Posted by: Richard Lenthall | May 31, 2010

UK Rail Privatisation: New Government Inherits It’s Old Problems

The way in which the UK rail network operates is hugely complicated. In short, several companies operate the trains according to a franchise agreement negotiated with the government, which covers a particular route or area, whilst another company maintains the tracks and signalling. Stations themselves are largely owned by the track maintainer or the largest operator of services to that station. Further complicating matters are the facts that new train orders are made in conjunction with the government’s Department of Transport (rendering them susceptible to political mandates), and that those trains are also then manufactured by private companies, usually abroad, which almost always raises the anger of would-be manufacturers in the UK.  Prior to 1993 almost the whole operation was under the umbrella of one nationalised company, British Rail.

Today, through two shining examples, we see how the privatisation of the network has become politically corrupted. Nigel Harris, editor of RAIL magazine, has published a piece saying that the UK government has advised Network Rail (that’s the now private company which maintains the track, many stations, and other infrastructure) to hold back on large bonuses to its executives. Also today the DFT has cancelled many orders of rolling stock that are much needed to relieve overcrowding.

But hang on! Who’s in charge here?

Network Rail is a private company operating in a private sector. Privatisation of the industry should mean it is now free of government to execute its mandate how it pleases. Yet today we see the government warning, in a very similar way to the banks, not to pay large bonuses that will “Defy the economic climate”. Is this a private sector business, or not? In the days of British Rail,  the nationalised company would have to bend its knee and do what the government wanted. On the other hand if it was truly a private company it would be free to do as it pleases, yet it seems we have neither.

Through its Department for Transport (DFT) arm, the government has cancelled the order for over 100 carriages, leaving many services in the North over capacity and hamstringing the efforts of private companies to meet the obvious demand. Basic economics teaches us that in a free market a private company aims to satisfy the needs of its clients. If sofas, beer or tyres are in short demand they order some more and keep the customer supplied. Except that’s not how it works on the UK railways. Is this truly private sector, or not? If it was British Rail, the decision would now be on the government’s record and would be judged accordingly. If it was a free market the private company would be free to order extra carriages and meet the demand of the passenger. But again, neither scenario seems accurate.

The truth of the matter is that UK rail privatisation was a badly managed exercise which continues to deliver poor value to the taxpayer. Despite governments from both sides having had an opportunity to remedy the situation, politics still has a controlling hand in what otherwise would be a free market sector.  This distorts its operation and now today we see the old political problems quickly emerging in a time of fiscal austerity. For the rail user this type of situation will almost certainly continue, as without clarity, efficiency and investment, the private sector will never truly emerge and the government will continue to meddle without the burden of accountability.

Later this week I’ll show you how the poor value of the privatised network gets highlighted to the passenger via modern mobile devices.

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