Off The Rails or Why Trains are the Black Sheep of Transport Policy

Trains are quick. Rail transport is efficient. It can be an extremely pleasant form of travel (as long as you can get a seat and relax, of course.) So why is it the that trains are not the main means of long distance transport in this country?

I accept that passenger numbers are increasing (as anyone with an interest is always quick to point out) but this is a long way from saying that the railways are doing well. Passenger numbers might be on the rise but comparable figures for road and air transport must be going through the roof. I haven't looked at the figures (if any exist,) but who can seriously tell me that rail is keeping up with the fantastic inflation of transport in general? Roads are always being built and completely renovated and airports are constantly building extensions. Why is it then that the rail network is, in the main, limping along with little visible improvement? It seems that the prevailing attitude is to create brand new roads whereas the rail network is merely being 'maintained' and 'upgraded.'

If the economic playing field was level, train travel and rail freight should be way ahead of the competition. If anyone can see a good reason why this shouldn't be the case please tell me because it eludes me. However, for some reason rail transport is disproportionately unreliable and expensive compared to the other transport options (in this point I agree with Transport Watch, but I disagree with their assumption that it is naturally so). Some reasons for this discrepancy are:

• As Tim Worstall suggests, operators are raising prices to discourage passengers since system is at capacity. This is more or less their only option as system capacity is largely out of their hands (since Network Rail is responsible for the underlying infrastructure)
• Train leasing companies (e.g. HSBC) recoup the cost of the trains in 3 years. In a way they have to because the operator only has a short contract, but this does mean that the banks have the operators by the short and curlys and there is nothing the government or passengers can do about it.
• I say this with a bit of reluctance, but I think it is possible that safety standards have been set too high (as compared to roads, say,) and that the cost of the associated bureaucracy and insurance is crippling.
• Poor management. I don't know enough to say where, but surely not everyone's hands are tied by the above points? Everyone seems to be making a meal out of maintenance and new track - but to be fair this may well be to do with the way the system was split (and the inevitable layers of contracts that are required at each new interface) rather than the managers who now have to make it work.

I think that the problem here is that there are so few rail infrastructure contractors and financial institutions that support the industry that although the network has the facade of privatised competition, these few players make monopolistic layers that run right across the service. These no doubt cream off huge profits (see leasing above) while operators probably do have to scrimp and save and put up prices to make any kind of money at all.

This profiteering could theoretically be legislated against (aaargh!) but this would probably create (or add to?) the monopoly of a few specialist consultancy firms to get everyone through the red tape!

So now what?

As far as I can see there are three 'possible' options (please put aside your prejudices for a few moments...):

1. Re-nationalise everything! This may not be as silly as it seems, because you have to admit that the government can afford a few trains and probably wouldn't lease them off itself at extortionate interest. Numerous lawyers fees could be avoided since they could (but wouldn't) employ maintenance staff direct, eliminating complicated contracts and sub-sub-contacts and, more importantly, allowing people to use common sense (of the 'that nut looks a bit loose, perhaps I'll just give it a tweak' rather than 'it don't say nuts in my contract - they'll have to pay extra' variety). Hopeful? Perhaps, but completely impossible in the current structure.

   Obviously this wouldn't work unless the government get a helluva lot better at running things like private businesses have to. This looks rather unlikely, but I'm hoping to have some thoughts on this matter in future blogs.

2. Build, build, build. Keep the track public (like the roads) but build much more so passengers get real choice (see under duplication in 'The flaws of choice - or why some things can't be privatised'). This would allow more operators and much longer contracts allowing real competion while allowing time for investment to be worthwhile.
3. Sell everything to the operators and also open up the competitive market by allowing and assisting in building of new private railways (planning and compulsory purchase orders etc.) This was the model for the rail heydays, why not in this privatised age?

There must be something wrong with me because actually I like the first idea best - it's simpler and more compact than the others.

Let's roll!

In anycase, the railways need optimism and someone competent to run them. Current changes and suggestions seem piecemeal and badly planned. After all, they're talking about road charging which will need some kind of fantastic technology to track every vehicle on an open network, yet rather fewer trains don't seem traceable even in a fixed and timetabled system. There is no reason why rail should be so difficult to run or cost so much. Someone out there just needs to make sure that they get it together...

The Flaws of 'Choice' - or Why Some Things Can't Be Privatised

Choice is the basis of privatisation and is being suggested as a way of raising standards in Health and Education. Though it often works wonders in free markets, it is often not appropriate in national and public functions...

One of the arguments for privatisation of and/or competition between public services is as follows:

Give consumers a choice and they will choose the best product. Other local providers will have to raise their standards to compete. This results in a permanent upward pressure on quality, improving the standard of life for everyone.

This works very well in many consumer markets and I believe it is this mechanism that has contributed to the huge developments in low-cost, high-technology products over recent decades.

However, there are a number of potential flaws which, if present, will stop this mechanism working:

(To keep the main gist as concise as possible, extra notes about these are at the bottom of this blog)

1. Lack of duplication For a true choice there must be more than one local source of the goods or service. For example, outside the largest cities most people have only one local train station (therefore line) and often only one 'choice' of train operator. This means that rail users have to use that service regardless of quality of service or value.
2. Cost not included in choice Where the service is free 'at point of use' people are likely to always take the more expensive option. This results in ever-increasing costs or requires a reduction in real choice.*
3. Choice given at wrong point in system This is often related to point 1. since many services have been privatised or split so there is competition only in the 'sales' side and there is not actually any competition in the provision. This means that competition is only in customer service, not in finding ingenious ways of providing a better infrastructure. Examples include rail, fixed telecoms (though there is competition from cable services in cities), electricity, gas and water.
4. Lack of information on which to choose It is very difficult for an infrequent user to be reliably and well informed about a large service. How does one know whether a hospital is good or bad in a particular field? My wife occasionally visits schools which have incredibly able and dynamic teaching, but have very poor results and reputations due to social demographics, and vice versa.
5. Too much choice Many financial services come into this section, which overlaps with 4. in some respects. When the choice is too great it is not worth most people's time reading the small print and finding the optimum product for their situation. I can't think of any public sector examples at the moment but I'm sure there are some out there!

This all leads me to just one conclusion: For national services which have one of these flaws, it is essential that the government runs that service, at least at the level in which the 'flaw' occurs.

The difficulty with this is that successive governments have proved to be not very good when it comes to running these monopolies. Despite this - if one can imagine a government running like a private business - publicly run services are the only simple and logical answer. So the next step is to ask how these services can be run in an efficient, business-like manner. The subject for a number of future blogs I feel.

Notes:

For the following reasons free commercial markets do not suffer from most of the potential flaws mentioned earlier (numbers refer to the points above): 1. People always try to enter successful markets even when they are dominated by one player (e.g. bagless vacuum cleaners - other companies quickly entered that market even though it was dominated by Dyson who no doubt had strong patents and lots of lawyers); 2. cost (therefore value) is always an issue; 3. the product or service is usually a complete package that does not rely on a monopolised third party product; and 5. too many players in a market usually results in weaker ones failing or being bought up. It is only when the service is complicated (such as financial products above) that this works less well.

*This leads to fudges (I mean 'proposals') such as money following patients/pupils. Surely this gives more money to the services that spend most money? That doesn't exactly encourage value for money, does it?! Though it may be possible to get round these problems with complicated legislation, I will argue in later blogs that simplicity is, in the end, a better answer.