Policy
Tony Lodge discusses the Centre for Policy Studies’ response to the ORR’s Periodic Review 2013: on-rail competition: consultation on options for change in access
O n March 25th the Centre for
Policy Studies published, Rail’s Second Chance – putting competition back on track.
For the purposes of this response the publication will be abbreviated as R2C. The CPS welcomes the ORR’s
intentions to find approaches which support an increase in the level of on- rail competition. Evidence contained in R2C has demonstrated that on-rail competition through open access brings significant benefits to passengers, operators, funders, infrastructure, the wider industry and the regions. The higher level of revenue growth for both the whole industry and for individual operators evident on passenger flows where on-rail competition exists reflects the positive effect of all these benefits on the market. The benefits of open access
competition, alongside franchises, must now be deployed more widely on the UK rail network in order to reap these benefits across other parts of the network. The evidence from R2C, which is detailed below, is clear and is in parallel with the benefits of successful competition in other key public service sectors which were also previously dominated by incumbent monopoly suppliers. Twenty years since the 1993 Railways
Act the maturity of the rail sector is now at an important stage where clear trends and evidence provides a critical mass of information which allows quantifiable assessments to be made. Consequently, it is now an ideal time to drop previous draconian blocks on more open access competition, alongside franchises, in the interests of passengers, the taxpayer and the industry and the regions.
Evidence supporting more open access alongside franchises New evidence presented in R2C shows
Page 72 October 2013
that in those few areas where on-rail competition has been allowed to emerge – primarily on the East Coast Main Line and in rail freight – the benefits are clear: competition has led to new private investment, innovation, new routes, lower taxpayer subsidies, lower transparent fares, more journeys and happier passengers. A small part of the passenger rail
network is open to some competitive pressures. On the East Coast Main Line (ECML), two non-subsidised ‘open access’ operators – Grand Central and First Hull Trains – compete with the franchise holder East Coast. They have shown that competition leads to more journeys, higher revenues for the train companies, lower fares, and more and happier passengers. Data for R2C, based on AECOM figures, showed that at ECML stations:
• passenger journeys increased by 42 per cent at those stations which enjoy rail competition, compared with 27 per cent for those without competition
• revenue increased by 57 per cent where competition occurs compared to 48 per cent for those stations without competition
• average fares increased by only 11 per cent on those stations with competition, compared to 17 per cent at those stations without competition
• in the case of the franchise holder – East Coast – it has been able to increase its premium payments to government year-on-year with no need for subsidy, while facing increased on- track competition from open access operators.
In addition, in the official rankings
of passenger satisfaction of the 31 main train companies, the companies which came first and second were those which are running open access competitive
services against the franchise – Grand Central and First Hull Trains. (See National Passenger Survey, Passenger Focus – Spring 2013.1
) Where Network Rail had previously
suggested there was no available capacity on the WCML, analysis by private timetable experts has subsequently identified available capacity for such extra services. It is therefore essential that Network Rail’s current work to improve the timetabling process is progressed with a degree of urgency and with a new attitude towards delivering more capacity for a more competitive railway.
Network Rail and the ORR must now be mandated to:
• encourage as much competition as possible between train companies and to free up as many routes as possible. It should also be better incentivised to maximise the capacity available on all routes through its role in the timetabling process
• work and make sure that the rail network is used most effectively with a view to better rail competition, where capacity exists
• identify and explain to ministers and Parliament the benefits of more rail competition (alongside franchises) and how it can reduce industry costs and boost passenger satisfaction, in line with initial Conservative rail privatisation ambitions
• detail, in light of the rail franchise collapse of 2012, how open access should play a bigger part alongside existing and soon to be re-let franchises, especially on the West Coast Main Line.
At present Network Rail is not
effectively incentivised and lacks corporate commitment and ambition
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