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Privatised rail: industry vs passengers

Dan Milmo had an interesting article in yesterday’s Observer about the upturn in fortunes of the recently nationalised east coast rail service. Its success was reviving interest in recreating an integrated InterCity network, he said, “possibly under government ownership”.

Milmo quoted two responses to this idea.

Roger Ford, industry and technology editor of Modern Railways magazine, said that an InterCity operator with one website, a simplified fares structure and a unifying brand would galvanise an industry that has “lost sight of the passenger”:

“It seems such an obvious thing to do. One of the problems facing the railway is that it is terribly fragmented with different operators. It is very difficult making a long-distance journey these days. There are so many different tickets and websites. What the railway has lost is an integrated national network that holds it together. InterCity is the face of the railway that everybody sees.”

Tony Collins, chief executive of Virgin Trains, opposed the idea:

“The term ‘InterCity’ as a catch-all is out of date. Our route is now a complex mix of ‘long commute’, leisure and business travel, which each have different needs, and we are succeeding in the face of greater competition than ever before. Our routes all need astute marketing and management, which wouldn’t come under a multi-legged monolith. One size doesn’t fit all.”

“Complex mix”, “greater competition”, “astute marketing”? Hmm, what could Roger Ford have meant when he said the industry has lost sight of its passengers?

Update 26 Nov 2009: Doh!


Posted by Other TPA at 12:59pm on 23 November 2009
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“greater competition” - my arse, Virgin has in place something called ‘Moderation of Competition’ which legally prevents other train companies competing on some of its core routes.  I’m with Uncle Roger on this one.

Posted by Tom at 01:35pm on 23 November 2009

If I want to travel from my home in Brighton to my family, near Liverpool, the cheapest way to do it is:

1. Book a Southern advance off-peak Brighton-London single for £3 only available on the Southern website.
2. Buy a single Oyster fare across London, or use the bus.
3. Book a limited advance fare from Euston to Liverpool, available from most ticket offices. However, the Virgin website tells you the best fares available across all trains rather than hoping for the best at the time I want to travel. In other words, if you go to the office and say “How much is a return at 6pm on Thursday?” they won’t tell you that 3pm and 9pm on Thursday could be a third of the price.

By far the cheapest way is to look at the different fares on the two sites and find when the cheapest are. Then try to find a time when both cheap fares are available - Southern’s cheapest might not connect with Virgin’s cheapest, but a mid-price on both might. Or it might be cheaper to use the cheapest Virgin with an expensive Southern, or vice-versa.

If the Virgin train leaves at the very end of ‘peak’ time (weirdly, from 3pm in the afternoon), it might be cheaper to book the Virgin train only to the first stop, then buy an off-peak ticket from that stop to Liverpool. You don’t have to move trains or seats.

Madness. Utter and total madness.

Posted by Rick at 01:45pm on 23 November 2009

Can’t help but think this is a bit like the Other Other TPA commenting on prison sentencing last week: a difference in opinion on the best marketing strategy for railways doesn’t really have all that much to do with promoting the case for fairer taxation…

Posted by john b at 01:55pm on 23 November 2009

It does have quite a bit to do with taxation, given that a privatised service costs taxpayers more and potentially gives them a worse service.

Posted by Rick at 02:00pm on 23 November 2009

@Tom, he means ‘competition from modes that aren’t rail’. Competition between rail companies is an irrelevance, nice though it is that the German taxpayer is willing to provide hugely expensive and empty trains to take one slowly and comfortably to Wrexham.

@Rick, the East Coast website ( is quoting me direct, through fares from Brighton-Liverpool for Tuesday December 8 from £29.50 for an advance-purchase single ticket. The cheapest London-Liverpool fares are £22 AP Single. £22+£3+£4 (cross-London paper ticket) is £29. Even if you assume the Oyster fare of £2, that’s £27 - in other words, you can easily and simply buy a £29 ticket to Liverpool from a single website with no hassle at all, or you can make life enormously complicated to save yourself £2.50.

(I agree that the Trainline software that Virgin use for online booking is much less good than the ATOS Origin software that East Coast use - luckily, you can use the East Coast site to buy whatever tickets you like.)

Posted by john b at 02:04pm on 23 November 2009

It does have quite a bit to do with taxation, given that a privatised service costs taxpayers more and potentially gives them a worse service.

But the post wasn’t about privatisation, it was about resurrecting the InterCity brand for certain, mostly-but-much-less-than-they-used-to-be-long-distance routes. Renationalising the network doesn’t entail bringing back IC, and bringing back IC doesn’t require renationalising the network (the requirement to use the brand could be written into franchise agreements, in the same way that First operates the Scotrail franchise based on the Scottish Government’s branding requirements).

And you can’t just assert that “having a privatised service costs taxpayers more”. We know that the current railway costs taxpayers more than BR did when Mrs Thatcher was starving it of money for upgrades, maintenance and new trains.. We also know that the current railway provides a far better service than BR did at that time, on any actual metric (unless you count asking grumpy old men whether Things Were Better In Ye Olden Times as an actual metric).

We don’t know whether current levels of railway spending would have produced a better result under BR or under the current system. The experience of the NHS, where an extremely-efficient-because-money-starved public sector operation was given huge budget increases which led to improvements in overall output but huge declines in efficiency, might be relevant… but there are too many unknowns to be sure either way.

Posted by john b at 02:13pm on 23 November 2009

True enough. But we do know that the franchises which have been temporarily nationalised after either the collapse or failure of the owner, have provided a better service for less subsidy than when they were run privately.

It seems simple to me. For a private service:
Ticket Revenues + Subsidy = Service Investments + Shareholder Profit

Whereas for a nationalised service:
Ticket Revenues + Subsidy = Service Investments

So either investment goes up on the public service, or ticket cost and subsidy go down. I admit I’m not economist or businessman, though, so maybe I’ve missed something.

It’s also interesting that one of the major bidders for the east coast franchise is…. the German nationally owned rail company…

Posted by Rick at 02:18pm on 23 November 2009

No, you’ve missed two elements from the equation:

For a private service:
Ticket Revenues If Nationalised + Extra Ticket Revenues From Better Marketing + Subsidy = Service Investments + Shareholder Profit - Savings From Better Cost Management

Now, you might want to argue that actually, the private sector isn’t much better at marketing or cost-cutting in this case [*] than the public sector, and so Shareholder Profit > ETRFBM + SFBCM, but that’s a case you need to make rather than an accounting identity.

I’m also not sure where your ‘temporarily nationalised’ point comes from, either. Connex had its franchise terminated for gross mismanagement, so it’s hardly surprising that the SRA did a better job - however, the follow-on South Eastern franchise showed better performance and requires less subsidy than the public sector SET. On East Coast, I reckon 2 weeks is too soon to tell…

[*] I think everyone outside the SWP accepts that there are some cases where it is, hence why the civil service doesn’t manufacture its own Biros.

Posted by john b at 02:30pm on 23 November 2009

The RMT have done well out of privatisation, playing each franchisee off against the others. Good luck to them, but it suggests that the current privatisation has not improved productivity much, letting increased subsidy pay the drivers instead!

The law of unintended consequences, eh? Even the very successful BA and BT privatisations don’t look so hot now, do they? Or gas and electricity.

Nationalisation now would probably mean Bob Crow would demand all drivers earn as much as the best paid. But at least we’d only need one ticket while we sat waiting for a train that didn’t arrive…..

Posted by Steve at 04:51pm on 26 November 2009

I would like to be able to put figures to the variables in the equations above, but at the moment, my suspicion is that “Savings From Better Cost Management” is negative (due to the interfaces of the franchisees with Network Rail, the Office of the Rail Regulator, each other, and the duplication of resources required). I am also not convinced that “Extra Ticket Revenues From Better Marketing” is positive. And even if it is, I suspect there is another term: “Extra Ticket Revenues due to milking a captive audience of commuters”.  So I suspect that the inequality is satisfied.

The other reason I suspect this is the startling increase in costs per passenger kilometre travelled since privatisation. With the increase in passenger numbers one might have expected that economies of scale would lead to costs per passenger km going down, not up.

As the evidence suggests that the most efficient method of running the railways in the UK was in fact the nationalised British Rail, I have signed the petition to “Bring Back British Rail” organised by the Bring Back British Rail campaign, and would encourage others to do so.

Posted by David Sterratt at 04:46pm on 8 March 2010

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