Potential Railway Reforms Raise Issues

The issue of the British Railway system has taken up a few posts here in Financial Regulation Matters, with the majority being concerned with developments with the HS2 project. However, in relation to yesterday’s post on the concept of ‘capture’, this post will examine a suite of potential reforms that are heading towards the British Railway. In examining the proposals put forward to Government recently, we will look at this potential issue of developing an ‘arms-length’ body or entity, and also the effect of the proposals, which has been to completely ignore the question of nationalisation.

The Government have commissioned a review of the rail system, to be undertaken by former British Airways CEO Keith Williams. This week the first signs of the reform proposals have been released and there are a number of issues the Williams’ Review intends to tackle. The main issue that has been picked up by the media is that a ‘Fat Controller type figure would be key for regaining public trust’. The sentiment is that the public needs to see that there is accountability within the system, with the suggestion that a body needs to be created that may be similar to the Strategic Rail Authority that existed in the early 2000s. Williams has identified that the Department for Transport (DfT) is too involved in the rail network system, so much so that the DfT has been specifying which trains stop at which stations. To fix this and other issues, Williams has focused on five key areas, including ‘a new passenger office, simplified fares and ticketing, a new industry structure, a new commercial model, and a range of proposals on leadership and skills diversity’. The Government has suggested these proposals will lead to the ‘most significant [review] since privatisation’, although Unions have been quick to make the point that the review has ‘ducked the issue of public ownership’, and that Britain is in urgent need of a railway that ‘delivers reliable, affordable and environmentally sound transport to communities across the country’. The Unions also suggest that support for Nationalisation is increasing, and that is based upon statistical evidence that suggests that ‘punctuality across Britain sank to a 13-year low in 2018, with one in seven trains delayed by at least five minutes’. With it being the case on a number of routes that it is cheaper to fly than travel on the rail system, it is not surprising that nationalisation is looking more appealing. This is on top of the fact that companies (Virgin) have been complaining about the tendering processes for a number of key routes, which in effect puts the DfT at the centre of the rail system’s issues once more.

The reality is that the DfT has created such ‘quangos’ before, with little effect. The claim is that such elements were the foundation for future evolutions towards an arms-length entity, but it is questionable whether that would even work. The potential for capture increases, whilst the penalties for underperforming have not been suggested – it is all well and good creating accountability, but to what end? There is also the obvious question of whether a full nationalisation of the system i.e. a return to ‘British Rail’ is the best way forward. Whilst bringing the train companies under governmental rule may sound appealing, the question then comes of whether the appropriate amount of funding would be directed towards the system, or whether competing pressures would take precedence, like education. It remains to be seen whether the establishment of an arms-length body would work, both in terms of effectiveness and maintaining an independence from Government, but it is clear that reforms are needed.

Keywords – Railways, UK, Business, @finregmatters