3 May 2018

Britain’s railways need free market reform, not nationalisation

By Matt Kilcoyne

The debate on trains is stuck in the station going nowhere. The political impasse, caused by those that can’t see beyond the article of faith that is nationalisation, is holding the country back. We need more competition, not less.

Sadly, delays getting competition on more lines could end up costing the broader capitalist cause dearly. Once you accept renationalisation on this, those lobbying for it will move onto the next industry. Depressingly, polls have found that trains are the area where the public have the most rose-tinted view of nationalisation.

Back in January a poll for Sky Data showed some 60 per cent of people were in favour of renationalisation of the railways, while 20 per cent oppose it (and that’s up from 2015 when 55 per cent supported the policy and 23 per cent opposed it).

But people are reacting to the overtures of media and politicians who tell them they’ve never had it so bad. This is simply not true. Last year when Simon Jenkins released his serenade to Britain’s 100 best railway stations he wrote of the “rise, fall and rise again of Britain’s railways”. That rise was down to privatisation.

Before it the number of train journeys per year had fallen from about 1 billion in 1950 to just over 600 million by the mid-1980s. Since privatisation it’s been on the rise, and over the past ten years passenger numbers have increased by 60 per cent. Now we make 1.6 billion rail journeys a year and growth has been well above the EU average. That the date of the rise starts when trains were privatised is no accident.

They’ve been getting better too. While 72 per cent of passengers reported they were satisfied with services in 2002, this rose to 83 per cent by the autumn of 2015. Again, the rise in satisfaction in railways and train operators since privatisation is not an accident.

But the train companies with the highest satisfaction levels? Grand Central (96 per cent satisfaction) and Hull Trains (95 per cent satisfaction). What’s different about these companies? Well, they’re the ones that face the most competition and have the best incentives to provide value at a price punters are willing to pay. And they’re behind the suggestion today by Adrian Quine to get more competition into inter-city train routes via Open Access to drive up quality, and drive down prices.

What causes people to lose patience with rail is the high cost they perceive they’re paying. Now part of this is a feature of the system, not a bug. The passenger network now generates £9.5bn to cover 99 per cent of its daily operating costs, meaning that people that don’t use the railways aren’t cross subsidising those who do. But people are very much aware that since 1995 the cost of an ‘anytime fare’ has risen by 250 per cent on many routes, while RPI has risen only 86 per cent in that time.

Tories that slam the train companies and not the quasi-socialist system we have as a train network at present are creating very real signalling problems.

When MPs attacked Southern Rail after public rage over continuous strikes, they omitted the fact that it doesn’t set schedules, prices or pay and conditions. They never explained that Southern don’t get the money, just collect it for government and then get given a fee. It’s not even a franchise with a monopoly. It’s far more akin to the failed nationalisation of the past, than the competitive vision of the future that rail users should be looking forward to.

When they get the blame wrong, they lead the country down the wrong path and they open the door to Corbyn and the failed creed of socialism. As my colleague Sam Dumitriu has said before, Tories need to stop blaming private enterprise for shoddy state decisions – otherwise they invite more intervention and inadvertently make Corbyn’s case for him.

So what should they do instead? Well, remember to mind the gap in information that commuters currently have. Change the message and the focus of consumer and commuter rage.

Government is still very much involved in running the railways. Network rail is still publicly owned and it owns nearly all the tracks in the country. The Department for Transport (DfT) stipulates exactly what a franchised train company can offer: dictating timetables, stopping patterns and even minor details such as whether a train has a catering trolley or not.

This limits their capacity to compete with overlapping franchises and other forms of transport on anything but fares. That’s not necessarily a bad thing, mind. Peterborough is the starting point for GoVia Thameslink Railway (GTR) running a half-hourly stopping service to London and onwards to the South Coast. Slower and with more stops, but importantly lower in price than Virgin’s direct service, the GTR route has seen a 70% increase in commuter numbers in just 14 years.

But Open Access is a different beast altogether. Freed from the DfT’s excessive specifications, operators innovate: on WiFi offerings, cheaper on-board snacks and even board games built into the train’s tables – again those satisfaction ratings for Hull Trains and Grand Central aren’t by accident either, but by commercial design.

People who travel between cities are more like airline passengers than their fellow train riders on commuter services. Most routes are used by one-off business or leisure passengers who buy their tickets in advance. Competition and different services would drive down prices and give people a choices of service that better fits their preferences.

In the government’s strategic vision for rail, released at the end of last year, Secretary of State for Transport Chris Grayling noted the failings of nationalisation, the stagnation under British Rail, and the impact of Dr Beeching’s cuts to supply. He extolled the virtues of opening up the railways to private operators and called for a transformation in the industry and the way that services are run. His vision saw evolution rather than revolution as key to a rail renaissance in Britain. Open Access is that evolution, and could bring the benefits of effective competition to more lines.

Let’s stop pretending our rail woes are down to the wrong kind of snow, and remind people of the benefits of free market reform. It might even start to turn back the red tide.

Matt Kilcoyne is Head of Communications at the Adam Smith Institute.