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Put aside ideological battles of public versus private – the evidence shows a thriving railway should be a shared responsibility, says Rail Partners

11 July 2023
  • New research commissioned by Rail Partners reveals where competition among train companies is harnessed effectively across Britain and Europe there are more customers, more services, newer trains, cheaper fares and reduced subsidy
  • Decision makers face critical choices about Britain’s railway, but what matters is what works for customers and the taxpayer. We must put aside the ideological battle in order to bring more passengers back, restore hundreds of millions of pounds in lost revenue, and ultimately set up the industry to deliver wider economic growth and environmental benefits
  • If reform continues to stall, the railway faces a stunted recovery from the pandemic and, in the worst case, a permanently smaller railway

Rail Partners, the trade association for independent passenger owning groups, is calling for a reinvigorated public-private partnership to get Britain’s railways back on the track to growth. While European railways are liberalising and seeing signs of a renaissance, our railway risks being left behind, facing the same choice it did in the 1990s – either setting the railway up for managed decline, or harnessing train companies to replicate their previous success of achieving record passenger numbers and reducing rail subsidy.

A thriving railway boosts the economy and, as a lower carbon form of transport, it can act as an engine for green growth, helping to meet net-zero ambitions and air quality targets. It is widely recognised the railway is not performing as it should, but the scale of the challenges and the time needed for reform to have an impact are often underestimated – the need to make progress is urgent.

In a new report. Track to Growth: Creating a dynamic railway for passengers and the economy, Rail Partners sets out the significant and complex challenges currently facing the railway, including the blurring of responsibilities and accountabilities between different parts of the system, prescriptive and no-longer-fit-for-purpose contracts, an out-dated fares system, changed travel patterns resulting in millions of pounds lost in revenue, and drawn-out industrial action.

A response, often making national headlines as a panacea to these issues, is placing the blame exclusively on train companies and calling for public ownership. But public control is far greater today than under British Rail, with the government micro-managing the smallest of commercial decisions. Reform has been needed for several years and the pandemic compounded the problem and accelerated the need for drastic change.

The report sets out analysis by economic consultants Oxera, confirming the role the private sector played in stopping the decline of the railway post-British Rail. An operational deficit was closed, taxpayer subsidy reduced freeing up money for infrastructure, and ultimately, passengers returned in record numbers. Although franchising in its latter days needed reform, harnessing train companies in the delivery of passenger services was transformative for customers and the railway.

Rail Partners’ chief executive, Andy Bagnall, said:

‘Today’s report is about getting back on track to growth. What matters is what works for customers and the taxpayer, so we should put aside ideological debates. The evidence shows that a reinvigorated public-private partnership is the best way to revitalise the railway.

‘Train companies, domestically in the past and across the continent right now, have shown the skills needed to grow passenger numbers and reduce costs for the taxpayer.

‘If reform continues to stall, the railway faces stunted recovery from the pandemic and worst case, a permanently smaller network. But with the right reforms, the railway can return to growth and act as a catalyst for a stronger, greener economy.’

As Westminster continues to debate how to meet the challenges we face, Rail Partners commissioned research by Arup and Frontier Economics to examine the experiences of our European neighbours and how train companies on the continent have boosted passenger numbers and have created better experiences and outcomes for customers.

The European Union has sought to tackle the inefficiency of public monopoly operators who have been slow to innovate and adapt for European passengers. They have done this by allowing new operators to compete both ‘for the market’ through bidding for contracts and ‘on rail’ through direct competition on the same routes through open access competition.

The findings from the study reveal where there is competition both for contracts and by operators on the same route, there are significant benefits:

  • Reduction in subsidy by 15-50% – subsidy has reduced where contracts have been competed rather than directly awarded, freeing up public money for other uses
  • Operational efficiency gains of 20-50% – where national and regional European governments have adopted a competitive tendering process, rather than direct awards, operational efficiency gains have been realised, allowing for more services on the network
  • Increased service levels up to 60% on some routes – in the countries examined where operators compete on the same routes, evidence shows that the number of departures increased, offering more choice to passengers.
  • An increase of up to 40% more passengers on routes where operators compete, while demand on regional competitively tendered lines outperformed untendered long-distance lines in some countries.
  • Fares falling by 15-50% on routes where there is competition, open access operators offered fare reductions of between 15-50% immediately following entry, with fares being typically around 20-60% lower than that of the incumbent over time.

Andy Bagnall continued:

‘This is one of the most wide-ranging studies on the emerging impacts of rail liberalisation in the EU to date. We can draw on the experience of managed competition across Europe to deliver benefits here in Britain.

‘The evidence from European railways clearly shows that, if we get reform right, and train companies are harnessed in the right way, competition will deliver significant benefits for the customer, and ultimately reduces subsidy, bringing public spending down.'

Rail Partners’ report offers a series of policy solutions based on the evidence. While greater public control through an arms-length body is needed to give the system greater coherence, operators need freedom within that system. Allowing decisions to be made closer to the customer in a public-private partnership is the right answer.

Managed competition is evidently working on the continent and dispels the notion that changing ownership of train operating companies alone will make a single fare cheaper or a single train run more punctually. Rather, if train companies are harnessed in the right way, they deliver good outcomes for the passenger and taxpayer, and ultimately the economy and environment.

Notes to editors
  • The full report, including Oxera and Arup and Frontier Economics’ findings, is available on our website https://railpartners.co.uk/our-work/publications/track-to-growth
  • Rail Partners commissioned independent analysis by Oxera to examine the performance of the rail industry after privatisation in 1994. Oxera’s research details how a public-private partnership and the commercial incentives placed on operators up until the pandemic led to a vibrant and growing railway – see more in section 2.
  • Drawing on a growing body of evidence, Rail Partners commissioned Arup and Frontier Economics to examine how the liberalisation of European railways is delivering better outcomes for passengers and taxpayers. See more in section 3.
  • In order to meet the challenges facing the railway, Rail Partners has a number of reform recommendations to government. See below and section 4 for a full list.
  1. Establish a new arms-length body at the earliest opportunity to create coherence and public control across the railway
  2. Harness the private sector to deliver for passengers and taxpayers today by turning on revenue incentives
  3. Reunite cost and revenue within DfT at first and then within the new arm’s length body
  4. Ensure the new contracting model allows companies to deliver for passengers
  5. The full potential of open access should also be realised on long-distance routes
  6. Deliver fares reform to ensure passengers can get the best deal
About Rail Partners

Rail Partners exists to make the railway better by harnessing the expertise and creativity of private sector operators for the benefit of those who use the railway, passengers and freight customers, and those who pay for it, including taxpayers.

Rail Partners provides advocacy and policy solutions for its private sector passenger owning group and freight company members. Rail Partners additionally provides technical services to train operating companies in both the public and private sectors. For more information regarding our membership visit: https://www.railpartners.co.uk/

Rail Partners - Track to Growth
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