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Spectator Briefing

The free market is the key to fixing Britain’s railways

16 January 2018

12:21 PM

16 January 2018

12:21 PM

As the political argument over the East Coast railway franchise continues, it’s easy to lose sight of the passenger interest. Last year, the Campaign for Better Transport found that nationally over 50 per cent of trains were late or cancelled. This is despite fares and costs that have risen sharply for the last 14 years.

Chris Grayling, confirmed last week as the Secretary of State for Transport, is right to be reforming the franchises, such as re-integrating track and train, to address the confused responsibility for poor service that characterises the current system. But tweaks to the status quo will only get us so far. Also heralded in the government’s vision for rail, published at the end of last year, is a move towards market-led proposals, away from the current model of predict-and-provide and perhaps more like that practised in Australia or the US.

Predict-and-provide has been root of the problem with the railways since they were brought under state control for the First World War. Central government forecasts demand and advises Parliament to spend taxpayers’ money accordingly. Officially, it is a rigorous process but that is difficult to reconcile with either the Beeching cuts or the lists of new schemes and their prevalence in marginal constituencies.

The problem with predict-and-provide isn’t the absence of a reliable crystal ball, it’s the conflict of interest. Ministers are obliged to be both advocates and judges in their own causes. Instead of being on the side of the people, judging the schemes of others in the national interest, they find themselves effectively working for councils, lobbyists or even the rail industry itself. Some schemes that do get funded but then go wrong cause embarrassment for ministers because they look like a failure of delivery, when often they were supported based on necessarily incomplete information.

Markets handle this much more constructively.

Canals, for example, were a great development of the early 19th century. Before many were even half complete, however, there was the better invention of the railways. Because the Victorians operated a market-led system, they were able to tolerate the failure of the canals. Yet today, our infrastructure procurement is less sophisticated.

What if something came along that made our most modern high-speed railways or even airports obsolete (perhaps the Virgin Hyperloop or something completely different)? The owners of the canals resented ‘the father of the railways’ George Stephenson so much that they blocked him from joining the Institute of Civil Engineers (leading to the creation of the Institute of Mechanical Engineers). Faced with the railways’ obsolescence, would our modern government, as its owner, have the same not-invented-here attitude as the canal owners or would it behave with the benign detachment of Queen Victoria’s governments? The latter enabled Britain to lead the world in railways and the industrial revolution.

This isn’t just of historical interest as transport is again being revolutionised, this time by the giants of the Internet, with self-flying drones, driverless cars and Artificial Intelligence.

Much of this innovation is applicable to rail – but only if it is not blocked by governments. Tesla-style batteries may soon make overhead electrification unnecessary. The hugely expensive European Rail Traffic Management System could be outmoded before it is operational.

This is not intended to be criticism, to say that any scheme will fail or be overtaken. It is just asking a hypothetical question, which is important because how we allow failure is critical to how we enable success. If we don’t allow people to fail, there is no success either; we are all just doing what we are told.

Many of the advantages of entrepreneurship can be seen in related markets. Datacentres (information networks) routinely achieve ‘five nines’ reliability, 99.999% uptime. In Japan, the Shinkansen railway achieves 100% punctuality measured to the nearest minute. The UK parcels market (the transport of things) has seen volumes rise by 7% last year. These arrive more quickly and reliably than ever. Spurred by huge capital investments by Amazon and its competitors, prices are going down, 5% cheaper per parcel in 2016, according to Ofcom. Last month, in Florida, the first privately-funded railway for over 100 years, received its operating permits.

In Britain, with the world’s first railways, we shouldn’t simplistically re-open old lines. Instead we should consider what lines, old or new, would best serve public demand today. The imperfect network we have inherited gives us enormous potential for improvement.

The Windsor Link Railway, for instance, will link two lines that terminate in central Windsor, about 300 metres apart and create a new link west of Heathrow between the Thames Valley and Southwest London, enabling new journeys within the region and greatly reducing road congestion and environmental pollution. New housing and enlarged public parks, combined with a better riverside environment will improve Windsor, the most popular tourist destination outside London, with 7 million visitors per year to the borough.

As with many innovative ideas, it has taken some time for it to be accepted as a practical possibility. With the support of respected engineering companies, however, a formal feasibility report was submitted to Network Rail last year. Phase 2 provides both north-west and south-west links to Heathrow, two for the price of one, enabling the country’s first unsubsidised new railway in living memory.

In time, an ‘M25 railway’ could be created around London, joining up with schemes such as the planned East-West Railway and improved links to Gatwick. There are many other ‘missing link’ schemes around the country that could save more money for taxpayers, improve air quality, create new homes, reduce fares or improve punctuality.

Private proposals will always need to be subject to proper scrutiny but that is the beauty of a market-led system: the person judging is not the same as the person promoting.

Proponents of familiar, EU-style procurement argue that we need ‘to compare apples with apples’ so competition should be limited to ‘delivery’, once the government has decided what to do. Unfortunately, this approach discourages innovation and the savings from competing just the construction are a fraction of what might be achieved from an open ‘competition of ideas’. This is recognised by Mark Carne, Chief Executive of Network Rail, who has called for more ‘non-compliant bids’. And comparing apples with oranges isn’t that hard: it’s what we do every time we go to the supermarket.

It’s vital that we inject more entrepreneurialism into rail, something that the Secretary of State supports. If you support it too, please help by writing to your local MP and the Spectator.

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