UK Rail Shows Pitfalls of Natural Monopoly Privatization

Lambert here: I’m sure readers can come up with other natural monopolies that are, in fact, privatized.

By Unconventional Economist, who has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs. Originally posted at Macrobusiness.

The announcement that rail fares will increase by up to 5.5% is yet another indictment of the failure of the country’s privatized railway industry. Railway privatization was sold to the public on the basis it would “provide better value for money for the public who travel by rail”.

The government’s White Paper in 1992 that heralded the break-up and privatization of Britain’s state-owned railway network ultimately promised a lot but in reality delivered very few benefits for the passenger or the tax payer. In particular, as far as rail fares were concerned, rail privatization has led to anything but “better value” for the passenger.

Since privatization, rail fares have been categorised as either regulated or non-regulated. The government was aware that passengers who commuted to work by train were a captive market, since there was usually no realistic alternative method of transport. They therefore made commuter services and some other types of longer distance tickets regulated to limit the ability of private train operators to impose exorbitant fare increases. But for other non-regulated types of tickets, operators would be able to charge whatever the market would bear.

Majority of fares not regulated

Contrary to the belief of most passengers, however, the majority of rail fares are not regulated in any way. Out of the total annual passenger income of £7.7 billion, about two-thirds of this revenue is from fares that are unregulated.

Even where there are regulated fares – as in some long distance off-peak return tickets – the train operators are increasingly able to apply ever more onerous time restrictions on the availability of trains in order to limit use of these cheaper tickets.

Since privatization, the government has also allowed train operators to impose ever larger increases in fare income from regulated tickets. Originally, increases in regulated fares were kept below the inflation rate by using a retail price index (RPI) minus 1%. But, as state subsidises to the industry continued to soar to more than twice the level received by the former state owned British Rail, the government changed the pricing model.

Since 2004, to ensure the passenger carried a greater share of the cost of operating the railway network, tickets have been calculated and increased each year by the RPI plus 1%. (Although for 2013-14, for political expediency, the chancellor limited the rise to just the RPI only link.)

This year’s rise

Given that the RPI is now 2.5%, all regulated fares will increase by 3.5% in January 2015. But the fares framework also allows train operators to impose further fare increases on some routes. Under a so-called “fares flex” policy, train companies can target specified routes for a fare increase surcharge – provided, in total, the general pricing model is still met.

This additional flexibility originally permitted another 5% increase. However, the government subsequently changed the “fares flex” regime to a 2% increase over and above the general pricing model. This is why some fares may increase by a full 3% over the RPI, reaching 5.5% on some routes.

The only way is up

There seems little evidence that the train operators are using their commercial freedom to offer “value for money” by lowering the increase on most unregulated fares. Quite the opposite. Since privatization most unregulated fares have increased at a considerably higher rate than regulated fares across the network.

In practice, many journeys have no effective competition from road or air services to hold down the price of unregulated railway tickets. As a result, train operators can and do impose whatever fare increases they wish in order to extract as much revenue from customers as possible. Indeed, the government even persists in allowing train operators to use a pricing model based on the RPI – an index that is usually higher than the more widely used, but lower, Consumer Price Index.

Taking all types of fares together, train tickets have now soared 17.5% higher in real terms since 2003, with many of the unregulated fares increasing much more. So much for the forecasted benefits that privatization would bring.

Wider industry malaise

While these fare increases are clearly important for passengers, they are merely reflecting a wider malaise of the railway industry. Rather than privatization leading to downward pressure on fare levels, as predicted at the time of privatization, the opposite has happened. The privatised and fragmented industry that was split up into more than 100 separate sectors has become a costly and dysfunctional business.

The income for the railways can only come from two sources: the passenger or the taxpayer. Unlike most other EU railways, UK governments of all parties have decided to reduce the level of state subsidies to the railways and shift more of the financial burden to passengers.

In 2008, the cost of operating the nation’s railways was shared roughly equally between the taxpayer and passenger. Since then the burden has shifted to the passenger who now funds two-thirds of the industry costs.

On top of this, there is more financial pain to come for the railway traveller. Over the next few years the Department for Transport has planned for the passenger to be required to carry up to three-quarters of the industry’s costs.

Passengers paying these higher fares will find little consolation in knowing that they are not just paying for a railway ticket; they are also paying for the structural, financial and operational failure of an industry that should never have been privatised.

Lambert here: I’m sure readers can come up with other natural monopolies that are, in fact, privatized.

Print Friendly, PDF & Email
This entry was posted in Economic fundamentals, Macroeconomic policy, Market inefficiencies on by .

About Lambert Strether

Readers, I have had a correspondent characterize my views as realistic cynical. Let me briefly explain them. I believe in universal programs that provide concrete material benefits, especially to the working class. Medicare for All is the prime example, but tuition-free college and a Post Office Bank also fall under this heading. So do a Jobs Guarantee and a Debt Jubilee. Clearly, neither liberal Democrats nor conservative Republicans can deliver on such programs, because the two are different flavors of neoliberalism (“Because markets”). I don’t much care about the “ism” that delivers the benefits, although whichever one does have to put common humanity first, as opposed to markets. Could be a second FDR saving capitalism, democratic socialism leashing and collaring it, or communism razing it. I don’t much care, as long as the benefits are delivered. To me, the key issue — and this is why Medicare for All is always first with me — is the tens of thousands of excess “deaths from despair,” as described by the Case-Deaton study, and other recent studies. That enormous body count makes Medicare for All, at the very least, a moral and strategic imperative. And that level of suffering and organic damage makes the concerns of identity politics — even the worthy fight to help the refugees Bush, Obama, and Clinton’s wars created — bright shiny objects by comparison. Hence my frustration with the news flow — currently in my view the swirling intersection of two, separate Shock Doctrine campaigns, one by the Administration, and the other by out-of-power liberals and their allies in the State and in the press — a news flow that constantly forces me to focus on matters that I regard as of secondary importance to the excess deaths. What kind of political economy is it that halts or even reverses the increases in life expectancy that civilized societies have achieved? I am also very hopeful that the continuing destruction of both party establishments will open the space for voices supporting programs similar to those I have listed; let’s call such voices “the left.” Volatility creates opportunity, especially if the Democrat establishment, which puts markets first and opposes all such programs, isn’t allowed to get back into the saddle. Eyes on the prize! I love the tactical level, and secretly love even the horse race, since I’ve been blogging about it daily for fourteen years, but everything I write has this perspective at the back of it.


  1. rich

    The UK rail privatisation was basically a gift to a load of connected insiders, law firms and consulting firms that got to cash out and make a fortune. The poor traveler gets to pay vastly more for basically the same lousy service he had in the 80s. A good chunk of the network seems to shut down on weekends for maintenance. It shuts down completely in the event of any kind of weather at all. The only real difference seems to be the endless inane automated announcements that play throughout the journey, pitched at a level which seems to assume everybody on the train is a half-wit.

    The companies invest just about enough to keep the service above the point of collapse while creaming off massive profits. When they get the calculations wrong, the taxpayer steps in to rescue them. Or people die in crashes. And then the taxpayer steps in.

    1. Generalfeldmarschall von Hindenburg

      It’s the same formula used to privatize Russia. Most likely implemented by many of the same combination of starry eyed TINA pseudo intellectuals, spooks and pump and dump mega grifters.

      1. digi_owl

        Neoliberalism under different guises. Shits been going on in one form or other since the 80s.

    1. ambrit

      Come on Jim. You and I know that an “unregulated” subway system in as heavily corrupt a place as NYC would have much more than tripled over that time span. (Cue the ghost of Boss Tweed!)

      1. LifelongLib

        Dunno. Admittedly limited reading suggests the political bosses of Tweed’s time felt more obligation to their constituents than most politicians do now.

        1. ambrit

          Hmmm. Sort of the definition of ‘rational’ vs. ‘irrational’ predators.
          “Cuando el Tiburon se bana, salpica.”

        2. Ben Johannson

          It doesn’t track: if government ownership were the optimum institutional arrangement for enriching favored interested parties and corruption, then there would not have been a privatization push, which has never enjoyed grass-roots local support. To the contrary privatization is almost always forced through despite popular opposition and is invariably accompanied by opaque contracting arrangements to avoid scrutiny.

          It’s doubtful business elites want to privatize a service to increase competition and lower their profits, as follows from their own arguments.

  2. ambrit

    Where oh where is a real “Labour” party when we need it?
    Time to re-nationalize the public utilities, without compensation for the “private” entities stealing value. They have already made their piles. Time for them to go off to some tropic isle and laze their lives away. The farther away from the rest of us, the better.

    1. rich

      Right – Privatisation is nothing but the theft of public owned assets to enrich cronies. How can you have ‘competition’ in utilities?

      1. Richard

        Same con job going on here in the U.S. ! Public/taxpayer assets secretly sold to private firms. The biggest example right now is toll roads being built everywhere. Private companies grabbing a boat load of profit while taxpayers have to pay to use roads that once belonged to them and they are still on the hook for maintenance and repair of those same roads. Seems that many of these private owners are foreign based and enjoy the protections, given to them in one or more of the international trade agreements passed over the past twenty five years, protections that cannot be overridden by U.S. Law. Those same agreements provided private U.S. Companies with loopholes that allowed them to ship all their living wage jobs to low wage countries in the far east and elsewhere leaving the current and future U.S. Workforce to survive on low wage service sector (Mc. Donald’s and such) jobs. A consumer economy doesn’t work very well when everyone is just existing paycheck to paycheck and consumer’s credit is totally maxed out !

      2. Richard

        We privatized electric utilities in the U.S. about twenty years ago, until then most big electric providers had exclusive franchises with the towns and cities that they served. Rates and increases were negotiated between the utility companies and the franchiser and often overseen by a public utility commission in each state.
        Now we have a lot of individually owned marketing companies who have contracts with the electricity providers to buy their product at a negotiated wholesale price and mark it up to the end users. Because of the mass of companies marketing electric service to the same subscriber base, the profit is miniscule for electric service provided to an individual subscriber so any real profit depends on a large customer enrollment.
        It this sounds like a jumbled mess, it is ! Individual customers are often seen changing electric utility marketing companies to save two U.S. Pennies a kilowatt hour. In addition, the actual utility providers have now farmed out their outside plant installation and maintenance crews to outside companies that where created when this mess was implemented. Most experienced electric service workers, that previously worked directly for the electricity providers, were forced to change jobs losing their company retirement and accepting much lower salaries from a new for-profit company. The biggest service related effect of this change was a marked increase in power outages due to many factors, the most visible being a sharp reduction in the trimming of trees and scrubs that ended up touching high voltage lines and this has often led to massive outages during the mildest of adverse weather conditions !
        One again the sheep that make up a majority of the U.S. Population were effectively brain washed by the Free Market hucksters into happily accepting this system, not having the slightest idea as to what they were getting involved !

        1. digi_owl

          Sounds very familiar to this Norwegian.

          At some point in the 90s there was a wave of privatization etc going on.

          One of them was with the electrical grid. Where before the wiring and the supply was more or less from the same company, now you could buy your electricity from any supplier in the nation (more or less). but the wires were still owned and operated by the local supplier. End result is that the the “line rent” skyrocketed, where before it had been a mere footnote. So while the pr Wh price dropped from competition, the bill stayed the same or even went up.

          The only ones getting anything out of it are the suits running the day trade spot market. But the change was marketed as being a benefit for the common citizen.

  3. impermanence

    The concentration of capital is directly related to the lack of competition in the economy. If the goal of business is to increase your market share, this would seem to be a natural outcome in times when lawmakers sell their services to the highest bidder.

  4. Ed

    One thing I never understood about this is that you would think there is a stronger case for government ownership of the rail lines and rail ways than for just about any other non-armed sector. This is a capital intensive industry with really high barriers to entry. Its hard to have two competing companies run trains along the same track, and impractical to have parallel tracks, run by different companies, heading to the same place, and at any rates the schedules would have to be different. So free market competition is essentially impossible.

    Rail is also really, really important to the health of an economy, and it makes sense for the government to make sure the infrastructure is maintained, people are able to get to work on commuter lines without being gouged out of most of their salary, and that rail companies are not playing favorites or taking kickbacks to give favorable terms for freight hauled by one company vs. its competitors. Also militaries are major users of freight rail networks.

    So its curious as to why the insistence on private rail companies. Its almost as if this is nostalgia for the era of super-powerful rail companies that could dictate to the government. But I’m not sure if that era went away; in the US the private freight rail companies were able to get out of their obligations to carry mail and passengers, and offload their pension obligations to the government. Maybe I’ve answered my own question.

    1. digi_owl

      Likely the private company is on tender form the government, meaning that ever so often it has to renegotiate its operations contract for that route or region.

      This in the belief that the government will get more bang for its buck that way.

      But most likely any savings are eaten up by defending the contract process against favoritsm lawsuits etc.

      And whoever gets the contract is likely to bring in sub-contractors that bring in sub-contractors until the whole structure collapse (both figuratively and literary).

      Its the same kind of MBA/economist abstractions that fuel New Public Management etc…

  5. Gabriel

    Who would have thought? I would have naively thought that costs for private v public rails would even out – in other words, given the differences in pension costs, manager pay, executive pay, etc that the cost per passenger mile of each would be roughly similar.
    Apparently not.
    So what are the deeper differences? Has anyone taken a close look at the income [or turnover] statement of private v public railroads? Where are the big differences?

    This is not a parallel but a somewhat different comparison – I remember in the old days during regulation that regulated US utilities absorbed extra cash by giving lush executive facilities and perks. Are the private railroads doing the same?

    1. vidimi

      in general, when you privatise a monopoly, whether it’s a railway, utility, garbage collection, you name it, these things happen:

      1-first year prices go down for the first year. this is to justify the privatisation and happens because the union gets busted: salaries and pensions get slashed, paid overtime gets replaced with unpaid, lay-offs.
      2-investment in infrastructure desists
      3-prices in subsequent years increase: skyrocketing costs are used as a scapegoat, though these, in real terms, are lower than ever, but the robber barons’ profit requirements have gone up.

      1. drexciya

        Totally agree on that one. I remember a documentary on the privatization of water companies in France and (later) in Germany. You were only leaving out the bribes involved to get (local) governments to kick off the privatization process.

        Typically with utilities, you are talking about investments which are very long term. This doesn’t work with the for-profit companies that step in with privatization. They want low maintenance and short term profits and that simply doesn’t work.

    2. cnchal

      So what are the deeper differences?

      From the post.

      The privatised and fragmented industry that was split up into more than 100 separate sectors has become a costly and dysfunctional business.

      In this instance, overhead is too heavy.

  6. diptherio

    Sounds a lot like what we got here in Montana when our regulated monopoly got “de-regulated” in the late nineties. Of course, we were told that allowing Montana Power Company to sell off all of it’s dams, power-plants and transmission lines to out-of-state owners would somehow provide lower rates through the wonders of competition and free markets (despite the fact that the generation facilities all went to ONE company, PPL, and the distribution facilities went to ONE other company, Northwestern). The predictably awful results: skyrocketing power prices…and the former MPC, which transformed itself into a telecom company after selling off everything profitable, promptly went tits-up, leaving retirees of the company who had faithfully put their retirement savings in company stock to find some other way of financing their declining years. Bob Gannon, the CEO who oversaw MPC’s de-reg and subsequent bankruptcy, can no longer walk safely down the streets of Butte, so hated is he there.

    Altogether, a pitiful story.

    1. rich

      This. Exactly. Something everybody needs, handed to one company to make unlimited profits. Executives squander the money on boondoggles, go bust and the taxpayer picks up the tab.

    2. Ben Johannson

      If the consumer has no choice in supplier of a good, there is no market. If there is no competition, there is no market.

      Always we’re given this schmutz leaked from a libertarian’s brain promising market solutions when all they really mean by market is “non-government”. Business conservatives use it for propaganda; only internet libertarians are dumb enough to really believe it.

    3. ambrit

      As far as Gannon is concerned; Are there no lamp posts in Butte? I know that cowboys are big up there, so there shouldn’t be a shortage of rope. (Rustlers come in all shapes and sizes pardner.)

    4. sharonsj

      So why hasn’t some impoverished ex-worker taken a few shots at Gannon? I always thought a few dead thieving CEOs and vulture capitalists might put the brakes on companies stealing pension money.

  7. John

    People are now getting a glimpse into why some UK elites want out of the EU. Some industries like telecomm & banking want to charge anything want without Brussels meddling

    1. rich

      Nobody in the UK Elite wants out of the EU which represents the ultimate in cronyism and corruption, with the additional advantage that the electorate can do nothing about it. It’s a post democratic government of technocrats.

  8. strowger

    The privatisation of British Rail was done in an enormous rush by a Conservative government facing an election it knew it would lose. The structure chosen (very large number of entities replacing one monolithic one) was not well thought-through.

    Objectives of increased responsiveness to market signals turned out to be politically impossible. The market signals are that most services are hideously uneconomic and resources should shift to commuter peak-time-only services in rich areas, and fast long-distance services. This is not a vote-winning proposition.

    The result has been that the passenger service is in fact controlled to a very great degree by central government, which specifies the timetable, rolling stock, and fares. The franchise holders who run the trains, do so with little freedom of action, but serve a politically *extremely* valuable service – of taking all the blame for high costs and poor quality.

    The industry as a whole has badly failed to keep control of its costs. It suffers badly from gold-plating of health & safety regulation, being held to a much higher standard than road transport. It has failed to grasp the issue of disabled access to rail transport, being lumbered with big costs of provision that is very lightly used. It’s badly overmanned and pays staff far too much relative to similar roles in other industries. With the industry micromanaged by government, much of this is government’s fault.

    The cost issues are very hard to tackle with the industry structured as it is because so many companies are involved.

    1. Mark P.

      ‘The privatisation of British Rail was done in an enormous rush by a Conservative government facing an election it knew it would lose’

      Same situation as here in 2014, w. Cameron’s gang and the NHS.

  9. Ed

    One other point I was going to make is that we should break the association between capitalism and free markets. By “we” I mean people on both the right and the left.

    Taking a government monopoly and turning it into a private monopoly has nothing to do with the free markets whatsoever. Its part of the process of turning the economy back into the sort of 18th century mercantilist theme park that Adam Smith got so worked up about, and the French Revolution helped smash.

  10. Jay Humphrey

    I just think a private company will run any business better than a government………….provided you don’t give them a monopoly.

    Is there any well run low cost urban train system in the world? How do they operate?

    In Wash DC the metro trains are packed and expensive and the system is usually losing money, how can this be? Won’t mention the poor maintenance.

    Are passenger trains just economically inefficient? don’t know why this is but 99% of passenger train systems are expensive and losing money (Boston’s is heavily used and deep in debt $Billions). Is it the basic technology (wheels on steel rails?)

    1. digi_owl

      The only time it works, as best i can tell, to go private over public, is if the cost of entry into the market is as close to zero as you can get. That way there is little possibility, short of mafia behavior, for the incumbents to avoid being pushed towards the margins.

  11. Kurt Sperry

    Privatized natural monopolies make no sense whatever except as looting devices. Internet providers are a good modern analog, a natural utility with high entry barriers that makes no sense to create parallel competing lines of communication for. Internet is an even more obvious utility as most private consumers don’t even require any special or personalized service so there’s no actual reason to even have billing and marketing bureaucracies that contribute exactly zero to actually providing the service, those are complete and total inefficiencies or perhaps even worse in the case of billing where the only possible effect it can have on the delivery of the service is to discontinue it, so worse even than a 100% waste. As of course are profit and middleman markups–like marketing, baked in inefficiencies that provide no actual user benefit only costs with no corresponding upside.

  12. Joanne

    Since privatization and the subsequent demise of the round-trip “day return” fares of the 1980’s the British rail system has become a hodge-podge of wildly varying and unpredictable fares. Like the airlines, the railroads companies have obliterated flexibility in travel, resulting, I would guess, in an increased rather than diminished reliance on car and bus travel and far less opportunity for tourists to see the towns and cities outside of London. For a day trip to Norwich from London a few years ago I was able to purchase an advance round-trip ticket for a little less than twenty pounds, but, when my business was completed earlier than anticipated, I was unable to return to London immediately because my ticket was for a 6:30 train and to change it would have cost close to one hundred pounds. Instead I was expected to sit in the station waiting until 6:30 while two successive London-bound trains left the station with only a minimal number of passengers — a prime example of the stubborn insanity of the corporate bureaucracy.

    1. vidimi


      though even airlines are more flexible. when i was early for my flight to london at the airport in dublin, aer lingus were happy to put me on an earlier flight with no extra cost. no british train company has ever been that accommodating to me.

    2. Kurt Sperry

      Publicly owned passenger systems on the continent are in my experience much nicer–and cheaper. I got an eight euro fare from Milan to Arezzo this year. First class is even cheaper than second sometimes. Don’t ask me why. It’s worth a couple of eurobucks just for the shorter walk/hike from the platform to the station. They haul ass too if there aren’t any mountains around.

  13. vidimi

    i’ve taken train trips in most european countries and british trains have to be the worst and most expensive of any that i’ve been on. of these, greater anglia is probably the worst company, although the southeastern, southwestern and chiltern lines come close.

    here are the biggest problems off the top of my head:
    1-most expensive in europe. heaven forbid you have to buy tickets on short notice.
    2-antediluvian trains. little investment for upgrading antiquated equipment. virgin one of few exceptions.
    3-half the cars are first class and mostly empty in order to keep standard class scarce and expensive

    there are other problems, too, such as a reservation system that’s broken and a two hour window between buying tickets and being able to print them, making last-minute purchases risky, but these are minor compared to the three main ones.

    a personal anecdote, after three years of living in london we still haven’t been to cornwall because train travel is too long and too expensive. a 7+ hour trip to penzance costs £100 per person, and if you want to take a night train, a sleeping car will cost an extra 50 per person – the price of a four-star b&b for the most basic accommodation for two people.

    that the tories were able to trick the public into believing that a service that cost more for less which paid its staff less while eviscerating their pensions so that a few wealthy plutocrats who had no hand in the construction of the networks could collect their tolls was a better alternative over public rail must be one of the great heists of all time.

  14. Jacob

    Public-owned rail is one of the many examples we have of socialism. Some other examples of socialism include the streets and highways, national and state parks, public water, gas and electric utilities. Although most of us don’t think of these as examples of socialism, it’s important to point out that these are examples of socialism because the ruling elite and their foot soldiers in the media have for many decades conditioned us to view all examples of collectively owned resources as equivalent to evil communism. As a result, the public is easily fooled into agreeing with the proponents of privatization.

  15. Kurt Sperry

    It just makes no sense for any significant communication system that requires fixed interstate or inter-regional infrastructure to be in the hands of financial speculators instead of publicly owned. Does it?

  16. DJG

    Tony Judt, in his essay-book, Ill Fares the Land, discusses privatization of U.K. railroads and attendant big cuts in service. Nationalized railroad systems have as their charge serving small towns throughout the country–even Cornwall (as mentioned above) or Annecy in France or Cormons in Italy. He also discusses the continuing decline and destruction of U.S. railroads. In a sense, what he saw (and foresaw) is how benighted the Anglo-Americano elite is. He considered a well-kept and innovative railroad system to be a sign of modernity. One of the main characteristics of the Anglo-Americano elite is it absolute lack of interest in innovations in industry and manufacturing. We see this in the traditional cluelessness of upper class Brits and the disdain for work and manufacturing in the U.S. (Noted any MBAs lately with a concentration in manufacturing?) So the crappy railroads are an economic problem created by the diminished ethos of our betters, eh.

  17. Erwin Gordon

    It’s just silly to imagine that giving a monopoly on providing any service to a private company (and calling it privatisation) is going to somehow magically create competition that doesn’t exist and put pressure on said company to provide value for money and reduce prices. It would be better to provide the communities that live along the corridor shares in the joint company that manages the rail along that corridor. That way the company would need to balance the cost it is charging to customers with the profit that would be going back to the community. Allowing those profits to only go to private investors who have nothing invested in that area is just a recipe for disaster.

  18. Wayne Martin

    When discussing fare increases , shouldn’t one include cost-of-labor increases, as well as fuel increases?
    Just looking at fare increases without the costs associated with producing the product/service seems pretty one-sided.

  19. Roland

    British Columbia, in Canada, same story.

    In our case, we sold off the publicly-built provincial railway for less than cost, just before a rise in natural resource prices was finally going to make it profitable. The private owners aren’t even responsible for the infrastructure, which is only leased. That means they’ll do only minimum maintenance and hand it back to the public just in time for all that expensive stuff to be rebuilt at taxpayers’ expense (or else we won’t have a railroad anymore, so TINA).

    British Columbia’s local neoliberal government also forbade the publicly-owned electric utility from building any new generating capacity. Additional power must be purchased from private power companies–which all receive tax breaks and subsidies for their green-ness.

    In the Vancouver area, part of the light rail transit system was a P3, with the private partner guaranteed minimum revenue levels by the public partner. Because we all know that the bourgeoisie are swashbuckling, risk-taking, entrepreneurs!

    Same story with the new Port Mann bridge. Another P3, another looting. Too tiresome to relate. Nice bridge, though.

  20. vlade


    It would help to get the base facts right. There’s tons of stuff to complain about british rail companies, but if you don’t get it right, it’s just a joke.

    So first. All the rail, signaling, stations, i.e. pretty much all the train infrastructure (which is usually the cause of the problems with British rail, since sometimes it seems to me it wasn’t upgraded since Victorian times -and proud of it) except the actual rolling stock are owned and operated (well, some stations are not operated by NR, but the largest ones are) by _state_ owned not-for-profit Network Rail (it used to be Railtrack which was privately owned). The private train operators are franchises on the specific routes. So please stop talking about privatising monopoly. The monopoly is firmly in state’s hands, fully for infrastructure, and leased out for lines (and franchises can, and were, revoked early on bad performance, although the performance has to be abysmal first).

    The UK rail is the most expensive in Europe because gov’t decided that user pays, instead of subsidies. When you look at the fact that most rail users are commuters, namely London commuters, it’s not that hard to understand. After all, why should a yorkshireman’s taxes subsidise Londoner’s commute. Note that usual price for London commute is about 3-4k GBP per year (the cheapest option which is to buy an annual pass), so a vast majority of London commuters are not poor. Oh, incidentally, for casual user the main problem is that the ticketing is extremely hard to navigate, and you have to know what you’re doing, ideally well in advance. I paid once 50GBP per person for a return trip, first class, to Edinburgh. Yes, I had to book on the day tickets become available, and know exactly when and how I wanted to travel. But it was possible. There’s a number of discounts that pay themselves off quickly even for a rather casual user – but they are very badly advertised and promoted IMO.
    So yes, it’s expensive, but it’s expensive on purpose, and one could say it’s expensive because those who use it mainly can afford it. What’s wrong or not progressive about that?

    The franchising system is cr*p, since it rolls I believe for 3 (maybe 5 in some cases) years. Which means there’s nil incentive for the franchise holder to update stock they got from the previous franchise holders, just to do the basic maintenance and pass the old stuff on few years of looting later. But we can thank Mr. Brown of Labour party for that, not the Tories (not that they would have done it better).

    There are serious problems with british rail system, not the least the idiocy of proposed HS2, but they are at most just touched on by the article. If you want to get a good understanding of what’s wrong with UK rail, you have to get back to Beeching review in 1963 (although I doubt Thatcher would not do it’s own later on), which more or less killed all but commuter rail in the UK in favour of car.

    This is what I meant some time ago that the fact-finding/confirmation is sometimes seriously missing and the automatic bias kicks in..

  21. The Dork of Cork

    Rail use or non use is closely related to the availability of money tokens.
    Once reaching critical mass usage it is much less capital intensive then road transport..

    The simple hard truth is that rail passenger numbers in the UK has soared while in France under SNCF (a state corporate body ) it has remained static.
    However of course rail use in the UK is very unbalanced towards London and London and the Shires residents moving through the Uk (perhaps using the train to go on holiday in Cornwall) because that is where the money tokens reside and for no other reason)
    Price therefore has little consequence for people who can easily afford the product.
    What better ilustration of the absurdiity of inflation baselines (which do not include income in their metrics)

    The Petri dish for this is Ireland where we have seen a dramatic disconect between Northern Ireland and Southern Ireland rail companies and their passenger growth and anti growth (despite Southern Ireland having better physical advantages for rail travel then tiny Northern Ireland)
    To the point where the southern irish rail company is now on the point of collapse despite a apparent energy crisis.

  22. Karel

    Reminds me of water supply in Czech republic. Under the notion of absolute laisses faire introduced to us by Vaclav Klaus lot of local water suppliers were privatized (lot of these privatization decisions were made by local politics of Klaus’ party). Since there is no regulation there are cases in which the net profit (dividend for an owner) is more than one third of the price for water and sanitation.

Comments are closed.