Bid competitions are only a Start; Now open up on-rail access

Why new rail franchises must not become ‘railopolies’.

The announcement today of new bid competitions is a welcome first step in the reform of the rail franchise bidding system as it will provide a competitive bid process for the allocation of new rail franchises.

But is vitally important that these franchises should face non-franchised ‘open access’ competition to help keep fares down, boost passenger choice, boost passenger satisfaction and deliver more routes.

Tony Lodge, author of ‘Rail’s Second Chance: Putting competition back on track’, published this week by the Centre for Policy Studies, comments:

It is vitally important that new long distance franchises, such as the soon to be re-let East Coast Main Line and the West Coast Main Line should face and benefit from on-rail competition. The present ECML franchise holder ‘East Coast’ competes with open access rail companies Grand Central and First Hull Trains, resulting in lower fares at stations where there is competition, more revenue, more and happier passengers and higher premiums.”

Tim Knox, Director of the Centre for Policy Studies, comments:

The franchise proposals pay lip service to the importance of passengers’ views of the rail companies performance. For example, they say that ‘the new approach will see the interests of passengers strengthened within the franchising system, with passengers’ views on train company performance playing an enhanced role in deciding whether to continue an operator’s contract.’ But using simulating market pressures via artificial mechanisms is a failed New Labour-style approach. Why not open up the market so that competition can flourish to the benefit of all?

Data from Rail’s Second Chance shows that on the ECML:

  • average fares increased by only 11% on those stations with competition, compared to 17% at those stations without competition.
  • revenue increased by 57% where competition occurs compared to 48% for those stations without competition;
  • passenger journeys increased by 42% at those stations which enjoy rail competition, compared with 27% for those without competition;
  • The ECML franchise holder – East Coast – has been able to increase its premium payments to Government year on year with no need for subsidy, whilst facing on-track competition.
  • As well as setting up a new cross-industry Franchise Advisory Panel, the Government must consider a new Office of Rail Competition and Utilisation to identify, allocate and deliver on-rail competition where franchises operate alongside open access rail operators to deliver a better and cheaper railway passenger sector.

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

Date Added: Tuesday 26th March 2013