The rising cost of rail transport has become something of a running sore for governments of all stripes since 2004. In that year new regulation was introduced that set annual rail fare rises at RPI inflation plus one per cent. This has led to inevitable bad headlines, with “the Squeezed Commuter” pitted against “Big Rail”.
At the same time, passenger satisfaction is at historic lows, with complaints of overcrowding and tired rolling stock commonly heard. Against this backdrop it has been suggested that the railways should be re-nationalised, as the free market experiment to privatise them appears to have failed. This idea however is incorrect. Britain’s railway problems result not from a lack of state ownership, but from a lack of adequate on-track competition between train operating companies. The solution is to increase the number of open-access firms operating on major passenger routes.
The East Coast myth
One case frequently highlighted by proponents of re-nationalisation is that of the publicly owned train operating company East Coast. The franchise for the East Coast Main Line (ECML) was taken over by Directly Operated Railways (DOR) in 2009 when the then-operators, National Express, defaulted on their contract after it became clear that they could not pay the government the premium it had promised in their bid.
Since the franchise was taken into Department for Transport (DfT) control in 2009, East Coast has returned £1bn to the public purse. This year alone – its last full year as operator of the ECML franchise – East Coast paid a £235m premium to central government. As Joe Cox of Compass pointed out in the Independent on the 19th August, the latest published National Rail Passenger Survey (NRPS) sees East Coast achieving a passenger satisfaction rating of 91% – higher than any company ever to operate the franchise. These two facts appear to suggest that re-nationalisation is the only solution to the twin problems of public expense on railways and falling customer satisfaction. This argument however is not justified.
Passenger Satisfaction: a triumph for State control or for Competition?
The link between East Coast’s high passenger satisfaction rating and its state ownership is tenuous. Rather, and as demonstrated by the recent CPS report Rail’s Second Chance, East Coast’s success can be more convincingly attributed to the simple fact that the ECML is the only passenger main line in the country with real on-track competition. The open-access firms First Hull Trains (operated by First Group) and Grand Central (operated by Deutsche Bahn, the German state railway company) run intercity services to London on the same line, in direct competition with East Coast. These firms receive no subsidy from government. Interestingly, both First Hull Trains and Grand Central achieved higher scores than East Coast for overall passenger satisfaction (at 96% and 94% respectively) in the same NRPS data set. This suggests that genuine on-track competition has driven up standards across all firms operating passenger trains on the ECML, and so improved passenger satisfaction.
That East Coast has the highest satisfaction rating of any franchise operator on the ECML is not evidence that state ownership is the solution to poor passenger satisfaction, rather it is evidence of the power of real competition. The expansion of such competition across the passenger network is the answer to passenger’s woes, not re-nationalisation.