Wednesday 6 February 2019 9:11 am

Britain needs more competition to get the railways back on track

When the word “privatisation” is mentioned in the same sentence as “rail”, even some Tories feel a spurt of red go through them.

At the forefront of their minds must be the fact that the broader public – about 56 per cent – have expressed support for nationalisation.

But when asked why it is that people want the railways nationalised, the reasons are not ideological, but practical. They complain that trains are too expensive, grubby, and often late.

They’re right. But nationalisation won’t solve these issues. The key problem is not that Britain’s rail system is partly privately operated, it is that there is too little competition.

First, let’s get the facts straight about nationalisation and privatisation. Nationalisation ain’t cheap and it ain’t progressive.

Households in the top fifth of the income distribution take four times as many rail journeys and travel six times as far as those in the bottom 20 per cent, according to a recent Centre for Policy Studies paper. When nationalised, rail travel for richer commuters ends up being heavily subsidised by poorer taxpayers.

In contrast, despite oft-repeated claims, privatisation has been fruitful for passengers. Just look at the 1.65bn rail journeys made annually, twice as many as pre-privatisation.

This has been matched by £20bn of investment even in the face of ballooning demand. You can see the results – frequenters of the newly renovated London Bridge and Kings Cross stations can see first-hand how snazzy they are.

Every economics student knows that competition leads to lower prices and better products because companies are keen to fight for consumers.

Think of the airline industry: privatisation and a big injection of competition have over the decades led to more choice in prices and services, making air travel affordable for people who could never have dreamt of flying when the technology first arrived.

The reason why trains are essentially acting like they don’t have to compete at the moment is that they don’t. Franchises like Virgin and GWR compete for a contract from the Department for Transport, and that’s mostly where the competition ends.

But on certain routes, such as London to Birmingham, competition is alive and well, satisfaction rates are high, and ticket prices are low. On these lines, Open Access Operators are allowed, giving a variety of train companies access to the tracks. This has been the case in the freight train industry since the mid-1990s, leading to greater efficiency and lower costs.

The Japanese system is often hailed as an example of railways done right. It is the Elysian Fields for free-market train anoraks: competition is in abundance, price increases are in line with inflation, and ongoing investment means that the trains have some of the latest technology.

While Japan has a different model of competition – between lines rather than between operators on the same line – the model shows the power of competition to improve the railways.

There are other issues with our rail system. The rail unions regularly flex their muscles, pressuring the government to prevent modernisation under the facade that it will cause potential job losses or endanger passengers.

The increases in train fares that have so tormented commuters every January has largely been down to both the RMT and Aslef unions asking for pay increases above inflation.

The public should have their eyes open to this and realise that their motives aren’t as pure as they seem. They should also note that the politicians calling the loudest for rail nationalisation are often those closest to the unions whose unfair demands are so detrimental to passengers.

Above all, nationalisation should be the dirty word, not competition. We need more competition to get the railways back on the right track.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.