What are the alternatives to private monopolies on the railways?

With passengers wholly dissatisfied with the service provided on the railways, is now the time to look for an alternative?

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According to a survey published today in Which? magazine, Britain’s rail users are wholly dissatisfied with the service being offered by the rail industry. More than half of the train companies received a customer satisfaction rate of lower than 50 per cent.

Such underwhelming figures once again open up the debate as to whether the status quo on the railways is really acceptable. Should the railways be considered a vital public service, or simply a tool for the incomes of weary customers to pass into the hands of the few?

Many arguments against rail nationalisation are keen to remind us of the “bad old days” of British Rail, and how such wholly undesirable circumstances left customers deserting the railways in droves. Such a theory is undermined by the recent success of Direct Operated Railways, Britain’s only state-owned rail operator, that runs East Coast.

Picking up the pieces following the hapless tenures of its predecessors, GNER and National Express, East Coast has not only vastly improved its customer service (in 2013 they were the only company, along with South Eastern Trains, to record higher levels of customer satisfaction than in 2012) but has also made the Treasury around £1bn since it took over the line in 2009. Today’s Which? survey noted that it offers a better service than 14 of the other 19 train providers.

Regardless of this, the government plans to allow a private operator to take over the franchise in March 2015.

Given the line’s profitability, this seems bizarre, and it is easy to identify with those who claim the government’s plans to sell are more ideological than practical.

Advocates of the sale claim that the private sector is more innovative and as such will be able to provide a higher standard of service with increased efficiency.

This point that could be taken seriously were not one of the three accepted bids for the line to have come in the form of a joint venture from the majority state-owned French companies Keolis and Eurostar (the UK government also possesses a 40 per cent stake in the latter).

Handing over a profitable line between London and Edinburgh to the French government would be an astounding decision from a government that has spent the last few months offering the Hollande administration nothing but barbed criticisms of its high state spending.

Meanwhile, the government granting the franchise to either of the other two private bidders would also be understandable if the private ownership of railway services offered the levels of competition that they prize so highly.

In reality, very few of the lines offer any competition at all but are merely monopolised by a single company that is largely unaccountable to its customers. Should one, for example, be travelling from London to Manchester with Virgin Trains but be dissatisfied with the above inflation price rises of 3.3 per cent, one has little option to put up with it – or drive.

All the more galling is that between 1997 and 2012 Virgin received £2.79bn in direct subsidies from the government.

The conditions that this government most fears from state ownership of the railways – sluggish innovation due to a single, slow-reacting and inefficient behemoth monopolising affairs – are already created by the private companies to whom the franchises have been handed over.

The alternatives to the present state of affairs are either increased private competition or nationalisation.

The former might well be plausible, indeed it was in a market of free and open competition that the railways were originally founded, with companies competing on quality and price in an effort to attract customers in much the same cut-throat manner in which the aviation industry operates today.

However, this does raise the prospect of a bewildering range of options and timetables with certain tickets only being valid for certain trains. It is unlikely that the public would tolerate such confusion.

East Coast has shown that nationalisation should not be discounted as an alternative to the increasingly expensive status quo; their average price rise for for 2014 is a mere 1.21 per cent, which represents a real terms cut.

Undaunted by this evident success, the coalition presses on with a harebrained policy that will see one of the country’s most successful state owned companies move back into the hands of a private monopolist. Once again, the taxpayer can only watch and lament as the £200m plus of annual Treasury income is converted into dividends for shareholders.

As was the case with Royal Mail, investors must be rubbing their hands with glee.

3 Responses to “What are the alternatives to private monopolies on the railways?”

  1. blarg1987

    Talking about the East coast main line, I would recommend LFF do an FOI request to ask for the buisness case for the privatisation of the line and the actual figures to back up the plan for the privatisation.

    I am sure they will reply it is commercially sensitive data, however with your contacts and resources you could appeal to the infomarmation commision to get this dat released, if it is still refused because of commercial sensitivity, there have ben recent cases where such things have been over turned.

    With a large readership and contacts in other news outlets, you could make this a campaign, after all Cameron pledged “open goverment” so all media outlets should hold him to his word.

    Hope I hear back.

  2. JC

    All these expensive railways are fine for the middle class commuters and business travelers, but they do very little for the workers. Why should we spend yet more money taking from the poor to subsidise the wealthy?

  3. GO

    “The alternatives to the present state of affairs are either increased private competition or nationalisation.”

    Social ownership doesn’t have to mean state ownership. How about the proposal to mutualise the railways?

    http://owenjones.org/2011/01/26/the-leftwing-alternative-to-nationalisation/

    To me this is just the sort of idea Labour should be pursuing. It’s far more palatable than a ‘turn back the clock’ message, and whereas nationalisation smacks of ‘old Labour’ and the ‘hard Left’, the Tories have (inexplicably) put mutualisation in the centre ground of UK politics.

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