What went wrong?

[SECR263]

Just found a leaflet dated March 94 from Dft. Tiltle "Franchising of Rail Passenger Services".

Extracts:

What will happen to fares?
The Franchising Director will control fares where this is necessary to protect passengers interests. They Government believes there is no reason why fares should rise as a result of privatisation. Rather it believes that private sector companies will have to compete to attract more passengers and will have every incentive to introduce additional discounted fares.

What does Franchising mean?
Private Sector franchisees will be outside public sector controls on investment and should have greater management freedom to improve services through innovate ideas.

I am aware a lot of water has gone under the bridge and other changes but were these aims ever achieved in a noticeable way?

 

[Djgr]

At a high level it was a bunch of lies.

It was also based on a naive view that private is more efficient than public, ignoring the possibility that the exploitation of the consumer would occur.

 

[Dr Hoo]

Just found a leaflet dated March 94 from Dft. Tiltle "Franchising of Rail Passenger Services". Sub para - What will happen to fares?. The Franchising Director will control fares where this is necessary to protect passengers interests. They Government believes there is no reason why fares should rise as a result of privatisation. Rather it believes that private sector companies will have to compete to attract more passengers and will have every incentive to introduce additional discounted fares.

Extract from "What does Franchising mean? Private Sector franchisees will be outside public sector controls on investment and should have greater management freedom to improve services through innovate ideas.


I am aware a lot of water has gone under the bridge and other changes but we're these aims ever achieved in a noticeable way?

Well, a lot of fares were 'regulated' from the word go. If I recall correctly, in some early years the permitted increase for these was RPI-minus 1%.

Subsequently the limitations of RPI became apparent and it compared unfavourably with the more modern and widespread CPI but the link is still there for many fares.

Many "additional discounted fares" have been introduced, largely thanks to the internet. Some would see this as a large cause of the confusion and complexity that many people see in the fares structure.

At the risk of stating the obvious, no government can bind its successors. In subsequent years and administrations, the Strategic Rail Authority and so on, RPI-minus became RPI or even RPI-plus.

But the original franchising arguably did much of what it said on the tin.

 

[SynthD]

How did RPI-1 become RPI+3?

The ROSCOs seem to often be a limit on investment, was their place in the system known back then? The thinking then seems to hand wave away any downsides or unhelpful decisions of the free market.

 

[SeanBentley]

The belief in private sector efficiency can overlook potential consumer exploitation.

At a high level it was a bunch of lies.

It was also based on a naive view that private is more efficient than public, ignoring the possibility that the exploitation of the consumer would occur.

The belief in private sector efficiency can overlook potential consumer exploitation.

Just found a leaflet dated March 94 from Dft. Tiltle "Franchising of Rail Passenger Services". Sub para - What will happen to fares?. The Franchising Director will control fares where this is necessary to protect passengers interests. They Government believes there is no reason why fares should rise as a result of privatisation. Rather it believes that private sector companies will have to compete to attract more passengers and will have every incentive to introduce additional discounted fares.

Extract from "What does Franchising mean? Private Sector franchisees will be outside public sector controls on investment and should have greater management freedom to improve services through innovate ideas.


I am aware a lot of water has gone under the bridge and other changes but we're these aims ever achieved in a noticeable way?

The government believed that privatization would not lead to fare increases, and private companies would introduce discounted fares to attract passengers.

 

[Re 4/4]

Christian Wolmar makes the case that privatisation built on the idea that BR was horribly inefficient and out of date, and the free market would kill off these inefficiencies and deliver a much cheaper railway as a result. But, to continue with Wolmar's argument, whatever BR might have been a decade previously, in its last years it was already running the railway about as efficiently as humanly possible under the circumstances - there wasn't much low-hanging fruit left to pick. And so since privatisation, both fares and the government rail sibsidies have been steadily going up.

A separate argument, not from Wolmar, is that rail today is much safer per million passenger-miles or per hour worked, and that costs money - BR used to employ a full-time workshop of people to make prosthetics for shunters and other railwaymen injured on duty. That injury rate simply wouldn't fly nowadays.

 

[SeanBentley]

How did RPI-1 become RPI+3?

The ROSCOs seem to often be a limit on investment, was their place in the system known back then? The thinking then seems to hand wave away any downsides or unhelpful decisions of the free market.

Back then, the role of ROSCOs and their potential impact on investment may not have been fully recognized, and the free market approach may have downplayed potential downsides or unhelpful decisions.

 

[The Quincunx]

The current fares regulation regime arose from the fares review carried out by the SRA in 2002, whose conculsions were published in this lengthy document in June 2003 https://www.orr.gov.uk/sites/default/files/om/sra-fares-conclusions-2003.pdf

Among other things, the average increase was set to RPI+1% from 2006. It was only ever RPI+3% for two TOCs, South Eastern and Northern, from 2007-2011 to address specific investment. Then RPI flat from 2015 to 2022 (with the exception of 2021, when it was RPI+1%). And, of course, this year it was RPI minus 6.4%.

 

[MikeWM]

For the fares part, it worked as predicted in many cases where there was genuine competition between TOCs. Take Cambridge-London for example, we had a nice period where FCC and whatever-Anglia-were-called-that-week introduced increasingly-competitively priced fares to undercut one another. For example, at weekends the super-off-peak travelcard that FCC introduced is barely more now than the off-peak travelcard was 10 or so years ago. And the GA-only version that was introduced a little later is considerably cheaper even now.

Unfortunately the number of routes that have such genuine competition is rather limited, which is one of the big flaws of pretending that competition will benefit the consumer/passenger when such competition is non-extant and the barriers to entry so high.

 

[SteveM70]

Unfortunately the number of routes that have such genuine competition is rather limited, which is one of the big flaws of pretending that competition will benefit the consumer/passenger when such competition is non-extant and the barriers to entry so high.

Is it not the case that the competition the government *really* cared about was that between TOCs at the point of tendering for a franchise?

 

[LNW-GW Joint]

The "Franchising Director" is now the DfT, and they still regulate fares as the original legislation intended.
But only season tickets and an off-peak fare (varies with service) are regulated, Anytime, Advances and First Class are not regulated.
Over the years there have been many changes in time restrictions on off-peak tickets, mostly forcing people onto higher fares.
All TOCs are now under DfT or local government control and all fare changes have to be approved by them.
TOCs have next to no room to change the fare structure, and the government's annual inflation formula (RPI+x) rules.
Scotland and Wales have certain freedoms but don't usually go out of line.

 

[GRALISTAIR]

Christian Wolmar makes the case that privatisation built on the idea that BR was horribly inefficient and out of date, and the free market would kill off these inefficiencies and deliver a much cheaper railway as a result. But, to continue with Wolmar's argument, whatever BR might have been a decade previously, in its last years it was already running the railway about as efficiently as humanly possible under the circumstances - there wasn't much low-hanging fruit left to pick. And so since privatisation, both fares and the government rail sibsidies have been steadily going up.

Exactly.

 

[Adrian1980uk]

Privatisation may have worked if competition was practical, but there are 2 flaws, routes that are profitable are generally at or near capacity.
Routes with capacity have spare capacity for a reason.

 

[eldomtom2]

A separate argument, not from Wolmar, is that rail today is much safer per million passenger-miles or per hour worked, and that costs money - BR used to employ a full-time workshop of people to make prosthetics for shunters and other railwaymen injured on duty. That injury rate simply wouldn't fly nowadays.

A lot of that safety improvement came under BR though. I doubt BR was still making in-house prosthetics in the 1990s.

 

[Pdf]

A lot of that safety improvement came under BR though. I doubt BR was still making in-house prosthetics in the 1990s.

I think Re 4/4's argument was that running things to modern safety standards costs money, not that privatisation brought upon improved safety (Railtrack being an example where it very much didn't).

 

[Bevan Price]

Privatisation may have worked if competition was practical, but there are 2 flaws, routes that are profitable are generally at or near capacity.
Routes with capacity have spare capacity for a reason.

And the government ignored that the REAL competition was the private car.......

 

[Hadders]

What we don't know is what would have happened to fares had privitisation not happened.

I doubt we'd have any regulated fares, BR would have been able to increase prices to whatever they wanted (as they did pre-privitisation). Had BR have continued I doubt we'd have seen any Anytime Return from London to Manchester costing £369.40 but I doubt very much the Off Peak Return would've cost £103.90 either.

I suspect BR would've removed many walk up tickets in favour of a book ahead, Advance railway.

 

[HSTEd]

Reality intervened.

 

[Mikey C]

Up until the pandemic, there were lots of cheap advance tickets available, especially on Virgin Trains West Coast, so while many journeys have become significantly more expensive, a number are actually cheaper than before

For the fares part, it worked as predicted in many cases where there was genuine competition between TOCs. Take Cambridge-London for example, we had a nice period where FCC and whatever-Anglia-were-called-that-week introduced increasingly-competitively priced fares to undercut one another. For example, at weekends the super-off-peak travelcard that FCC introduced is barely more now than the off-peak travelcard was 10 or so years ago. And the GA-only version that was introduced a little later is considerably cheaper even now.

Unfortunately the number of routes that have such genuine competition is rather limited, which is one of the big flaws of pretending that competition will benefit the consumer/passenger when such competition is non-extant and the barriers to entry so high.

There are still the bargain Thameslink only tickets to Brighton, which are a happy anomaly now.

 

[ATrainSpotter]

Just found a leaflet dated March 94 from Dft. Tiltle "Franchising of Rail Passenger Services". Sub para - What will happen to fares?. The Franchising Director will control fares where this is necessary to protect passengers interests. They Government believes there is no reason why fares should rise as a result of privatisation. Rather it believes that private sector companies will have to compete to attract more passengers and will have every incentive to introduce additional discounted fares.

Extract from "What does Franchising mean? Private Sector franchisees will be outside public sector controls on investment and should have greater management freedom to improve services through innovate ideas.


I am aware a lot of water has gone under the bridge and other changes but we're these aims ever achieved in a noticeable way?

No. The current government are more interested in playing musical chairs than doing actual work

 

[brad465]

Just found a leaflet dated March 94 from Dft. Tiltle "Franchising of Rail Passenger Services". Sub para - What will happen to fares?. The Franchising Director will control fares where this is necessary to protect passengers interests. They Government believes there is no reason why fares should rise as a result of privatisation. Rather it believes that private sector companies will have to compete to attract more passengers and will have every incentive to introduce additional discounted fares.

Extract from "What does Franchising mean? Private Sector franchisees will be outside public sector controls on investment and should have greater management freedom to improve services through innovate ideas.


I am aware a lot of water has gone under the bridge and other changes but we're these aims ever achieved in a noticeable way?

Substitute water and other utilities in there and it more or less still makes sense.

 

[mrcheek]

The current fares regulation regime arose from the fares review carried out by the SRA in 2002, whose conculsions were published in this lengthy document in June 2003 https://www.orr.gov.uk/sites/default/files/om/sra-fares-conclusions-2003.pdf

Among other things, the average increase was set to RPI+1% from 2006. It was only ever RPI+3% for two TOCs, South Eastern and Northern, from 2007-2011 to address specific investment. Then RPI flat from 2015 to 2022 (with the exception of 2021, when it was RPI+1%). And, of course, this year it was RPI minus 6.4%.

Now all we need to do is look at who was in government during those particular years.......

 

[yorksrob]

I suspect BR would've removed many walk up tickets in favour of a book ahead, Advance railway.

Whilst I don't doubt that BR would have developed the Advanced Purchase market, it seems like a stretch to assume that large numbers of walk-on fares would have been withdrawn.

 

[Gonzoiku]

Privatisation may have been sold on the basis of competitively priced fares, but the reality was about getting private-sector financing for trains and infrastructure. Public-sector financing was fraught with problems, not just the impact on the Public Sector Borrowing Requirement, but also the strict annual spend limits. It was the latter which gave Network South East the digital clocks on every platform - there was money in the budget which needed to be spent by end of March, and the clocks fitted the bill.

GZ

 

[yorksrob]

Privatisation may have been sold on the basis of competitively priced fares, but the reality was about getting private-sector financing for trains and infrastructure. Public-sector financing was fraught with problems, not just the impact on the Public Sector Borrowing Requirement, but also the strict annual spend limits. It was the latter which gave Network South East the digital clocks on every platform - there was money in the budget which needed to be spent by end of March, and the clocks fitted the bill.

GZ

The private sector always wants its pound of flesh though. This is what's always forgotten by the privatisers.

The annual public sector spending limit was presumably solved in the case of NR's control periods, so could have been done a lot more cheaply than by getting everyone indebted to the private sector.

 

[MikeWM]

Up until the pandemic, there were lots of cheap advance tickets available, especially on Virgin Trains West Coast, so while many journeys have become significantly more expensive, a number are actually cheaper than before

True, but at one point - around 2017, I think? - they significantly increased the price of the low tiers of advances on many routes. I recall it being quite trivial to get an Advance for Cambridge-Liverpool (or Manchester) via London for around £20, and then at one fare change the cheapest tier suddenly jumped to about £40. Whether that was a competition thing or not wasn't clear (I don't think London Midland were having a particularly bad period at the time, those bad times were a few years earlier and a year or two later).

There are still the bargain Thameslink only tickets to Brighton, which are a happy anomaly now.

Yes, I still use those a few times a year. Guess they're not long for this world, but good they've survived so far.

 

[The Prisoner]

I think privatisation had it's merits in terms of innovation, but the cynical nature of the measure was revealed by the lengths of the franchises offered which offered no scope for genuine long term planning and subsequent improvement - Virgin Cross Country for example won a seven year (?) franchise to start in 1997 (it was extended to ten years on a rolling basis I think).

This is such a strategically important operation for the country, and yet what can you actually do in seven years?

New trains take 3-5 years typically to spec, procure, build and test - proven by Virgin not being introduce the Voyager into passenger service til 2002 (they were built 2000-2001, and I'm using Wiki as my source).

On the original length of franchise offered you could have been handing over an entirely new fleet of trains to someone else in 2004 (and they did in 2007 as they couldn't agree a further rolling extension and handed the franchise to Arriva, who have basically minded the shop ever since with little additional innovation).

Why would anyone think they could offer any meaningful benefit to such an operation in such a short time? The only reason to get involved is money - some half baked loon of a forecast to kid the DfT into giving you the keys with an agreed level of return by way of management fees and dividends, which was often inflated just to have a shot at the cash (VTEC).

Privatisation has had some benefits, but contracts should have been let on far longer terms to allow sensible evolution and genuine improvement over panic ordering, cash grabs and quick fixes.

 

[Adrian1980uk]

I think privatisation had it's merits in terms of innovation, but the cynical nature of the measure was revealed by the lengths of the franchises offered which offered no scope for genuine long term planning and subsequent improvement - Virgin Cross Country for example won a seven year (?) franchise to start in 1997 (it was extended to ten years on a rolling basis I think).

This is such a strategically important operation for the country, and yet what can you actually do in seven years?

New trains take 3-5 years typically to spec, procure, build and test - proven by Virgin not being introduce the Voyager into passenger service til 2002 (they were built 2000-2001, and I'm using Wiki as my source).

On the original length of franchise offered you could have been handing over an entirely new fleet of trains to someone else in 2004 (and they did in 2007 as they couldn't agree a further rolling extension and handed the franchise to Arriva, who have basically minded the shop ever since with little additional innovation).

Why would anyone think they could offer any meaningful benefit to such an operation in such a short time? The only reason to get involved is money - some half baked loon of a forecast to kid the DfT into giving you the keys with an agreed level of return by way of management fees and dividends, which was often inflated just to have a shot at the cash (VTEC).

Privatisation has had some benefits, but contracts should have been let on far longer terms to allow sensible evolution and genuine improvement over panic ordering, cash grabs and quick fixes.

That's always the problem with the public sector, risk averse and therefore short franchises so easily changed if things go wrong.

The Rosco model was supposed enable stock orders for franchisees without the risk of leaving not getting the benefits of new stock as they haven't paid for it but the issue is that ROSCOs also have no incentive to order new stock either. Example is that even if you had 1 ROSCO supplying all the Hitachi IEPs, you couldn't say GWR are short of a train this week we'll send the spare LNER one - different specs etc. Also the TOCs look after their own Stock so there's no pressure on the ROSCOs to hold spares.

Same to a certain extent Network Rail, there's limited pressure or gain if greater Anglia said they wanted to send 8 or 9 tph through Ely north junction along with all the other operators. Answer is no you can't, no capacity but in a market economy NR would say if we build the improvement to allow it, we'd make xx more in track access chances.

 

[eldomtom2]

Fundamentally the problem with privatisation was that it started with an unshakeable ideological conviction that the private sector was superior and only then tried to find a method of actually privatising the railways.

 

[Dr Hoo]

Fundamentally the problem with privatisation was that it started with an unshakeable ideological conviction that the private sector was superior and only then tried to find a method of actually privatising the railways.

An ironic mirror of 1947, which started with an unshakeable ideological conviction that the public sector was superior and only then tried to find a method of actually nationalising the railways (with fit-for-purpose corporate structure, objectives, financing basis, investment plans, choice of leadership talent, fit with other transport modes such as the Special Roads Act and so on).