Peer review: Richard McClean
Managing Director, Grand Central
One of the highlights of the progress that the UK’s rail
industry has delivered over the past 20 years has been the extraordinary success of the passenger sector - outstripping the performance of comparable operations across Europe and in defiance of perceived wisdom and the general economic cycle. As a result, costs to taxpayers have reduced, fares paid by passengers have been essentially static, and rail is now seen by policymakers as an enabler of social and
economic growth.
This is all in complete contrast with what was expected to happen when the current industry structure was established, where the thinking was all about managed decline and protection for the fledgling franchises. Primarily as the result of growth, we have the position today where significant elements of the passenger rail sector are essentially commercially viable in their own right – a situation simply not envisaged at privatisation.
While this progress has been made through the current industry arrangements, it is clearly a good time to take stock and consider whether development of these arrangements could enable further, continued and accelerated progress.
If the underpinning factor that has driven the passenger sector’s success has been growth, it is worth looking at the role that on-rail competition has had in driving this. It is clear that the existing small-scale, niche open access operators have, at their own commercial risk, successfully opened up new markets in communities that have been neglected by the centrally planned franchise operations - bringing new traffic to rail. The evidence also shows that at the few locations where these open access services directly interact with the franchised services, growth has been higher than where there is no choice offered to passengers. The same is true at locations where franchised operations overlap.
The current policy for UK on-rail competition is not coherent with other elements of the industry structure. Therefore, where on-rail competition exists or proposals are floated to increase its scope, increasing levels of tension are created - tensions that do nothing positive for passengers, operators or taxpayers. Addressing this, and thus unlocking the potential for acceleration in the benefits that increased on-rail competition can deliver, will require a considered approach. This needs to:
- Focus on the markets where passenger choice is most real - the long-distance, high-speed, inter-city markets - by ending the current policy of renting timebound monopolies through the franchising of these operations, and allowing the emergence of strong long-term operators to compete in these markets.
- Ensure the best value delivery of non-commercial necessary public service operations - the commuter and regional services - by enhancing the current process of competition for the market.
- Establish mechanisms that allow the commercial operators to support the public service operations to replace the current money-go-round of franchise premium payments from some operations balancing franchise subsidies paid to others – careful use of well-structured access charging and access levies would enable this.
