Rail 526: Railway’s little Britons should stop preaching to Europe

Britain is so far down the line in rail privatisation that many believe it has nothing to learn from Europe. In fact, as CHRISTIAN WOLMAR points out, Johnny Foreigner could teach the UK a trick or two.

Nearly ten years after the start of UK rail privatisation, no European railway has undertaken a railway restructuring as radical and far-reaching. Sure, there has been a wave of railway reforms which has resulted in a bewildering array of different models, but Britain’s experiment is in a completely different league from the changes experienced by our European neighbours.

This is made very clear in a fascinating little book just published by the Community of European Railway and Infrastructure Companies (it has only recently added that last bit so is still known as CER). The title may not be exactly sexy – Reforming Europe’s Railways; an assessment of progress – and thewriting leaves something to be desired – which is understandable as most of the authors are clearly non English speakers –  but the book should be required reading for anyone concerned with the future of the railways in the UK.

Sweden started the process of reform when it separated its infrastructure from its operations in the late 1980s. However, this was done for completely different reasons than in the UK. The aim was to create a level playing field between modes and stimulate investment in the infrastructure, whereas the UK’s separation was aimed at stimulating on-rail competition which was always a mirage.

However, not many countries have even gone as far as Sweden in this separation and Britain is so much further down the road of railway revolution that there is a tendency not to look at what has happened abroad. Such xenophobia is a rather unpleasant British trait that is made worse by the fact that British officials have been heard extolling the virtues of the UK model of rail privatisation to European audiences. The underlying message is that we have nothing to learn from Johnny foreigner, but they could do with ourexpertise. Hmmm In fact, there is much to gain from examining the European experience. It is, however, already too late to take on the most important one which is that a gradual approach with a clear goal in mind is preferable to a upheaval.

The first question is why reforms are necessary. For the most part, they have been driven by the straitened circumstances of the railways as market share (but usually not actual numbers) have declined as competition from the car has intensified. Moreover, the idea of heavily subsidised monopolistic state owned enterprises often with very generous labour practices and opaque financial relationships with government sits unhappily in the modern notion of the role of government.

That is all well and good, but the authors have found that railway reform is rarely, if ever, carried out within the context of an overall transport policy, let alone overall political objectives. Therefore there are often unintended consequences, such as pressure to close lines, sharp fare rises or sudden huge rises in debt as funding for the railways is squeezed.

The second reason for reform is that, as the authors put it, ‘politicians have been tempted to expand railway services without wanting to pay for them’. Therefore debts have mounted alarmingly in several countries, though, of course, with Network Rail heading for borrowings of £21bn, that is the case in the UK, too.

The reforms have been stimulated at the European level by a series of railway packages, the third of which is currently being negotiated. The first, famously, specified that there should be separate accounting arrangements for operations and infrastructure in order to allow open access to the network. This does not, as Richard Bowker mistakenly wrote in Rail recently that the two cannot both remain owned by the same organisation, and indeed the majority of railways in Europe are still integrated. The diktats of Europe have, in fact, played a surprisingly small role in bringing about changes, especially as some countries have virtually ignored them.

The reforms – and therefore the conclusions of the book – are very much work in progress. Indeed, reform tends to engender further change: ‘In several countries, reforms give the appearance of trying to hit a moving target, one reform leads to another, without any particular coherent government strategy towards the transport sector as a whole’. Sounds familiar.

Therefore, watch for a process of almost continuous change over the next decade. Every country has a different model – indeed, there are a variety of both integrated and separated structures. The financial arrangements vary, too, and no country has attempted to create an access charge regime like that in Britain, which, I have long contended, has a deterrent effect on rail growth because it imposes such high costs on operators and now threatens to undermine the future of the whole industry. Holland, for a time, charged nothing for access, a model which certainly makes sense if the government is encouraging rail use.

The extent of reform varies, too. In France, not a single train operated by any company other than SNCF has so far run, while in Germany there has been both open access services (though limited) and considerable franchising out at the regional level. The far greater emphasis on the involvement of regional government is one of the characteristics of several European models and is one that seems to work well. For the moment this model cannot be transferred here since we do not have strong regional bodies (with the arguable exception of London) Labour is thinking of reorganising the provision of transport services by local government in order that they can exploit the opportunities of road pricing. That could open the way to similar devolution but then would strong regional bodies want control of integrated sections of railway, something to which Network Rail is vehemently opposed.

In those countries which have attempted the most reforms, the ride has occasionally been very bumpy. In Germany, there has been a longstanding aim to part privatise Deutsche Bahn as an integrated company, but the date has repeatedly been postponed because of the failure of the company to reach financial objectives. Meanwhile in Holland, there was an early attempt at open access, with the wonderfully named Lovers Rail briefly attempting head on competition on the 19 km Amsterdam – Haarlem route but foundered because so many passengers held cards entitling them to discounts on the state network (presumably Lovers Rail did well on February 14, though!). In Holland, too, when the infrastructure was separated out, punctuality fell dramatically, and only recovered when the two separate (but both state owned) companies worked more closely together.

In Italy, where the focus is on building an 800 km long high speed line through the spine of the country, there has been little real institutional change and, as in Germany, there is still a debate taking place over whether there should be a full separation between infrastructure and operations.

One of the noticeable features of all this is just how little private money is being invested in the railways, apart from for freight which is a very different story and has, in many ways, benefited more from the reforms.

There is a naïve notion that simply launching reforms will bring about desired objectives such as attracting private finance, improving rail’s economics or increasing its modal share. While clearly some benefits have been brought about from reforms, such as improved labour productivity, the overall message is that politicians and administrators need to work out what they want from the railways before embarking on complex reorganisations with no clear destination.

Fun and games over Thameslink box

A very neat solution has been devised for the fitting out of the Thameslink box at Kings Cross. Readers will recall that this new station for the Thameslink services has been built but not fitted out because there was apparently not the money – some £70m – to fit it out. In one of those classic fudges which make railway economics so unfathomable, the money will now be paid by the successful bidder for the new Thameslink franchise.

That does not mean taxpayers are getting a free lunch. The money is not really coming from the franchisee, but will be paid to the company by the Department for Transport as part of the general subsidy it will receive. Or rather, in the likely event that the franchise is profitable, the money will be generated by requiring reduced premium payments from the franchisee. And, of course, that will look better on the government books than if hard cash had to be paid out from the Exchequer even though in the end it is all the same pot and there will simply be less money available for investment elsewhere. All this clever wheeze does is make it look as if the private sector is contributing more than it is in reality. And, of course, it is very likely to cost more since the company will put in extra for risk and profit. Oh well, I suppose at least we will get the station that is desperately needed.

An apology

Those readers who contacted me and expected me to give a full blast back at Richard Bowker over the review of my book in the last issue will, I am afraid, be disappointed. I really can’t be  bothered to engage with a man who does precisely what he accuses me of – refusing to consider or listen to any arguments other than his own. Moreover, since he no longer has any role in the rail industry, such a discussion will be boring for the readers.

Perhaps when he has got over the trauma of having the organisation he headed shot from under him, we may be able to have a proper chat about the future of the railways, but I won’t hold my breath.

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