department for Transport and Office for Rail Regulation should drop their opposition to new open access routes. The benefits of this are clear; new investment, innovation, new routes, lower subsidies, lower fares, more journeys and, as a result, happier passengers.

The Centre for Policy Studies has produced a short animation to highlight the report’s key findings, Rail’s Second Chance.

To view the full article, visit Politics Home website

Watch our short animation of the benefits of on-rail open access competition:

Date Added: Monday 25th March 2013