How were the Big Four regulated? Would it work now?

[Meerkat]

One of the suggestions for structural changes to our railways is to create vertically integrated private companies rather like the big four.
Obviously this creates some market abuse issues, mainly around commuting.......so what stopped the big four rinsing passengers (bearing in mind there was less competition from cars) and could it work now - is the answer just regulated fares as per the current situation?

 

[Bald Rick]

The big four were effectively only in existence and out of full government control for 16 years from 1923-1939; note this is rather less time than the current structure.

Government economic regulation for railways in the private era took 2 broad forms:

Price control, ie a requirement to offer cheap fares on certain trains.

Profit control, ie a requirement that railways could not make a profit above a certain percentage of revenue. This led to the unintended consequence (in the railway boom years) that railway companies had to find things to spend cash on to keep their profits down, and they often spent it building new branch lines for marginal traffic or in direct competition to other companies. It’s fair to say that many of these lines probably shouldn’t have been buil.

I can’t remember off hand the extent to which each form of regulation was applied, when they were applied, and if they applie to the big 4.

 

[Dr Hoo]

One of the suggestions for structural changes to our railways is to create vertically integrated private companies rather like the big four.
Obviously this creates some market abuse issues, mainly around commuting.......so what stopped the big four rinsing passengers (bearing in mind there was less competition from cars) and could it work now - is the answer just regulated fares as per the current situation?

The book ‘The Four Great Railways’ by Michael Bonavia, published in 1980, is a nice easy read of around 220 pages.
Long distance commuting was far less common in the Big Four era but each of the companies could point to new stations and/or electrification undertaken to stimulate or retain commuting even if its relatively peaky nature made it economically questionable.

 

[LNW-GW Joint]

I think since the very early days, the government has set "parliamentary" fares for basic 3rd class travel (1d a mile etc), for all-stations services.
For a long time railway companies also paid a duty on higher fares for faster trains and higher classes, until the duty was abolished in 1929.
The "fares book" was just a single sheet of paper with a grid of mileage, classes and fares, which tapered slightly at the higher end.
There really weren't categories of fares like Advances and Off Peak like there are today, nor time restrictions, just "the fare".
On the other hand there were more special excursions and one-off services, eg to sports events, at special fares.

Freight was relatively more important than it is today and formed the bulk of traffic/profits on many routes.
The railway companies had to accept traffic however unprofitable (common carrier obligation) right into the BR period.
Basic safety legislation was strictly enforced, and I think employment was protected to a degree (although pay was very low).
The railways also agreed common rates on certain neighbouring routes (eg Manchester-London via LNW, Mid, GC, GN), and had many joint services where it suited them.
This is bit like the airline code-sharing practices today, sharing costs/revenue on a pooled set of routes.
So the Big 4 (or their predecessors) were not necessarily as competitive as today's TOCs.
The beggar-thy-neighbour era of unbridled competition ended roughly in the 1860s when the big railways generally called truces with their neighbours.

I think the railway companies were more driven by costs, most of which were under their direct control (track, rolling stock, operation, maintenance etc).
Today, most of these costs are externalised from the TOCs by contracts with NR, ROSCOs and manufacturers, leaving just the train operational costs to control.
We are inclined to concentrate on the TOC accounts, but something like 75% of their costs lie elsewhere and are mostly fixed for a franchise duration.
The NR costs, in particular, are not subject to competition (though ORR tries to regulate them).

 

[Bald Rick]

The NR costs, in particular, are not subject to competition (though ORR tries to regulate them).

That’s not entirely true. A significant proportion of NR spend is procured via competitive processes.

 

[Meerkat]

That’s not entirely true. A significant proportion of NR spend is procured via competitive processes.

But it is still NR doing the spec and procurement, planning, and maintenance.
We need real benchmarking. Even separating out Scotland from NR would be an improvement.

 

[Bald Rick]

But it is still NR doing the spec and procurement, planning, and maintenance.
We need real benchmarking. Even separating out Scotland from NR would be an improvement.

It’s been regulated separately for years!

 

[Tetchytyke]

Long distance commuting wasn't as it is now. The train companies couldn't fleece short distance commuters because of the extensive bus and tram networks in most cities; back then, the roads were quiet enoigh for the buses to be a viable alternative.

 

[Meerkat]

It’s been regulated separately for years!

But it is still NR with the same leadership and culture.

 

[MarlowDonkey]

1923 to 1939 was an era of stable prices. In other words once a price was fixed, it stayed at that price until something external changed it. None of this excuse of increasing fares with RPI. The RPI index would have been level or falling anyway.

 

[Meerkat]

Weren’t there any rail unions then?

 

[Dstock7080]

Weren’t there any rail unions then?

ASLEF was formed in 1880.

 

[MarlowDonkey]

So the Big 4 (or their predecessors) were not necessarily as competitive as today's TOCs.

If the 1923 grouping had been more competition orientated, perhaps you would deliberately try to have competing routes between major cities. The Midland seemed to get everywhere, so perhaps let it remain independent or be grouped with the Southern. Also group the Great Central with the Great Western.

That could result in cities in the Midlands and North being served by all four railways.

 

[LNW-GW Joint]

There were several different models for the grouping, but the government and industry eventually went with creating larger regional monopolies generally.
Plus such oddities as moving the Cambrian under the GWR because the LMS was "already too big".
The aim was to eliminate duplicate services, but was at the cost of less competition.
BR completed that process by merging the remaining overlaps and creating regional blocs, until the cross-regional sectors were created in the 80s.
In many ways, the current franchise system goes back to an approximation of the original shape/size of railway companies, when there was certainly more direct competition.