One of the worst pieces of privatisation ever embarked on by a government was the Railways Act 1993 under John Major. It was a complex piece of legislation and opposed by just about everyone - including the Labour party. They disliked it so much they promised to renationalise the railways when they got in and the Tory MP and chairman of the Transport Committee at the time, Robert Adley, described it as the "poll tax on wheels". In 1997 Labour swept to power (as everyone describes it), John Prescott (Two Jags later to be known as Two Jabs) was put in charge of transport and the rest is history. Well, that is to say, nothing much changed. Well, apart from the Labour Government increasing their subsidies on the railway, bailing out failed franchises and a slow, slow return to the nationalised days. The privatisation of the Railways was a complete shambles, but the solution is not to re-nationalise. The problem of privatisation was not that is was now put in to the hands of private companies who would have to make a competitive business out of the railways, but the complete opposite. These private companies were given monopolies on lines and could hold the passengers to ransom. At the same time the Government has been throwing money (£4,593m in 2005 alone) at subsidising these "private" companies. But why am I going on about all this?
In the press today a story about South West Trains putting fares up is what has been the trigger. SWT are up there for me, on a personal vendetta level at least, as the worst run business in the country. They seem to raise their fares when they please at any rate they please, have no accountability as far as I have ever managed to come across and the service is, during peak times, vastly over crowded and not nearly as reliable as you would expect. The reason for this is simple, as far as I am concerned, is that they know full well their passengers have no other alternative than to put up with it.
To illustrate, SWT trains have just their non peak fares up 20%. That is right, their non-peak fares. 20%. And that is the second increase in five months. But guess what - the price rises only occur at stations exclusively serving SWT. So go to Reading and catch a train to Waterloo and the price will not be rising, because there is an alternative there provided by First Great Western. So where there is genuine competition the market rules and prices stay competitive. This is not surprising behaviour on the part of SWT - and I say that for two reasons. Firstly SWT are, in my opinion, parasites. Secondly, the last few Governments (Tory and Labour) have created a situations where our railways are run like monopolies and the money making firms are doing what money making firms do - make money. Yes, SWT trains are taking advantage of a monopoly, but can you blame them? The Railways have never been properly privatised. Proper privatisation should mean competition and right now there is none. Like the NHS, our railways are a national embarrassment and they need to solved once and for all - and if that means companies like SWT take a kicking in the process then all the better as far as I'm concerned
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We need to give the operators more freedom, not less
Many people, including several of those developing policy for the Tory-lite party, share your view that the rail franchises are monopolies. I yield to no one in my dislike of government-enforced monopolies, but I simply don't see that the rail franchises are a case in point.
It is a question of substitutability. A monopoly is a situation where a single supplier not only dominates the supply of the good they provide, but also where there are no acceptable alternatives available from other suppliers. We do not talk of monopolies in the manufacture of Ford cars or the provision of BA flights, not because Ford and BA don't have 100% of their respective markets defined in that way, but because there are alternative goods (e.g. VW cars or Easyjet flights) that are reasonably substitutable should consumers not like their offerings. That is reasonably, not perfectly, substitutable, note - a VW is not the same as a Ford, but it is good enough to achieve the same end.
So the test of whether someone has a monopoly is whether there are reasonably-substitutable alternatives available. And in the case of railways, there are. For most people, there is the alternative of driving to your destination. For those without cars, there are the options of travel by coach or plane (or over a short distance, foot or bike).
There are many things wrong with our railway system. But I do not think you can argue that the franchises offer a protected monopoly that allows the franchisees to reap "excessive profits". I am sure the shareholders of the franchisees would laugh at the thought. What is really wrong with the railway system is that it is over-regulated, forcing operators to continue to operate unprofitable routes. The railways should be de-regulated to allow the operators to offer the services they judge can make a profit, and charge what they think they need to justify their operation. That way, we will find out which services are genuinely in demand, and where services are cut due to lack of demand, they can be replaced by coach or minibus services more suited to the level of demand, and therefore more economic. Conversely, prices on popular rush-hour routes may go dramatically higher if freed from regulatory constraint, reducing the current dangerous levels of overcrowding, and providing the economic incentive and wherewithal to invest to increase capacity on those popular routes.
I take your point, and there
I take your point, and there are problems with the way the the Government regulates our railways that is fundamental to the problems with Railway privatisation. And I also take the point that people do, in theory, have alternatives to railway transport. In practice, however, this is not the case for many. Whilst it is true to say that if the Railway companies charge vast sum of money for a ticket people would no longer use them, they do know they have a particularly captive audience who will resent paying inflated fares but have little alternative. They are abusing a position that the Government has allowed them to position themselves in. If this wasn't the case, why have they not raised prices across the board, rather than just in the routes that are not in competitive stations (e.g. Reading)?
There is no alternative route if I am to commute from Bracknell to Waterloo, for example, during rush hour. It is SWT or use a different mode of transport. No other train operator can get me there. Given the congestion on the roads at that time, the ever rising cost of motoring in London and parking costs, Railways are the only real option. I could catch a coach, but again my journey would take such an incredible length of time that it is not realistic. Obviously flying is out of the question. So yes there are alternatives, but the train companies know they have a massive audience who are going nowhere, even if they add 20% to their ticket prices every 5 months.
I have no doubt nor have said that these train companies are not making "excessive profits" (though Brian Souter, chief of Stagecoach, which owns SWT is worth a cool £770m, so he's not exactly done too badly out it all either)- but they are also not improving their services by the standards that was hoped prior to privatisation and the reason for that is because they have no real competitive incentive to do so.