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Was privatisation supposed to bring competition?

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Howardh

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Privatisation is supposed to bring competition, but as with Manchester - London only having one operator, the same applies to much of the North West; it's Northern or nothing. Sure TPX and Avanti might be an option for a few journeys, but not for most. There's no incentive for Northern to get their act together??
 
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Bantamzen

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Privatisation is supposed to bring competition, but as with Manchester - London only having one operator, the same applies to much of the North West; it's Northern or nothing. Sure TPX and Avanti might be an option for a few journeys, but not for most. There's no incentive for Northern to get their act together??

But how do you have competition on such limited infrastructure? Answer, you don't. The whole concept of competition on the rails was a lie to sell the idea of privatisation.
 

Journeyman

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But how do you have competition on such limited infrastructure? Answer, you don't. The whole concept of competition on the rails was a lie to sell the idea of privatisation.

Well, it depends how you view it. Genuine on-track competition doesn't exist outside a few corridors, the competition is for running franchises. This is how TfL bus tendering works - you have a monopoly once you're running services, but have to have a competitive advantage to get to that point in the first place.
 

Djgr

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Nobody knows. Nobody can remember who on earth thought fragmenting the railway into a million pieces would be a sound idea.
 

DerekC

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But how do you have competition on such limited infrastructure? Answer, you don't. The whole concept of competition on the rails was a lie to sell the idea of privatisation.

Not sure it was a lie so much as a cockup based on lack of understanding.

Well, it depends how you view it. Genuine on-track competition doesn't exist outside a few corridors, the competition is for running franchises. This is how TfL bus tendering works - you have a monopoly once you're running services, but have to have a competitive advantage to get to that point in the first place.

That isn't how it was sold to the voting public - people were offered "competitive services". And I think the politicians believed (because they wanted to believe) that that's what would happen. The franchising process was seen as a necessary evil to allow public funds to be injected in the interim before the golden era of the profitable open-access railway.
 
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Journeyman

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Not sure it was a lie so much as a cockup based on lack of understanding.

Yeah, much more cockup than conspiracy, but to be fair, the architects of privatisation assumed passenger numbers would be static or decline, and the system was designed around that assumption. On experience up to that point, it was a reasonable assumption. The huge jump in passenger numbers seemed to take everyone by surprise, and has been at the root of many of the industry's problems. I don't think a unified BR would have coped very well with it either.
 

DarloRich

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Yes. Although the fans of privatisation will insisit that the competition to win the franchise was the type of competition intended. It wasnt. Ministers at the time were clear in their statements.
 

JamesT

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There’s also the change of government to factor in.
The initial franchises were deliberately let with limited on-rail competition to allow the transfer from BR to proceed smoothly, with an intention that later on more services would be provided as Open Access rather than franchised, which would give the on-rail competition.
But then the 1997 Labour government arrived, whose stance was to work with what they had, but certainly not allow for ‘more’ privatisation. They nationalised Railtrack and generally centralised control back with the DfT over their time. It was under their SRA that franchises were consolidated to try and have one TOC per London terminus, which is the opposite of allowing on-rail competition.
So I’d say not a lie, but the people who made the promise weren’t around long enough to deliver.
 

Journeyman

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Yes. Although the fans of privatisation will insisit that the competition to win the franchise was the type of competition intended. It wasnt. Ministers at the time were clear in their statements.

Open access was meant to be a big thing, bit in most cases the barriers to entry were far too high, and the sink-or-swim environment has made survival a challenge. Wrexham & Shropshire seemed to be competent and popular, but franchised operators had far too much protection and security - how can you realistically compete with that?
 

Mag_seven

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It was once envisaged that Railtrack as was would auction off individual train paths to competing entities much in the way that airports sell landing / take-off slots. For example you would have one operator operating the 17.00 path from Euston to Manchester and another operating the 17.20 path from Euston to Manchester.
 

Purple Orange

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From an outsider to the rail industry, it appears that privatisation of rail services has been to achieve the some of the same effect as it has in the NHS, energy companies and prison services. The biggest cost to the government for all these industries has been people and part of that was the pension schemes. The only way a franchise can make a profit compared to the way it was, is through efficiency gains in the cost of employment. So the pension schemes were among the first to go. It is also the reason why the Tories could say the average public sector employee is paid more the average private sector employee, which is true when you consider that in a hospital for example, doctors, nurses and management are public sector employees, but the catering staff, cleaners and ports are all private sector employees. Yet those people are only employed because there is a public sector need.
 

Dr Hoo

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The 1992 Conservative Manifesto, which was really the only chance to ‘sell’ the policy of privatisation to the voting public was actually fairly measured, with a description of franchising and service obligations. Although there was reference to interest in providing ‘additional services’ the term ‘competition’ was hardly a major theme if it was mentioned at all, certainly not ‘on line’ competition.

Arguably the biggest changes - in terms of privatising what became Railtrack, let alone track maintenance, rolling stock leasing, etc. were never exposed to the electorate.
 

markymark2000

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It has opened up competition on the East Coast with Grand Central and Hull Trains.

Competition on the West Coast will be starting soon as well with the Grand Central service to Blackpool.
 

yorksrob

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Not sure it was a lie so much as a cockup based on lack of understanding.



That isn't how it was sold to the voting public - people were offered "competitive services". And I think the politicians believed (because they wanted to believe) that that's what would happen. The franchising process was seen as a necessary evil to allow public funds to be injected in the interim before the golden era of the profitable open-access railway.

I don't recall anyone at the time in Government saying that privatisation was intended to facilitate an increase in public funding to the railway (even though that was what happenned in the end).

The narrative was all about reducing public subsidy.
 

Railwaysceptic

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I don't recall anyone at the time in Government saying that privatisation was intended to facilitate an increase in public funding to the railway (even though that was what happenned in the end).

The narrative was all about reducing public subsidy.
It's not often I agree with you but I do here. The assertion made most clearly by John Major was that privatisation "would once and for all get the railway off the tax-payer's back." That was his big claim and what a bad joke that has turned out to be. He and his supporters also claimed that a privatised - and thereby liberated - railway would turn the tide and win new business.
 

Randomer

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Having done a bit of searching on this does anyone know at which point open access operators had to have routes that passed the "not primarily abstractive" test?

I presume it was introduced some time after privatisation or otherwise the idea of on rail competition seems dead in the water from the start. One does wonder what would happen if it was removed now. Presumably even less bids for franchises than the fairly disastrous cituation now.

Alternatively was it introduced to protect the original franchises to be later removed, which then didn't happen post 1997?

I do wander what would happen if HS2 had been let on the basis of two operators splitting paths fairly evenly.
 

ForTheLoveOf

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It's not often I agree with you but I do here. The assertion made most clearly by John Major was that privatisation "would once and for all get the railway off the tax-payer's back." That was his big claim and what a bad joke that has turned out to be. He and his supporters also claimed that a privatised - and thereby liberated - railway would turn the tide and win new business.
It's not entirely untrue through. Once you deduct the cost of railway improvements, and new lines like Crossrail, HS2 etc., the state pays "just" £200-300m a year towards the on-going costs of running and maintaining the railway. Not bad considering the number of people it moves, the environmental and social benefits and the financial benefits it unlocks in a way other means of transport can't.

The decision to spend the better part of £10bn a year into the railways to upgrade and improve them is a political one. If push came to shove you could continue to run the railway on a shoestring budget of the aforementioned £200-300m a year. Obviously it would be at the cost of ever increasing overcrowding but it is theoretically possible. This is considerably less than the average of £1.5bn a year that BR required in its latter years (using inflation-adjusted sums).

There are many valid criticisms to make against the privatised railway. The fragmentation of the industry has undoubtedly led to more inefficiencies than private "efficiency" has gains. But skyrocketing passenger numbers and real-terms fare increases have, despite this, allowed a real-terms reduction in underlying subsidy.

If the political aim of the railways were to make them pay, it would probably be possible, just about, by increasing fares even more in real terms, thus reducing overcrowding and extracting more money from the remainder who have the ability and willingness to pay. I think that most political parties recognise this is not politically expedient.
 

js1000

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Privatisation is supposed to bring competition, but as with Manchester - London only having one operator, the same applies to much of the North West; it's Northern or nothing. Sure TPX and Avanti might be an option for a few journeys, but not for most. There's no incentive for Northern to get their act together??
One recent example was the DfT moving the three routes between Liverpool / Windermere / Blackpool North to Manchester Airport from TPE to Northern as part of the new franchise in 2016.

As someone who believes in competition, and that's what privatisation is all about apparently, I never really understood why every other service could not have been operated by both franchises. Additionally, revenue would be penalised depending on delays and cancellations rather than the dated ORCATs system that is still is use and does not deliver for passengers.

I guarantee we would not have seen the chaos we have seen since these routes have changed hands as there is an incentive to adequately staff the network.

The only incentive for train companies is to bid unrealistic high for the franchise, make a bit of profit first few years, and then once the subsidy reduces let the taxpayer pick up the losses. Northern is the perfect example of this. It's a farce of a system that robs the taxpayer.
 

yorksrob

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It's not entirely untrue through. Once you deduct the cost of railway improvements, and new lines like Crossrail, HS2 etc., the state pays "just" £200-300m a year towards the on-going costs of running and maintaining the railway. Not bad considering the number of people it moves, the environmental and social benefits and the financial benefits it unlocks in a way other means of transport can't.

The decision to spend the better part of £10bn a year into the railways to upgrade and improve them is a political one. If push came to shove you could continue to run the railway on a shoestring budget of the aforementioned £200-300m a year. Obviously it would be at the cost of ever increasing overcrowding but it is theoretically possible. This is considerably less than the average of £1.5bn a year that BR required in its latter years (using inflation-adjusted sums).

There are many valid criticisms to make against the privatised railway. The fragmentation of the industry has undoubtedly led to more inefficiencies than private "efficiency" has gains. But skyrocketing passenger numbers and real-terms fare increases have, despite this, allowed a real-terms reduction in underlying subsidy.

If the political aim of the railways were to make them pay, it would probably be possible, just about, by increasing fares even more in real terms, thus reducing overcrowding and extracting more money from the remainder who have the ability and willingness to pay. I think that most political parties recognise this is not politically expedient.

It's all taken a very long time to get to this point though. Throughout most of the past twenty years (at a time when there weren't many big ticket infrastructure projects such as crossrail), subsidy was a lot higher than that towards the end of the nationalised period. The public funding at the end of the nationalised period also included a lot of improvements in Kent which were associated with the introduction of international services.
 

duesselmartin

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Competion is based in winning franchises and against other mode of transport such as car, air, coach.
With the railway stretched to its limits, is that not a sign of success?
 

Dr Hoo

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It's not often I agree with you but I do here. The assertion made most clearly by John Major was that privatisation "would once and for all get the railway off the tax-payer's back." That was his big claim and what a bad joke that has turned out to be. He and his supporters also claimed that a privatised - and thereby liberated - railway would turn the tide and win new business.
Do you have a source for the supposed John Major quote, please? Once again I will mention that the 1992 Manifesto talked about things like investment, franchising and the Passenger’s Charter but hardly seems to mention “subsidy”, “efficiency” and “competition”. As someone who worked in BR during the preparations for privatisation (and subsequently still in the industry for another 20 years after 1994) I never cease to be amazed at the number of things now attributed to that era that seem to own more to myth than published history.
 

bramling

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Privatisation is supposed to bring competition, but as with Manchester - London only having one operator, the same applies to much of the North West; it's Northern or nothing. Sure TPX and Avanti might be an option for a few journeys, but not for most. There's no incentive for Northern to get their act together??

Apart from a few routes, in reality competition has been non existent. This certainly wasn’t the original plan.

Where competition has happened it hasn’t always been wonderful for the passenger - look for example at LM where they have chased more exciting markets to the considerable detriment of people using intermediate stations. Even something like London to Peterborough has had cheaper fares for GN services, whilst the long-distance services normally operate with spare space. This simply doesn’t work well on an increasingly congested network.

Other potential competition routes have withered away with franchising changes - for example London to Oxford (initially GWT vs Thames Trains) or London to Ipswich (Anglia versus GER). Meanwhile SWT has never been able to go heavily for the Exeter traffic as they simply haven’t had the resources - both infrastructure and rolling stock - to properly provide for it at the same time as properly serve busy commuter railheads like Salisbury and Andover.
 
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Journeyman

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I don't recall anyone at the time in Government saying that privatisation was intended to facilitate an increase in public funding to the railway (even though that was what happenned in the end).

The narrative was all about reducing public subsidy.

As I mentioned earlier, though, a lot of the design for privatisation was based on the assumption thast growth would be slightly negative to very small, and not the enormous explosion in rail usage we've ended up seeing. I suspect a lot of the increase in subsidy has been down to the need to cope with that huge upsurge in usage, and we can't prove one way or another whether it would have happened had BR continued to exist. They'd have faced the same problems, and although in many ways they ran quite efficiently, they could never afford to invest enough to replace old kit and increase capacity. The government would have needed to step in sooner or later.
 

LNW-GW Joint

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Franchising was not intended to last for ever.
The idea was for HMG to fund the new setup for a decade or so until the new owners had driven the cost out of the system, and then move towards a mainly open-access future.
Franchises would eventually just cover the hopelessly uneconomic part of the network (considered to be the old Regional Railways bit).

Labour did not reverse these changes while in office 1997-2010, but regulated it by essentially keeping it in tight governmental control via the SRA (which it then abolished when the SRA did things HMG didn't like).
Network Rail's status is still unique, and is not under direct governmental control although most people think it is.
The private rail sector (TOCs, freight, open access, rolling stock) ensures that the regulator (ORR) enforces a level commercial playing field, even where the government is directly involved (eg LNER).
The regulator can also override the DfT on occasion (eg on open access permissions, and NR's funding requirements).
 

yorksrob

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As I mentioned earlier, though, a lot of the design for privatisation was based on the assumption thast growth would be slightly negative to very small, and not the enormous explosion in rail usage we've ended up seeing. I suspect a lot of the increase in subsidy has been down to the need to cope with that huge upsurge in usage, and we can't prove one way or another whether it would have happened had BR continued to exist. They'd have faced the same problems, and although in many ways they ran quite efficiently, they could never afford to invest enough to replace old kit and increase capacity. The government would have needed to step in sooner or later.

I don't disagree with that necessarily.

I think people should be wary of assuming that just because the privatised railway ended up levering in more public funding, that was the policy intention. It seemed very much the opposite to me at the time.
 

Journeyman

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Franchising was not intended to last for ever.
The idea was for HMG to fund the new setup for a decade or so until the new owners had driven the cost out of the system, and then move towards a mainly open-access future.
Franchises would eventually just cover the hopelessly uneconomic part of the network (considered to be the old Regional Railways bit).

Having studied the privatisation process quite a bit - I was doing a Transport Planning degree while it was happening - I haven't seen any proof of this anywhere. Can you quote any sources on it?
 

Edders23

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The whole point of privatisation not just the railways but the utilities coal,steel BP et al was to put money into the pockets of city traders and create more profits and share dividends to boost the pensions industry

deregulation is the tool for generating competition but eventually even that often produces a monopoly situation

If they truly wanted competition they could have created a "slot" system whereby all available paths on a particular route were divided into two or three lots and auctioned off the result would be two or three companies competing on the same route probably with their own stock and ticketing systems albeit only on the major routes as it would be unprofitable on the rest
 
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Journeyman

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I don't disagree with that necessarily.

I think people should be wary of assuming that just because the privatised railway ended up levering in more public funding, that was the policy intention. It seemed very much the opposite to me at the time.

I think comparing BR in the early 90s with the privatised railway now is like comparing apples and oranges, and I'm sure you'd agree with me there. I think what you'd need to do is look at the inflation-adjusted figures per passenger mile, rather than the gross overall amount, and I'm not sure I've seen anyone attempt to do that. It might produce surprising results.
 

yorksrob

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I think comparing BR in the early 90s with the privatised railway now is like comparing apples and oranges, and I'm sure you'd agree with me there. I think what you'd need to do is look at the inflation-adjusted figures per passenger mile, rather than the gross overall amount, and I'm not sure I've seen anyone attempt to do that. It might produce surprising results.

It would be interesting to see. One would also need to look at the performance of the railway throughout the whole period, from some time before privatisation up until now to give the full picture.
 
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