Why British rail privatisation failed
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| Author: Patrick Crozier |
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British rail privatisation failed because although the industry was privatised it was not liberated. There was still a great deal of government interference. The most damaging aspects of that interference were:
- Vertical fragmentation
- Contracting out, or franchising as it is known
- Fare control
- Higher costs imposed by the Health and Safety Executive. Scroll down for what would appear to be a fairly typical example. Here's another morsel, an accident enquiry from 1961. Note how quickly it was done in comparision to the 2 years for the Ladbroke Grove Enquiry. Now think of the costs involved.
Franchises were originally let on a 5-7 year basis. There were a couple of longer ones, of which the Virgin West Coast franchise sticks out. That was about 11 years if memory serves.
The problem is that they are too short. Rail is a capital intensive industry. Trains, tracks, signalling and stations have to last a long time. For a franchisee on a five-year contract there is no point in building a station that is not going to show a return until Year 6.
At one point it was suggested that franchises should be longer. But this doesn't help much. Sure, they franchisees can make long-term decisions at the beginning of a franchise but towards the end the same short-term thinking applies.
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