Katerina Nicholaou, an intern with the Centre for Policy Studies and graduate of International Politics from the Univerisity of Surrey, writes on the findings of Tony Lodge's report 'Rail's Second Chance: Putting competition back on track'.
“More competition, greater efficiency and a wider choice of services more closely tailored to what customers want.” This is what John Major’s government set out to achieve in 1992 when they began to pass the privatisation of rail services. It’s hard not to agree with the findings of Tony Lodge in his CPS report ‘Rail’s Second Chance: Putting competition back on track’ that the intended objectives have been betrayed. Two decades later privatisation of British Rail remains a much disputed topic of conversation. With other privatisations having proved so effective, we have to ask ourselves; what went wrong?
The problem: lack of competition. ‘Privatisation’ thus far has seen franchised rail operators having an effective monopoly of the core long distant routes, preventing competition from other rail operators. Too few rail companies bid for franchises to operate rail services over a fix term period, resulting in passenger monopolies or, in the words of Tony Lodge, “railopolies”. Odd when you consider the core reason for privatisation was “a wider choice of services”.
Furthermore, due to the worry of increased subsidies, “open access”, which allows rival train operators to run services on the same track, has been blocked by the government. This is odd, seeing as subsidies between the years of 2002-2012 have in fact doubled, despite rail fares being at an all-time high; in fact the highest in Europe. The subsidy to the railways is four times larger now than it was back in 1992, resulting in the tax payer digging deeper but seeing no benefits.
The rail industry desperately needs the benefits of competition. Increased competition could boost efficiency, reduce costs and deliver more passenger choice. Franchises and open access operators should and can successfully compete and co-exist. The East Coast Main Line open access operators receive no subsidies, compete with the main franchise, and have managed to offer cheaper fares, improved infrastructure and outstanding customer satisfaction; all the while bringing home revenue of £188 million.
If this example is followed across other regions, rail could be on the path to being ‘effective, efficient and affordable’. With passenger numbers expected to double by 2030, the government should accept the case for more open access. Privatisation of rail was advocated to remove rail politics from Whitehall and encourage private investment.
Today’s announcement 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 it vitally important that these franchises should face non-franchised open access competition to deliver the kind of benefits seen on the ECML - new investment, innovation, new routes, lower subsidies, lower fares, more journeys and, as a result, happier passengers. Open access, better and more efficient franchising, and a rapid decrease in subsidies must be delivered to bolster competition: enough of this half-hearted privatisation absurdity.