The continent’s approach to rail liberalisation holds lessons for Britain

An NTV train crosses the Tiburtina station in central Rome. Image: Getty.

As universal truths go, it’s not far off “death and taxes”: Britain’s rail network is privatised, the service is abysmal, fares are stratospheric. To restore our railway as a network we can be proud of, it must be renationalised. And we know that will work, because continental European railways are cheap, punctual, pleasurable and nationalised. Right?

Wrong. The binary debate over the future of UK rail is now so entrenched that we have increasingly ceased to question its fundamental tenets. This retreat to dogmatic positions risks doing a grave disservice to the travelling public – and we urgently need to consider both our own railway and those in Europe in a much more nuanced light.

John Band has already knocked down a few shibboleths in his 2015 article on rail fares, so I won’t cover the same ground again. Suffice to say, looking at our own railway’s structure, government control is so pervasive that it is not really credible to claim it is private at all. As in Europe, the railway’s fixed assets (track, stations, signalling etc.) are in public hands, following the reclassification in 2014 of Network Rail as a government entity.

Franchises, meanwhile, are so tightly specified by the Department for Transport (DfT) that any room for entrepreneurial activity has been all but squeezed out. Yes, DfT really does tell operators how many of their trains can have a catering trolley.

Yet arguably even more pressing for UK rail policy is the need to understand the profound changes happening to Europe’s railways as market reforms take root. It is still perfectly possible to jump on a train in Paris, Rome or Munich and find that train is run by a public sector operator, which is often part of a state holding group which also includes the infrastructure manager: train operator Trenitalia and infrastructure manager RFI in the case of Italy, for example.

However, over the past 20 years, EU policymakers have been looking for ways to make the European rail network more competitive. Policy measures have mostly focused on technical harmonisation between disparate national rail networks, but opening up of rail services to competition has also been a key strand.

This liberalisation has been resisted for years in many member states – but we are now reaching a point where the tide is turning, and the widely held perception in Britain of ‘nationalised’ continental railways is increasingly inaccurate. Perhaps most pernicious of all is the misleading suggestion that somehow Deutsche Bahn, SNCF or NS, the Dutch parent of Abellio, are sitting at home chuckling as filthy lucre from the fares of hardworking British commuters trickles into the coffers.

Far from it: most, but not all, European countries have seen some degree of liberalisation.

Take Italy, for starters. On 7 February, Global Infrastructure Partners (owner of London’s Gatwick Airport) made a successful offer of €1·9bn to acquire a company called Nuovo Trasporti Viaggiatori.

Who is that, you ask? Well, NTV runs pointy red high speed trains up, down and across the country, mostly on the dedicated high speed rail network that Italy has been building since the 1960s. Serving destinations including Turin, Venice and Naples, the company runs 50 trains per day on the key business route between Milan and Rome. Using the Italo brand, NTV competes head to head with the public sector operator Trenitalia, and between them they have gained a large majority of the rail/air market between the two hubs.

Unlike most British train companies however, NTV has no franchise or contract with government. It uses the EU’s ‘open access’ rules, paying access charges to use the national network. Its services are genuinely entrepreneurial as a result: if they are not viable, they would not survive.

NTV was established in 2011 by a consortium of high profile investors led by Luca di Montezemolo, whom Formula 1 motor racing fans will know as a former Team Principal at the Ferrari team. (The Italo trains’ scarlet livery is not a coincidence.)

For a few years, the state incumbent sought to frustrate NTV’s ambition amid a lack of strong independent regulation. But NTV has expanded from a niche operator to a significant player, at least on the core inter-city axes. As a consequence, private competition has compelled Trenitalia to up its game.

NTV’s state of the art Alstom trains were soon matched by a rival fleet procured by Trenitalia from Bombardier and Hitachi. Both have a whopping four classes of seating and, naturally, top quality espresso in the buffet car. More importantly, the number of services available between major cities has grown, but the rivalry has kept prices down.


There are lessons for here for Britain. We also have open access players in the shape of Grand Central and Hull Trains, operating out of London King’s Cross. Yet neither has the scale of NTV in Italy, and the government is lukewarm at best about operators who exist outside the contractual headlock of a franchise. For advocates of renationalisation however, there is a major quandary: Hull Trains and Grand Central regularly top passenger satisfaction tables, which suggests that more entrepreneurial zeal, not less, could lead to better services, at least in the long-distance segment.

In Italy, the inter-city network has been opened up to competition, while regional trains are, for now, still run by the state. In Germany, the opposite is true. Almost 40 per cent of German regional trains are now run by companies other than Deutsche Bahn, while DB retains a near monopoly on long-distance routes. Regional rail operating contracts are typically let by regional authorities (usually the Bundesländer), rather than by central government – but just as in Britain, the trains themselves are increasingly leased from the private sector rather than owned by the state.

Trenitalia is the second largest operator in Germany, while many of the companies holding UK franchises are also active. Indeed, British companies like National Express have made major inroads: its chief executive said last year that German contracts were now more attractive to private operators than UK franchising.

Where British and German ‘franchising’ really diverge is in costs. Typically, when DB loses a contract to a competitor, the cost of operation goes down, with a positive impact on subsidy and therefore fares. In an extreme example, Go-Ahead (yes, parent of loathed Southern Rail) has agreed to run several routes around Stuttgart for a period of 13 years from 2019. That contract is costing the regional authority in Baden-Württemberg approximately half the amount per train-kilometre it was giving to DB under the previous agreement. A raft of improvements is planned, including new trains across the network. Yet with such a dramatic reduction in the cost base, the authority also has the option to hold down fares.

Once again, the implications for British rail policy are clear. We should be asking why German rail liberalisation is driving down operating costs while quality of service is broadly improving. Instead, we get increasingly simplistic assertions about the benefits of renationalisation, which hark back to an increasingly hazy recollection of British Rail.

The opening up of Europe’s networks to competition has polarised opinion across the sector, and debate will continue for years to come as to the pros and cons. Indeed, there are areas where the British system has a clear advantage over, say, Germany – for example, a unified ticketing system which allows booking between any two stations, irrespective of operator.

But please let us not labour anymore under romanticised ideas of ‘nationalised’ European rail based on experience from the odd long weekend away. The debate over the future of Britain’s railways deserves a better level of understanding – and there is much to learn from the European experience.

Nick Kingsley is managing editor of Railway Gazette International, the business magazine for the global rail industry. He tweets as @njak_100.

 
 
 
 

How China's growing cities are adapting to pressures on housing and transport

Shenzhen, southern China's major financial centre. (Photo by Daniel Berehulak/Getty Images)

In the last 40 years, the world’s most populous country has urbanised at a rate unprecedented in human history. China now has over 100 cities with populations greater than a million people, easily overshadowing the combined total of such cities in North America and Europe. 

That means urban policy in China is of increasing relevance to planning professionals around the world, and for many in Western nations there’s a lot to learn about the big-picture trends happening there, especially as local and national governments grapple with the coronavirus crisis. 

Can Chinese policymakers fully incorporate the hundreds of millions of rural-to-urban migrants living semi-legally in China’s cities into the economic boom that has transformed the lives of so many of their fellow citizens? The air quality in many major cities is still extremely poor, and lung cancer and other respiratory ailments are a persistent threat to health. Relatedly, now that car ownership is normalised among the urban middle classes, where are they going to put all these newly minted private automobiles?


Yan Song is the director of the University of North Carolina, Chapel Hill’s Program on Chinese Cities and a professor in the school’s celebrated urban planning department. She’s studied Chinese, American, and European cities for almost 20 years and I spoke with her about the issues above as well as changing attitudes towards cycling and displacement caused by urban renewal. This conversation has been edited for length and clarity.

American cities face very different challenges depending on which part of the country they are in. The Rust Belt struggles with vacancy, depopulation, and loss of tax base. In coastal cities housing affordability is a huge problem. How do the challenges of Chinese cities vary by region?

Generally speaking, the cities that are richer, usually on the eastern coastal line, are facing different challenges than cities in the western "hinterland." The cities that are at a more advantaged stage, where socio-economic development is pretty good, those cities are pretty much aware of the sustainability issue. They're keen on addressing things like green cities.

But the biggest challenge they face is housing affordability. Cities like Beijing, Shanghai, Shenzhen, and Hangzhou are trying to keep or attract young talent, but the housing prices are really, really high. The second challenge is equity. How do you provide equal, or at least fair, services to both the urban residents and the migrants who are living in the city, to alleviate some of the concerns around what the government is calling “social harmony?” 

Then the cities in the hinterland, typically they are resource economies. They are shrinking cities; they're trying to keep population. At the same time, they are addressing environmental issues, because they were overly relying on the natural endowments of their resources in the past decades, and now they're facing how to make the next stage of economic transition. That's the biggest divide in terms of regional challenges.

These urban centers rely on migrant workers for a lot of essential services, food preparation, driving, cleaning. But they live tenuous lives and don't have access to a lot of public services like education, health care, social insurance. Are Chinese policymakers trying to adopt a healthier relationship with this vast workforce?

The governments are making huge efforts in providing basic services to the migrants living in the city. They're relaxing restrictions for educational enrollment for migrants in the cities. In health care as well as the social security they are reforming the system to allow the free transfer of social benefits or credits across where they live and where they work [so they can be used in their rural hometown or the cities where they live and work]. 

In terms of health care, it's tough for the urban residents as well just because of the general shortage of the public health care system. So, it's tough for the urban residents and even tougher for the migrants. But the new policy agenda's strategists are aware of those disadvantages that urban migrants are facing in the cities and they're trying to fix the problem.

What about in terms of housing?

The rental market has been relaxed a lot in recent years to allow for more affordable accommodation of rural-to-urban migrants. Welfare housing, subsidised housing, unfortunately, skews to the urban residents. It's not opened up yet for the migrants. 

The rental market wasn't that active in previous years. But recently some policies allow for more flexible rental arrangements, allowing for shared rentals, making choices more available in the rental market. Before it was adopted, it’s prohibited to have, for example, three or more people sharing an apartment unit. Now that’s been relaxed in some cities, allowing for more migrant workers to share one unit to keep the rates down for them. You see a little bit more affordable rental units available in the market now.

I just read Thomas Campanella’s The Concrete Dragon, and he talks a lot about the scale of displacement in the 1990s and 2000s. Massive urban renewal projects where over 300,000 people in Beijing lost homes to Olympics-related development. Or Shanghai and Beijing each losing more homes in the ‘90s than were lost in all of America's urban renewal projects combined. It didn't sound like those displaced people had much of a voice in the political process. But that book was published in 2008.  How has policy changed since then, especially if people are more willing to engage in activism?

First of all, I want to make a justification for urban renewal in Chinese cities, which were developed mostly in the ‘50s and ‘60s. At the time, [in the 1990s] the conditions weren’t good and allowing for better standards of construction would inevitably have to displace some of the residents in older settlements. In my personal opinion, that wasn't something that could be done in an alternative way.  

Still, in the earlier days, the way of displacing people was really arbitrary, that's true. There wasn't much feedback gathered from the public or even from the people affected. In the name of the public interest, in the name of expanding a road, or expanding an urban center, that's just directed from the top down. 

Nowadays things are changing. The State Council realized they needed more inclusive urban development, they needed to have all the stakeholders heard in the process. In terms of how to process urban development, and sometimes displacement, the way that they are dealing with it now is more delicate and more inclusive.

Can you give me an example of what that looks like?

For example, [consider] hutong in Beijing, the alleyway houses, a typical lower-density [neighbourhood] that needs to be redeveloped. In the past, a notification was sent to the neighbours: “You need to be replaced. You need to be displaced, we need to develop.” That's it. 

Nowadays, they inform all different sorts of stakeholders. They could include artists' associations, nonprofits, grassroots organisations that represent the interests of the local residents. Then they [the citizens groups] could say what they really want to preserve. “This is what we think is really valuable” and that will be part of the inputs in the planning process. Some of the key elements could possibly be preserved. They  [the authorities] also talk about the social network, because they realized that when they displace people, the biggest loss is the social network that they have built in the original location. So, it's not only conserving some of the physical environment, but also trying to conserve some of the social network that people have.  


(STR/AFP via Getty Images)

Speaking of urban renewal, there was a big emphasis in the ‘90s and 2000s on highways. A lot of auto-oriented development in Beijing, following more of a Los Angeles than New York model. There's this quote I saw from Hong Kong architect Tao Ho, during the 1990s development of Pudong in Shanghai, warning against replicating “the tall buildings and car-oriented mentality of the West." 

In the ’90s or the first decade of the 21st century, most cities in China were still making mistakes. When I was a student, in the late '90s, I was translating for the American Planning Association. At the time, Beijing was still taking out the bike lanes and the planners from APA were telling them: “No, don't do that. Don't make that mistake." 

In the past decade, that's not occurring anymore. It has been happening [adding bike lanes] for a couple of years in Beijing, Shanghai, Shenzhen. More attention has been given to improving the service quality of green transportation, upgrades to buses, the bike lane system, and so on. 

As China got richer, bikes became a symbol of poverty and, like you said, urban planners began removing bike lanes. Cities like Nanjing and Shanghai considered banning bikes from the central city entirely. 

For a long time, bike lanes were abandoned and the road surface was more devoted to the car. But in the past few years this has been changing, more road space has been given to bus rapid transit and to bike lanes. The attitude giving precedence to the private car is giving way.

Another thing they are trying to do is behavioural change, teaching younger generations that biking is cool, creating a new set of values that's more sustainable. In some major cities, you see educational campaigns, posters around the cities, [saying] bicycling is really cool. 

A recent paper you worked on looked at air quality in Chinese cities and found they are still struggling. The paper cited a study suggesting “that Chinese cities face the worst air quality across different cities around [the] world based on an extensive research of 175 countries.” Your paper recommends transit-oriented development and significant green outdoor space. Is that something you see policymakers adopting?

Yes, definitely, although with regional variations still. The eastern and southern cities are seeing more policies toward transit-oriented development. They are adapting smart technology too. For example, Hangzhou, which is the model of smart cities, the tech tycoon Alibaba installed sensors on every single traffic signal there. Then they were using technology to change the light, so when they detect a higher volume of traffic, they streamline the green lights and the red light wouldn't stop the cars, so there are less carbon emissions at the intersections. They showed that there was a reduction of up to 15% emissions. 

What about in terms of parking policy? How are policymakers trying to deal with the influx of cars in these cities? Are there parking minimums like in many American cities?

I was visiting Hangzhou in December, their “Smart City” headquarters there. They were trying to use technology to let people know where there's parking, so they don't have to drive around, which increases carbon emissions. In other cities, like Shenzhen, they were increasing the parking fee in the downtown by 50 yuan, or seven US dollars an hour. That's pretty high in the context of Chinese cities. It was 10 or 20 yuan before. So, just increasing the parking cost in the downtown area so that you discourage people from driving.

What are you working on now?

My new research is still on air quality. We had a really cool collaboration with a counterpart of Google Street Map. In China, that’s Baidu StreetMap. We asked the company to install another sensor on their cars when they take pictures. We added a sensor for air quality. So, we will know at a street level what are the current emissions by geolocation, by time. That will be really cool when we have all that data. 

Jake Blumgart is a staff writer for CityMetric.