Opinion
on the system and demands for upgrades and expansion to reduce overcrowding. Worried about spiralling costs, the department took full control of the railways from the now defunct Strategic Rail Authority in 2006. That decision is arguably the root cause of this recent debacle. Whilst British Airways or National Express is free to make decisions about how many aircraft or coaches they buy and where they operate them, the railways are run largely by Whitehall. The reason cited by successive governments is the large amount of public money pouring into the railway. But that argument is looking increasingly difficult to sustain. Long distance rail services in the UK are profitable. The West Coast franchise was all about how many hundreds of millions of pounds operators were prepared to give the Treasury. But bidders and passengers have been caught in a squeeze between increases in fares for the government’s coffers and highly prescriptive state rules covering nearly every aspect of running a train service. No other profitable business in the country runs in this fashion. Other transport operators are able to plan on normal business lines. One effect of Whitehall
control is that it works against the most efficient and rational economic investment decisions being made by the industry.
Financial handstands have to be performed to pay for trains with a life of 30 years to be run in a 10 or 15 year franchise. Operators end up with a centrally dictated mix of carriages that no rational private company would choose. These sorts of interventions have driven up fares and procurement and maintenance costs.
Policy crossroads From a problem springs opportunity. By accident or otherwise, Patrick McGloughlin has found himself at the crossroads of a policy choice. The secretary of state has already demonstrated his willingness to be very open about the franchising fiasco. His recent arrival at the department and an impending judicial review perhaps encouraged his course of action. But his decision to go public will be welcomed by many in the transport sector. McGloughlin should take the opportunity to go much further. He should announce plans to move the country’s profitable inter-city routes away
from Whitehall and subject them to much lighter regulation. Thirty-year concessions – similar to that of High Speed One – or auctioning long distance rail slots would provide a step change in how the railways are delivered. Competition from cars, coaches and airlines will keep the companies on their toes. They would be able to invest over sensible horizons. The experience of so called open-access operations is that they drive quality up and put downward pressure on fares. Perhaps best of all – from the government’s perspective – the Treasury would get paid up front when the rights to run services are sold. For commuter railways, the case for further devolution to the Mayor for London and other local authorities is equally, if not more, compelling. Locally elected, accountable individuals should have the final say in the fares people pay and the services they receive. Taken together, these changes would help put the railway beyond the reach of Whitehall once and for all. As they say in America, ‘never waste a crisis’ or in Mr McGloughlin’s case a judicial review.
Alex Jan, is the global head of Arup’s Transaction Advice Team for Transport
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DECEMBER 2012 PAGE 39
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