Privatisation Improved the Railways - New IEA Report Claims

The conventional wisdom that railway privatisation failed passengers and taxpayers is challenged by a new study published by the Institute of Economic Affairs*.

The IEA study by a team of authors examined privatisation in the context of the history of government interference in the railways and proposals for new approaches to management and ownerships. It found that:

• The number of passenger kilometres has grown rapidly since privatisation.

• Train punctuality improved considerably after privatisation – improvements only came to a halt as a result of government meddling after the Hatfield incident.

• Safety improved faster after privatisation than before privatisation for all classes of accidents.

• In 2003 the rate of broken rails per million train kilometres was the lowest for 40 years.

• Capital spending increased by £4.6billion between 1990 and 2002, partly to make up for decades of under-investment before privatisation.

Nevertheless, it is true that costs and government support did increase rapidly after privatisation. However, to a large extent, this can be blamed on the structure of privatisation. David Tyrrall of Cass Business School argues that, ‘A ludicrously complex structure was imposed on the industry at privatisation that has since been made more complex. No private railway has ever found the structure imposed on the UK rail industry at privatisation to be efficient’.

Not all the authors agree on the way forward. Richard Wellings and Oliver Knipping believe that the industry should be free to determine its own structure. Chris Nash, Rico Merkert and Rana Roy propose alternatives that are closer to the present structure of privatisation. Nevertheless, all the authors agree that privatisation has worked and will in the future work far more effectively than is popularly perceived.

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