What would a fully privatised railway look like?

[telstarbox]

If the railway was fully privatised with no subsidies, which lines would survive and which would close?

 

[tbtc]

Based on current things, only FCC are truly "profitable" (?)

But a truly private railway presumably wouldn't have to worry about unprofitable lines (or quiet services at anti-social hours) which may make some other routes profitable.

 

[Railsigns]

If the railway was fully privatised with no subsidies, which lines would survive

The profitable ones.

and which would close?

The loss-making ones.

That was easy!

 

[JohnCarlson]

I dont think anyone really knows but even a lot of the South East Commuter lines might go.

Have a look at

http://en.wikipedia.org/wiki/Serpell_Report

http://www.railwaysarchive.co.uk/documents/DoT_Serpell001.pdf

 

[yorksrob]

No subsidies ? With the exception of a few trunk routes such as TPE, there probably wouldn't be much of the Regional Railway left.

Unless..... they arranged it in such a way that profitable routes were made to cross subsidise the unprofitable ones. You might get a bit more then - but then you'd have to persuade the private sector to actually take it on (and by persuade I mean bribe of course - which is back to square one )

 

[Morgsie]

We had a fully privatised system in the 19th Century where there were many companies and multiple lines in areas

 

[Yew]

Profitable lines, and those that coincide with useful freight routes.

 

[Polarbear]

We had a fully privatised system in the 19th Century where there were many companies and multiple lines in areas

True, but in the 19th century, the railways had very little in the way of competition. No cars, buses, coaches, planes......

 

[LE Greys]

One firm prediction is that ORCATS would be wound up and the Railway Clearing House reopened.

Assume this means vertical integration as well. All the main lines would survive in one form or another, because they would no longer need to pay premiums to anyone, although fares would skyrocket without regulation. Northern would go bust in a few weeks, with the lines divided up roughly between the main line companies. XC could only continue to function via running powers or an Amtrak-style state-owned operation. The bottom would drop out of the freight market if passenger companies owned the lines, freight companies would either have to merge with them or build their own routes. There would be turf wars over the big regional depots and signalling centres, with various possible solutions including 'treaties' negotiated by the DfT or building/reopening other ones to duplicate their work. Essentially, we would have a decade of semi-chaos until it all settled out, probably losing about 20-30% of the network with some major reverses in BR/NR rationalisation policies. Then it would begin to change. If these new railway companies had total freedom to make decisions over their own property, then we would start seeing the sort of competition we saw in the Big Four era, presuming that the market is still expanding. Government loans could subsidise some reopening, including some of the missing links, so that lines could start cutting into their neighbours' territories.

 

[HSTEd]

Except there is no profit in most rail operations.

Pretty much all secondary routes would close to passengers almost immediately, with only major freight service corridors surviving, and there would be a huge rationalisation of trackwork since a handful of coal or container trains per day don't need double track (let alone quad track) and sophisicated signalling systems. (ERTMS-Regional or some modernised RETB would predominate.)

Intercity routes might last a bit longer but they would likely mutate into near-peak hour only operations with a tiny fraction fo the current off peak service, again with massive track rationalisation as loss-making branch lines and slow trains are eliminated.

South East Commuters would likely see fares shooting up with many secondary routes dismantled, reducing it to a handful of main lines, many likely feeding into Thameslink to enable the termini to be closed and sold.

Essentially the railway turns into a tiny freight dominated network with a handful of passenger lines.

 

[YorkshireBear]

We had a fully privatised system in the 19th Century where there were many companies and multiple lines in areas

Yep and the ballsed that up well and truly didn't they...


I think its best left the way it is, as a public service. Public services shouldn't need to make huge profit hence why i disagree with the principle of privatisation. However that doesn't mean it can't work.

 

[Oswyntail]

What a pessimistic bunch. All the old assumptions are being made, leading to the same old conclusions and the same old failures. For instance; "No rail operation can be profitable". Is this true, or is it simply a view of history? By definition, we have not had the innovative approach that might make rail profitable. And we tend to assume that a privatised railway would make the same mistakes Beeching made, of incorrectly assessing market flows. So, I shall make a couple of assumptions of my own: a fully privatised railway will be a single entity; it will be in a position to revise anything (Ts&Cs; Routing Guide; NRCOC etc); it will be run by an enterprise committed to the long term.
Given those assumptions and a properly innovative approach there is only one possible answer to the question posed: different from what we have at the moment.

 

[Greenback]

True, but in the 19th century, the railways had very little in the way of competition. No cars, buses, coaches, planes......

Quite correct, and I'd like to add lorries too. Freight traffic was very profitable for railways before road competition brought about by motorway construction.

What a pessimistic bunch. All the old assumptions are being made, leading to the same old conclusions and the same old failures. For instance; "No rail operation can be profitable". Is this true, or is it simply a view of history? By definition, we have not had the innovative approach that might make rail profitable. And we tend to assume that a privatised railway would make the same mistakes Beeching made, of incorrectly assessing market flows. So, I shall make a couple of assumptions of my own: a fully privatised railway will be a single entity; it will be in a position to revise anything (Ts&Cs; Routing Guide; NRCOC etc); it will be run by an enterprise committed to the long term.
Given those assumptions and a properly innovative approach there is only one possible answer to the question posed: different from what we have at the moment.

Interesting. Presumably that would involve the railway as it is now, and the overall operation would be profitable?

It seems to me that the only innovative approach that would make the current system profitable (as in making a return on investment for the owner and requiring no public money at all) would be by cutting costs.

I can't see how this can be done without slashing the number of staff, services, staff, staff pay and stations.

I think the pessimism shown is based on the fact that a profitable railway has been sought for a long time, and has never been found.

Even going back to the Victorian era many lines were in constant financial trouble. The Grouping, and then Nationalisation, followed by the Reshaping of Britain's Railways were all quite large scale attempts to put the railways into profit, and none of these succeeded in that aim.

Finally, we still don't really know whether a line, or route, that is profitable today (and there are few enough of them) would still be profitable if its feeder routes and connectivity were removed.

 

[DarloRich]

What a pessimistic bunch. All the old assumptions are being made, leading to the same old conclusions and the same old failures. For instance; "No rail operation can be profitable". Is this true, or is it simply a view of history? By definition, we have not had the innovative approach that might make rail profitable. And we tend to assume that a privatised railway would make the same mistakes Beeching made, of incorrectly assessing market flows. So, I shall make a couple of assumptions of my own: a fully privatised railway will be a single entity; it will be in a position to revise anything (Ts&Cs; Routing Guide; NRCOC etc); it will be run by an enterprise committed to the long term.
Given those assumptions and a properly innovative approach there is only one possible answer to the question posed: different from what we have at the moment.

It is somewhat naive to expect private industry to take a holistic approach to a unified railway network. They simply won’t. They can’t. Private entities will always prioritise shareholder dividend over everything else. They are legally obliged to do so.

I also doubt a private enterprise led railway would remain in a single ownership. Why would you bother with all of the troubles? Would you not just set out to manage things? Surely contracting out would offer better scope for efficiencies and cost savings. Why go through all the hassle and unpleasantness of screwing down terms and conditions, for instance, when you can hire in people who are already on a terrible deal.

Furthermore, surely a private enterprise led railway would focus only on only what is profitable (or can easily be made profitable) such as long distance intercity flows and commuter routes into the big cities. What would be the incentive to invest their own money into expanding services or infrastructure? I think they would take the easy option and simply cream off the profits on the decent routes and not try to expand or improve. For instance what would be the driver to electrify vast sections of the network?

That said I think the system can be profitable, or at least break even if the profitable routes, and being honest almost all lines into London should turn a profit due to the numbers travelling and the costs associated with ticketing, are made to cross subsidise the less profitable ones. Also the companies needs to be run on a not for profit basis but with real world commercial savvy, experience of public transport systems and with an innovative and flexible approach. It doesn’t help that lots of money is lost in multiple director remuneration packages, shareholder dividend payments and intra company financial planning to reduce profitability.
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We had a fully privatised system in the 19th Century where there were many companies and multiple lines in areas

Aye - because you either got the train or walked.

Most people in that time had not ventured far from their village or town. The more affluent may have had access to some sort of horse and cart for getting goods to market and the rich may have had some form of carriage. There were stage coaches for long distance “inter city” travel but they could carry only few people and most simply did not travel. Even the concept of the omnibus was in its most early stage (I think the first in London was Shillibeers Omnibus in 1829). So, if you were of the lower social orders you wither walked or stayed put, essentially living in the locality of your workplace.

The railways opened up the country in a way that could never be contemplated before that time. As a driver for social change the railways were unprecedented.

 

[Greenback]

It is somewhat naive to expect private industry to take a holistic approach to a unified railway network. They simply won’t. They can’t. Private entities will always prioritise shareholder dividend over everything else. They are legally obliged to do so.

That's right. In practice this means profit maximisation - it's not enough to turn a profit, they have to make as much money as they can.

Surely contracting out would offer better scope for efficiencies and cost savings. Why go through all the hassle and unpleasantness of screwing down terms and conditions, for instance, when you can hire in people who are already on a terrible deal.

I agree, and we can all see that this has happened in other industries.

Furthermore, surely a private enterprise led railway would focus only on only what is profitable (or can easily be made profitable) such as long distance intercity flows and commuter routes into the big cities. What would be the incentive to invest their own money into expanding services or infrastructure? I think they would take the easy option and simply cream off the profits on the decent routes and not try to expand or improve.

And the danger is that the profitable routes, such as they are, become unprofitable as other routes are run down and services withdrawn. It's what happened under BR following Beeching. Cut the branches, or the secondary routes, and the thriving trunk routes find themselves in trouble.

That said I think the system can be profitable, or at least break even if the profitable routes, and being honest almost all lines into London should turn a profit due to the numbers travelling and the costs associated with ticketing, are made to cross subsidise the less profitable ones. Also the companies needs to be run on a not for profit basis but with real world commercial savvy, experience of public transport systems and with an innovative and flexible approach. It doesn’t help that lots of money is lost in multiple director remuneration packages, shareholder dividend payments and intra company financial planning to reduce profitability.

Quite. I think that the system can be a lot more efficient than it is under the current franchising model. I tend to agree that a fully privatised system would be a disaster for the country, and I would like to see a serious national debate about the way forward that is not based on political ideology, but rather focuses on the realities of what we have and what we want.

Instead, the report into franchising recommends more of the same, somewhat unsurprisingly!

 

[David Barrett]

Try a search for "Serpell option a". From 1982 I know and at a low point in the Railway's fortunes but an indication of the thinking of officialdom on the issue.

 

[yorksrob]

What a pessimistic bunch. All the old assumptions are being made, leading to the same old conclusions and the same old failures. For instance; "No rail operation can be profitable". Is this true, or is it simply a view of history? By definition, we have not had the innovative approach that might make rail profitable. And we tend to assume that a privatised railway would make the same mistakes Beeching made, of incorrectly assessing market flows. So, I shall make a couple of assumptions of my own: a fully privatised railway will be a single entity; it will be in a position to revise anything (Ts&Cs; Routing Guide; NRCOC etc); it will be run by an enterprise committed to the long term.
Given those assumptions and a properly innovative approach there is only one possible answer to the question posed: different from what we have at the moment.

I still say even if you were to privatise the industry in one lump (which I find hard to believe, given the need felt by Governments to chop everything up so recently), and even if it were possible to get this entity to break even - how would you get the private sector interested long enough to turn it around ? It's not going to change from one state of affairs to the other overnight and the shareholders will start agitating sooner or later !

 

[Greenback]

I still say even if you were to privatise the industry in one lump (which I find hard to believe, given the need felt by Governments to chop everything up so recently), and even if it were possible to get this entity to break even - how would you get the private sector interested long enough to turn it around ? It's not going to change from one state of affairs to the other overnight and the shareholders will start agitating sooner or later !

I think it may well be highly unlikely that any private sector organisation would be willing to take such a risk. If, in the unlikely event that there was some interest, I would expect that the private company would want to make some very good returns on their investment given the high level of risk they would be exposed to.

 

[tbtc]

Would a fully privatised railway have no PTE subsidies? That'd change the demand patterns in some areas, as there's quite a difference between fares and investment in PTE areas/ outside PTE areas.

 

[GodAtum]

If non-profitable lines where to close that where also heavily used commuter routes into London (ie Brighton-Victoria), the roads will be impossible to use!

 

[Greenback]

Would a fully privatised railway have no PTE subsidies? That'd change the demand patterns in some areas, as there's quite a difference between fares and investment in PTE areas/ outside PTE areas.

Well, the opening post did say with no subsidies!

If non-profitable lines where to close that where also heavily used commuter routes into London (ie Brighton-Victoria), the roads will be impossible to use!

Indeed. This is the intrinsic reason why a fully privatised is, in my view, neither workable or desirable. It will take no account of benefits to society, and will only be interested in maximising profits.

Just as some form of state subsidy will be necessary, so will an element of government, local or national, control and central planning be required as well

 

[Xenophon PCDGS]

How do you privatise Bob Crow hock:

 

[tbtc]

Would a fully privatised railway have no PTE subsidies? That'd change the demand patterns in some areas, as there's quite a difference between fares and investment in PTE areas/ outside PTE areas.

Well, the opening post did say with no subsidies!

I was just trying to split the "obvious" subsidy (e.g. what the TOC gets from the Government to operate the services) from the "hidden" - if you take away PTE subsidies (through the fare box or through other support) then it's not just the rural lines that would be unprofitable - a lot of busy-ish urban lines may struggle if train users had to pay the true cost - for example there are some places where subsidised trains are much cheaper than competing (commercial) bus services.

 

[Greenback]

I was just trying to split the "obvious" subsidy (e.g. what the TOC gets from the Government to operate the services) from the "hidden" - if you take away PTE subsidies (through the fare box or through other support) then it's not just the rural lines that would be unprofitable - a lot of busy-ish urban lines may struggle if train users had to pay the true cost - for example there are some places where subsidised trains are much cheaper than competing (commercial) bus services.

I take the wording of the opening post to mean that the OP is interested in knowing how a subsidy free railway system run as a private concern in whatever guise, and with no government interference, would work.

The answer to that, as you have said, is that there are an awful lot of lines and services that would be cut in the search for maximum profits.

In my view, if there are 'hidden' subsidies, it could not be fully privatised railway. And I believe this is one of the reasons why we don't have such a system, and it has not been seriously suggested that we should (at elast not since 1983 anyway!), as most people recognise the benefits to society and the economy by providing subsidies of one sort or another so that the system can be maintained.

 

[LNW-GW Joint]

A privatised railway would sweat the assets for a generation, and then abandon much of the network because they would not take the renewal investment risk (resignalling, electrification, new trains etc).
A bit like the inability of the privatised electricity industry to build new power stations without government guarantees.
There would be no "network" or joined up thinking, no interoperability (unless someone else pays).
London radials (ie "NSE") would likely survive the longest, not much chance for PTE, regional and especially rural lines.
The railway spec (network size, speed, capacity etc) would be drastically cut.
As in the US, services would be trimmed to peak hours only, nothing off-peak or at weekends.

I keep thinking of the Ryanair business model - opening and closing routes at the drop of a hat, playing towns off against each other for route/station investment, operating seasonally, and exploiting their captive market at every turn.

The railway would become vertically integrated, with no place for a Network Rail, or an ORR.
There would be a few winners, and many losers.

But it won't happen...

 

[GodAtum]

just watched the BBC Railways. i doubt the line in Wales that recently reopened is profitable but its a lifeline to people working in Cardiff.

 

[ChiefPlanner]

Luckily - the 1968 Transport Act recognised the social purpose of the railways and put in a the line subsidy / or in Peter Parker's terms "the social contract".

Serpell was the raving of a very right wing economist - it would never have been implemented in any realistic way.

 

[Gareth]

The main intercity lines would remain. Commuter rail would probably barely exist outside of the South East. I'm sure Dr Beeching came up with a hypothetical map of what a no subsidy network would look like and it was along those lines.

 

[Greenback]

The main intercity lines would remain. Commuter rail would probably barely exist outside of the South East. I'm sure Dr Beeching came up with a hypothetical map of what a no subsidy network would look like and it was along those lines.

Beeching's analysis may well have been flawed. Suppose the main line from Cardiff or Swansea to London were to remain. How much traffic along that route would be lost through people from West and Central Wales, the Valleys, Hereford, Gloucester, Cheltenham etc not being able to connect into it?

Is there really sufficient custom to keep such lines going without the feeder routes? My feeling is that it would be difficult for the main lines to be profitable if they were just relying on point to point journeys along the route.

 

[cgcenet]

One firm prediction is that ORCATS would be wound up and the Railway Clearing House reopened.

More likely there would be no timetabling or fare integration at all; train operators would run their own ticket offices which would only issue tickets for their own lines, except where they have decided to co-operate. You would have to book at several different places for a through journey. At major termini and interchanges, you would have to know which company's ticket office to go to in order to buy a ticket for your destination. Long-distance operators would probably move to pure airline-style ticketing with only yield-managed fares.