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Is the UK rail franchise system a model railway?

  • January 2015
  • -
  • MarketLine
  • -
  • 24 pages

Introduction

Critics of the current UK rail franchise system lambaste the subsidies given to Train Operating Companies, and point to annual fare rises in excess of inflation, a lack of genuine competition on individual routes and overcrowded commuter trains. This case study examines the successes and limitations of the UK rail franchise system introduced in 1993, and potential future reforms to the system.

Features and benefits

* Assesses the performance of the rail franchise system from the perspective of both passengers and the UK Government.
* Considers potential reforms to the UK rail franchise model.

Highlights

Rising passenger volumes are a notable success of the privatized passenger rail sector, however it is difficult to attribute this solely to privatization.
A combination of rail fares rising faster than average earnings growth and ageing rolling stock in some geographical areas has weakened the case for privatization.
Further reforms such as changing the structure of franchise agreements to give operators sole responsibility for rolling stock and removing government intervention on fares would make operators directly accountable to passengers.

Your key questions answered

* What are the respective successes and failures of the UK rail franchise system?
* Have passengers benefited from privatization?
* Could the UK model be replicated in other countries?

Table Of Contents

Is the UK rail franchise system a model railway?
OVERVIEW
Catalyst
Summary
THE STRUCTURE OF THE RAIL FRANCHISE SYSTEM
A system based on the Railways Act 1993
SUCCESSES OF THE UK RAIL FRANCHISE SYSTEM
Placing the passenger rail sector on a commercial footing
Passenger volumes have risen rapidly
Direct subsidy payments to operators have fallen
Privatization has placed the industry on a commercial footing
LIMITATIONS OF THE UK RAIL FRANCHISE SYSTEM
Advantage of privatization to consumers has been undermined
Systemic failure of franchise tendering
Rising fares have undermined benefit of privatization to passengers
Comparing fares to other European countries is problematic
Renewal of rolling stock remains a key issue
A lack of genuine competition limits the benefits of privatization
The concentration of operators tendering raises concern
Dominance of large transport groups may harm competition
IS THE UK RAIL FRANCHISE SYSTEM A MODEL RAILWAY?
Objectively comparing systems is not a straightforward task
Reform would have been difficult to achieve without privatization
UK rail franchise system is not definitively superior compared to the passenger rail systems of other European countries
The UK rail franchise system is unlikely to be adopted in full internationally
SIGNIFICANT SCOPE FOR IMPROVEMENT REMAINS
Future prospective reforms for the UK rail franchise system
Transferring responsibility for rolling stock to operators will increase accountability and drive up standards
Removing fare regulation from Government will improve transparency
Competition is merited and necessary on selected mainline routes
Granting operators further freedoms will increase the pace of innovation
CONCLUSIONS
Prospective reforms for the UK rail franchise system
APPENDIX
Sources
Further Reading
Ask the analyst
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