Vertical Integration post-Brexit

[DerekC]

One possible advantage of Brexit (I am trying hard) is that we could re-integrate the main line railway. That's not the same as re-nationalising it - there is another thread about that. It's putting track and train back under the same ownership. In theory that's an excellent idea. It would make such things as ETCS rollout much easier to plan and would avoid the nonsenses associated with TOC compensation for planned renewal work, for example. However a private BR monolith doesn't seem such a good idea. Geographic sector businesses (a bit like the pre-WW2 "big four") could work, but they weren't a very good way of doing big city transport and we would have to worry about cross-country traffic and freight. Thoughts and ideas invited!

PS - I am hoping I am not missing an existing thread about this - I did look!

 

[Harbornite]

This is an interesting topic for a thread.

However a private BR monolith doesn't seem such a good idea. Geographic sector businesses (a bit like the pre-WW2 "big four") could work, but they weren't a very good way of doing big city transport and we would have to worry about cross-country traffic and freight. Thoughts and ideas invited!

Now this is food for thought. Network rail could be split into regional units (there might be a degree of this already, feel free to correct me) but having geographical units stifles crosscountry services (as you say) and could lead to monopolies. However, you could still have open access and multiple operators, as DB seems to manage with its regio units for each lander, as well as private operators such as ALEX and NOB.

 

[najaB]

Thoughts and ideas invited!

Not sure what being out of the EU will change here, as my understanding is that the only requirement is that they are operated separately.

By way of example, SNCF owns the track and runs the trains: SNCF Réseau operates the network and SNCF Voyageurs runs the passenger trains.

 

[DerekC]

Not sure what being out of the EU will change here, as my understanding is that the only requirement is that they are operated separately.

By way of example, SNCF owns the track and runs the trains: SNCF Réseau operates the network and SNCF Voyageurs runs the passenger trains.

As I understand it, under the various Railway Directives the infrastructure and trains have to be separately operated and commercially run. We didn't need to go as far as we did in separating them, but the fact remains that there will (post-Brexit) be no constraint. So - what do you think?

 

[LNW-GW Joint]

Separation of infrastructure and operator isn't just an EU whim, it's a necessary part of competition on the railways.
It's to establish a level playing field for multiple operators (and also multiple infrastructure providers, but that seems to be a dead end).
If you only want one operator (eg BR) then you can merge them (outside the EU).
But as soon as you have multiple TOCs and open access (ie competition), you have to have a means of comparing costs.
It also leads to price regulation and transparent access charges by the infrastructure owner.

Railways without competition (eg Merseyrail) could be integrated, but you would lose transparency on costs.

 

[highdyke]

Railways have spent most of their time in private ownership in the country and were vertically integrated for 170 years.

One of the few successes of BR operating was sectorisation, where operating sectors of BR were given charge of certain lines.

From the 1840s through to 1955, the railway clearing house handled standards, ticketing, and running rights from competing companies. You can very much have competition with vertical integration.

https://en.wikipedia.org/wiki/Railway_Clearing_House

 

[edwin_m]

Seeing as the UK has been ahead of the rest of Europe on rail privatisation, I can't see that removal of the need to comply with the very minimal European requirements on this subject will make any difference at all.
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You can very much have competition with vertical integration.

Only if you have multiple physical routes between two centres. This still exists only on a handful of London flows (Cambridge, Birmingham, Oxford, Exeter). Many competing routes were removed by Beeching as duplicates and it has to be said many city pairs never really had competing railway links in the first place.

 

[yorksrob]

Not sure what being out of the EU will change here, as my understanding is that the only requirement is that they are operated separately.

By way of example, SNCF owns the track and runs the trains: SNCF Réseau operates the network and SNCF Voyageurs runs the passenger trains.

Aren't the latest EU packages designed to break up these various compromises and deliver a more UK style system.

A potential benefit of Brexit should be for the UK polity to decide whether a separation of infrastructure and train operators is actually necessary.

It has to be said, at the time of privatisation, the whole track and train separation was seen as a bit of a political novelty.

 

[coppercapped]

As I understand it, under the various Railway Directives the infrastructure and trains have to be separately operated and commercially run. We didn't need to go as far as we did in separating them, but the fact remains that there will (post-Brexit) be no constraint. So - what do you think?

The Directive only requires that infrastructure and train operation have to have separate bookkeeping. This is to ensure transparency in costings and prices.

 

[DerekC]

The Directive only requires that infrastructure and train operation have to have separate bookkeeping. This is to ensure transparency in costings and prices.

It wasn't the purpose of this thread to examine exactly what the Directives require - simply to see what possibilities exist for the future.
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Separation of infrastructure and operator isn't just an EU whim, it's a necessary part of competition on the railways.
It's to establish a level playing field for multiple operators (and also multiple infrastructure providers, but that seems to be a dead end).
If you only want one operator (eg BR) then you can merge them (outside the EU).
But as soon as you have multiple TOCs and open access (ie competition), you have to have a means of comparing costs.
It also leads to price regulation and transparent access charges by the infrastructure owner.

Railways without competition (eg Merseyrail) could be integrated, but you would lose transparency on costs.

All very good in theory and exactly what the economists and consultants said at privatisation, but the practical effect has been to increase overall costs by a factor variously argued as between x2 and x3. Having said that, it would be naïve to assume that costs would fall again automatically if the railway was re-integrated. What is clear, though, is that the real competition for railways is other modes of transport. The days when railways had any kind of monopoly (except perhaps for high density commuter routes) are long gone.

 

[MarlowDonkey]

This is an interesting topic for a thread.

You could look back at the various commercial structures dreamed up by the private companies before 1923. So you had jointly owned railways, running powers over another company's railway etc.

The Midland Railway was the "open access" operator of its day with provincial services running everywhere. That used the device of the joint railway.

 

[yorksrob]

It wasn't the purpose of this thread to examine exactly what the Directives require - simply to see what possibilities exist for the future.
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All very good in theory and exactly what the economists and consultants said at privatisation, but the practical effect has been to increase overall costs by a factor variously argued as between x2 and x3. Having said that, it would be naïve to assume that costs would fall again automatically if the railway was re-integrated. What is clear, though, is that the real competition for railways is other modes of transport. The days when railways had any kind of monopoly (except perhaps for high density commuter routes) are long gone.

The other question is, is the separation of track and train necessary for competition on the railway ?

I think for open access, you might require a certain openness of accountancy, however, the idea that the main fleet of services need to be contracted out, rather than operated by a state run railway seems incorrect.

 

[highdyke]

You could look back at the various commercial structures dreamed up by the private companies before 1923. So you had jointly owned railways, running powers over another company's railway etc.

The Midland Railway was the "open access" operator of its day with provincial services running everywhere. That used the device of the joint railway.

Indeed, they had running rights over GWR, North London, Great Nothern, Great Eastern, Great Central, Hull and Barnsley, NER, North British, Met, District, LTS, Caledonian, GNSR, LSWR and LNWR plus running rights in Ireland. The map shows some of the network owned by them, and some of the running rights lines.

 

[racklam]

Whether track and train are owned by the same entity isn't necessarily the important point here. You can have them owned and operated by the same company, as long as there is a open and transparent system for third party access to the infrastructure.

So you could have, for example, Virgin owning the WCML infrastructure. They would then be responsible for maintenance/investment etc., and would recoup some of the cost (realistically there would still be government money flowing) from charging London Midland/TPE/Northern etc. access charges, similar to Network Rail access charges now.

This is the case for any industry with large infrastructure. It just so happens that the most effective way to ensure third party access is to split the operation into different entities.

 

[Bletchleyite]

Separation of infrastructure and operator isn't just an EU whim, it's a necessary part of competition on the railways.

Competition on the railways is largely a fallacy. Better to fully integrate the railway and have it target its energy at competing with the car and air.

 

[rf_ioliver]

The other question is, is the separation of track and train necessary for competition on the railway ?

No, but it helps with the transparency of costs. The other reason for splitting the two was to aid safety and auditing procedures.

I think for open access, you might require a certain openness of accountancy, however, the idea that the main fleet of services need to be contracted out, rather than operated by a state run railway seems incorrect.

Correct. What the EU directives requested was the legislation was put in place by each national parliament to ensure that bookkeeping was split and transparent. There is no requirement on who can or can't run services - that's for each country to decide for themselves, for example, Finland runs its passenger railways in a very different manner to the UK - there's no privatization, though VR is a 'private' (albeit state-owned) company.

France, Germany, Denmark etc all run their railways in different ways. As far as I can see the UK took the prioritization to one logical extreme whereas other countries didn't.

So in a post-Brexit situation, nothing really changes as the UK went much, much further than is required

t.

Ian

 

[highdyke]

Competition on the railways is largely a fallacy. Better to fully integrate the railway and have it target its energy at competing with the car and air.

I'd counter that by saying where you have got competition is lowers prices and drives up revenue.

Birmingham - London is a good example, three operators completing means there are two very successful routes and a lot lower prices over similar distances compared to services on the MML.

Oxford - London is another example, in this case competition with a coach services added to the mix, has lowered prices and given more choice.

The ECML is another example.

https://www.youtube.com/watch?v=d0_IORzvFwA

 

[CdBrux]

Wasn't the Shaw report proposing a closer integration between route management (in NR) and the various TOC's. I appreciate it's not at all the same as the question posed by the thread, but at least moving a little in that direction?

 

[coppercapped]

It wasn't the purpose of this thread to examine exactly what the Directives require - simply to see what possibilities exist for the future.

I was correcting the false assumption that the EU Directives require

the infrastructure and trains have to be separately operated and commercially run.

They don't. If one is going to have a debate than at least the basic facts should be clear and understood.

If infrastructure and operations are not separately accountable, and if there is no independent economic regulation of the infrastructure, then one ends up with a situation which can now be seen in Germany where DB Netz has recently been increasing its track access fees by about 3% per year. This has no effect on DB operated trains as the money is simply transferred from one pocket to another, but it is making life very difficult for the various open access freight and passenger operators who have to pay more to use a network which is slowly deteriorating.

Even if the British system was vertically integrated the costs are still real. It is simply that they are not clearly presented and can be fiddled. This helps nobody.

 

[yorksrob]

Correct me if I'm wrong, but isn't there a difference between current and incoming EU rail legislation as regards to the tendering out of railway services ?
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Even if the British system was vertically integrated the costs are still real. It is simply that they are not clearly presented and can be fiddled. This helps nobody.

I would have thought that this would depend on the ideological inclination of whoever's in charge.

At the moment, we have a governing class that largely understands the importance of the railway system as a whole, therefore it is probably beneficial to have transparency of costs.

Alternatively, if the powers that be didn't understand the interdedependent relationship between different parts of the railway and wanted each route to justify itself from a cost point of view, it might be more beneficial to maintain a level of opacity to hide some necessary cross subsidies.

 

[WatcherZero]

Correct me if I'm wrong, but isn't there a difference between current and incoming EU rail legislation as regards to the tendering out of railway services ?

The Fourth Railway Package has a few changes. Rather than just being seperate accounts services and infrastructure have to be seperate companies though they can both be owned by the same holding company. Infrastructure and EU rolling stock safety licensing optionally to a single set of standards rather than being nationally certified in each country, avoids duplication (a process Italians used to delay open access high speed services). They would also have the power to intervene if they thought a country was implementing non-compliant/compatible ERTMS that would affect true universal running.

 

[yorksrob]

The Fourth Railway Package has a few changes. Rather than just being seperate accounts services and infrastructure have to be seperate companies though they can both be owned by the same holding company. Infrastructure and EU rolling stock safety licensing optionally to a single set of standards rather than being nationally certified in each country, avoids duplication (a process Italians used to delay open access high speed services). They would also have the power to intervene if they thought a country was implementing non-compliant/compatible ERTMS that would affect true universal running.

Thanks for the clarification.

I suppose realistically there's a limit to how much through running we can practically expect from the continent anyway, so in practical terms it possibly comes down to being able to chose whether competition is necessary or not in the first place. Therefore I suspect that not a lot will change (as others have said)

 

[Deepgreen]

Competition on the railways is largely a fallacy. Better to fully integrate the railway and have it target its energy at competing with the car and air.

YES; totally agree!

 

[gsnedders]

How have other companies dealt with open access operators competing with the vertically integrated incumbent on lines near capacity? Bidding for available paths? A weaker obligation of service, simply requiring some operator to run every route (so the incumbent has no obligation if someone else does)?