“Britain’s railways need more, not less, competition”

London Kings Cross. Image: Getty.

There are two companies that regularly top Transport Focus’ rail passenger satisfaction league tables: Grand Central and First Hull Trains.

Unlike most franchised Train Operating Companies (TOCs), which have an effective monopoly on the track, these are open access operators, and compete directly with Virgin’s franchise on the East Coast. The only monopoly between London to Doncaster is the board game, which is available on all Standard Class tables on Grand Central trains (pieces are available from the buffet car for a small fee).

If every TOC was as popular as Grand Central (96 per cent satisfaction) and Hull Trains (95 per cent satisfaction) then I suspect Labour’s pledge to re-nationalise the railways would find few supporters.

In a report for the Adam Smith Institute, rail journalist and entrepreneur Adrian Quine argues that we need A Third Way for Britain’s Railways. He argues that by injecting competition into long-distance rail travel, Open Access can lead to a rail renaissance.

Re-nationalisation is the wrong answer to the wrong question. Since the Conservatives privatised rail in 1994, historic declines in passenger numbers have been reversed and more than doubled to reach record levels. At the same time, investment has increased, rail deaths have fallen, and subsidy per trip has fallen.

Frustrations with the railways are often the fault of the Department for Transport. Take Southern, where Govia Thameslink Railway run a service delivery contract under Southern’s branding. GTR run Southern in effectively the same way Arriva run London buses. Southern doesn’t set schedules, prices or pay and conditions, and it hands over fares directly to the DfT.

The Department for Transport (DfT) stipulates exactly what a franchised train company can offer: dictating timetables, stopping patterns and even minor details such as whether a train has a catering trolley or not. This limits their capacity to compete with overlapping franchises and other forms of transport on anything but fares.

Open Access operators are freed from the DfT’s excessive specifications. The result? Innovation leading to better customer service. 

It’s not just boardgames. Grand Central were the first TOC to offer free wi-fi. They make their full range of tickets available for sale on the train (most TOCs only have their most expensive tickets on sale for passengers who don’t purchase a ticket before boarding).

Hull Trains customers also get free 4G wi-fi and developed sophisticated passenger information systems for people who are into that sort of thing.

The pressure to compete forces OA operators to find greater efficiency savings. The Office for Rail and Road estimate that operating costs for OA operators are between 10 per cent and 30 per cent lower.

As a result, fares are lower too. To compete with Virgin, Grand Central and Hull Trains offer cheaper fares for peak-time travel (£52/£58 vs. Virgin’s £99). Virgin themselves charge less on the East Coast (where there is competition) than on comparable trips on the West Coast (where there isn’t competition).

Better service and cheaper fares have led to faster passenger on routes with open access. Research, commissioned by Grand Central, found that stations with competition – open access and where franchises accidentally overlap – saw faster revenue and passenger number growth than comparable stations without competition.

In freight where competition is intense, staff productivity has increased significantly. Aggressive competition with road freight, forced unit costs on rail freight down by 35 per cent between 1999 and 2009.

Rather than re-run the debate between nationalisation and privatisation, we should increase, not reduce, competition on Britain’s railways. We should make it easier for open access operators to compete on long-distance rail lines.

Consumers understand that competition on air travel delivered huge benefits. Flyers can choose between EasyJet, RyanAir, and BA at Gatwick or Heathrow: why shouldn’t rail passengers have similar choice?

Sam Dumitriu is head of research at the Adam Smith Institute.


What's actually in the UK government’s bailout package for Transport for London?

Wood Green Underground station, north London. Image: Getty.

On 14 May, hours before London’s transport authority ran out of money, the British government agreed to a financial rescue package. Many details of that bailout – its size, the fact it was roughly two-thirds cash and one-third loan, many conditions attached – have been known about for weeks. 

But the information was filtered through spokespeople, because the exact terms of the deal had not been published. This was clearly a source of frustration for London’s mayor Sadiq Khan, who stood to take the political heat for some of the ensuing cuts (to free travel for the old or young, say), but had no way of backing up his contention that the British government made him do it.

That changed Tuesday when Transport for London published this month's board papers, which include a copy of the letter in which transport secretary Grant Shapps sets out the exact terms of the bailout deal. You can read the whole thing here, if you’re so minded, but here are the three big things revealed in the new disclosure.

Firstly, there’s some flexibility in the size of the deal. The bailout was reported to be worth £1.6 billion, significantly less than the £1.9 billion that TfL wanted. In his letter, Shapps spells it out: “To the extent that the actual funding shortfall is greater or lesser than £1.6bn then the amount of Extraordinary Grant and TfL borrowing will increase pro rata, up to a maximum of £1.9bn in aggregate or reduce pro rata accordingly”. 

To put that in English, London’s transport network will not be grinding to a halt because the government didn’t believe TfL about how much money it would need. Up to a point, the money will be available without further negotiations.

The second big takeaway from these board papers is that negotiations will be going on anyway. This bail out is meant to keep TfL rolling until 17 October; but because the agency gets around three-quarters of its revenues from fares, and because the pandemic means fares are likely to be depressed for the foreseeable future, it’s not clear what is meant to happen after that. Social distancing, the board papers note, means that the network will only be able to handle 13 to 20% of normal passenger numbers, even when every service is running.

Shapps’ letter doesn’t answer this question, but it does at least give a sense of when an answer may be forthcoming. It promises “an immediate and broad ranging government-led review of TfL’s future financial position and future financial structure”, which will publish detailed recommendations by the end of August. That will take in fares, operating efficiencies, capital expenditure, “the current fiscal devolution arrangements” – basically, everything. 

The third thing we leaned from that letter is that, to the first approximation, every change to London’s transport policy that is now being rushed through was an explicit condition of this deal. Segregated cycle lanes, pavement extensions and road closures? All in there. So are the suspension of free travel for people under 18, or free peak-hours travel for those over 60. So are increases in the level of the congestion charge.

Many of these changes may be unpopular, but we now know they are not being embraced by London’s mayor entirely on their own merit: They’re being pushed by the Department of Transport as a condition of receiving the bailout. No wonder Khan was miffed that the latter hadn’t been published.

Jonn Elledge was founding editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites.