1. Transport
  2. Rail
May 3, 2018

“Britain’s railways need more, not less, competition”

By Sam Dumitriu

There are two companies that regularly top Transport Focus’ rail passenger satisfaction league tables: Grand Central and First Hull Trains.

Unlike most franchised Train Operating Companies (TOCs), which have an effective monopoly on the track, these are open access operators, and compete directly with Virgin’s franchise on the East Coast. The only monopoly between London to Doncaster is the board game, which is available on all Standard Class tables on Grand Central trains (pieces are available from the buffet car for a small fee).

If every TOC was as popular as Grand Central (96 per cent satisfaction) and Hull Trains (95 per cent satisfaction) then I suspect Labour’s pledge to re-nationalise the railways would find few supporters.

In a report for the Adam Smith Institute, rail journalist and entrepreneur Adrian Quine argues that we need A Third Way for Britain’s Railways. He argues that by injecting competition into long-distance rail travel, Open Access can lead to a rail renaissance.

Re-nationalisation is the wrong answer to the wrong question. Since the Conservatives privatised rail in 1994, historic declines in passenger numbers have been reversed and more than doubled to reach record levels. At the same time, investment has increased, rail deaths have fallen, and subsidy per trip has fallen.

Frustrations with the railways are often the fault of the Department for Transport. Take Southern, where Govia Thameslink Railway run a service delivery contract under Southern’s branding. GTR run Southern in effectively the same way Arriva run London buses. Southern doesn’t set schedules, prices or pay and conditions, and it hands over fares directly to the DfT.

The Department for Transport (DfT) stipulates exactly what a franchised train company can offer: dictating timetables, stopping patterns and even minor details such as whether a train has a catering trolley or not. This limits their capacity to compete with overlapping franchises and other forms of transport on anything but fares.

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Open Access operators are freed from the DfT’s excessive specifications. The result? Innovation leading to better customer service. 

It’s not just boardgames. Grand Central were the first TOC to offer free wi-fi. They make their full range of tickets available for sale on the train (most TOCs only have their most expensive tickets on sale for passengers who don’t purchase a ticket before boarding).

Hull Trains customers also get free 4G wi-fi and developed sophisticated passenger information systems for people who are into that sort of thing.

The pressure to compete forces OA operators to find greater efficiency savings. The Office for Rail and Road estimate that operating costs for OA operators are between 10 per cent and 30 per cent lower.

As a result, fares are lower too. To compete with Virgin, Grand Central and Hull Trains offer cheaper fares for peak-time travel (£52/£58 vs. Virgin’s £99). Virgin themselves charge less on the East Coast (where there is competition) than on comparable trips on the West Coast (where there isn’t competition).

Better service and cheaper fares have led to faster passenger on routes with open access. Research, commissioned by Grand Central, found that stations with competition – open access and where franchises accidentally overlap – saw faster revenue and passenger number growth than comparable stations without competition.

In freight where competition is intense, staff productivity has increased significantly. Aggressive competition with road freight, forced unit costs on rail freight down by 35 per cent between 1999 and 2009.

Rather than re-run the debate between nationalisation and privatisation, we should increase, not reduce, competition on Britain’s railways. We should make it easier for open access operators to compete on long-distance rail lines.

Consumers understand that competition on air travel delivered huge benefits. Flyers can choose between EasyJet, RyanAir, and BA at Gatwick or Heathrow: why shouldn’t rail passengers have similar choice?

Sam Dumitriu is head of research at the Adam Smith Institute.

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