Train operators need autonomy, not more top-down control

Rail travel is still far below pre-Covid levels, particularly on the commuter lines into London which accounted for the biggest chunk of revenue in the Before Times.

The last two years have involved a stonking increase in government subsidy just to keep trains running. But the £16 billion emergency funding during the pandemic could clearly not be sustained, and it is unsurprising that services have now been cut back sharply, the only way to shave costs significantly in the short run.

The Shapps-Williams Review last May proposed a new entity, Great British Railways (GBR), to run the system. Little has been done about this yet, however, and the bulk of the previously franchised routes are in the hands of the Department for Transport, which now has almost total control over timetables and fares. Train operating companies are on contracts which simply involve a flat fee for running trains and revenue collection.

Arbitrary cutbacks – accentuated by recent Omicron staffing problems – have led to some services being hugely overcrowded while others are still  just moving air around. Of course, the track and other infrastructure remain in the hands of the nationalised Network Rail – the organisation responsible for the project delays and overruns which helped  to scupper the business plans of various franchises in the past.

Despite the government’s – and the public’s – apparent antipathy to the private sector, any sustained recovery will have to involve GBR giving greater responsibility to the train operating companies.

Recently released statistics for July-September last year suggest that those parts of the railways with greatest exposure to the market were recovering faster pre-Omicron than those directly under the OFT’s thumb.

For example, the freight sector – still entirely in private hands – was actually doing better in terms of tonne-kilometres and volume moved than in the corresponding pre-pandemic period. The freight companies lost a big chunk of their market with the demise of coal trains to power stations. But they have seized new opportunities in domestic intermodal travel suggested by the government’s green targets and the shortage of HGV drivers. For instance, Tesco’s new twice-daily refrigerated container service between Tilbury and Coatbridge in Scotland – a 400-mile trip – is calculated to take 17,000 lorries off the roads in a full year.

As for passengers, an interesting analysis of long-distance services by Roger Ford shows that Hull Trains and Grand Central, two ‘open access’ (private) operators, were doing much better than the average in getting travellers back on board. But it also shows that LNER did best of all, back to 90% of pre-Covid levels of passenger journeys.

What’s significant about this is that LNER is run by the Operator of Last Resort – the government-owned company which was set up to run, on commercial lines, services where franchises had failed. Rather than being run by the bureaucrats of the DfT, LNER was able to make changes on its own initiative to attract passengers back. This included enhanced cleaning, maintenance of regular Anglo-Scottish services, compulsory pre-booking to enable managed social distancing, and new marketing activities. By contrast, the other operators were unable to make changes without the DfT’s say-so.

This suggests that, if we are to have GBR as what Grant Shapps calls ‘one guiding mind’ running our railways, it must allow for maximum possible initiative by contracted companies to adapt to new market conditions – and share in the returns from increasing the numbers of passengers. Privatisation, for all its faults, achieved a massive revival in rail travel which the old British Rail had failed to do over many years. The new GBR set-up should learn lessons from this rather than going back to failed central direction.

There will be no return to the levels of commuter and business travel which existed before Zoom and working from home. A successful future for rail passenger transport lies in persuading people to take long-distance trains to see families and friends instead of being stuck on congested motorways, and in encouraging frequent leisure visits around the country. Timetables, pricing structures and the configuration of coaches for comfort rather than cattle-truck crowding are key. Profit-motivated companies are more likely to succeed in promoting innovation than bureaucrats, whether employed by the DfT or GBR.


Editorial and Research Fellow

Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham. He was previously Dean of the Royal Docks Business School at the University of East London and prior to that was Dean of the Westminster Business School. He has also taught at Queen Mary, University of London and worked as an economist in the Civil Service. His research interests are primarily in the economics of labour markets. He has worked with many think tanks, most closely with the Institute of Economic Affairs, where he is an Economics Fellow. He edits the journal Economic Affairs, which is co-published by the IEA and the University of Buckingham.

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