Tony Lodge is a Research Fellow at the Centre for Policy Studies and author of Rail’s Second Chance – putting competition back on track.
The Competition and Markets Authority (CMA) has spoken for hard-pressed train passengers and those who want more choice. Their new study into the possibilities of greater competition between train operators is a revealing analysis of how and why there should be more on-track competition in a sector in which in just over 20 years a renaissance has taken place.
Since privatisation in 1994, the number of annual passenger journeys has doubled to 1.6 billion. Smart ticketing and the internet have changed the way we plan our travel forever, and new rolling stock has and is slashing journey times so that rail is becoming much more competitive with air on the long distance high speed routes. But real choice at stations between operators and consequent downward pressure on fares remains poor.
During 2012 and 2013, the CPS undertook considerable research into the scope for more competition on the rail network following the earlier collapse of the rail franchise process on the West Coast Main Line. We were concerned that 20 years on since Conservative rail privatisation, there remained very little actual on-track competition: indeed, the only real competition was in the franchise bidding process, after which the Government would hand one company the franchise or the ‘railopoly’ as we have come to call it.
The CMA has now risen to the challenge. When it first announced its study in February, I wrote on this site of our hopes for a proper, thorough and considered study. We have got one. It argues for more competition through a number of options, and recognises the huge potential from the ‘open access’ train companies which have been allowed to compete with the franchise – though only on one long distance high speed route (East Coast Main Line). It has consistently recorded the highest passenger ratings. Rail’s Second Chance focused on this important evidence based success. It showed that this competition led to lower fares, higher revenues, more passengers, more routes served and happier passengers.
Importantly, there is a key test coming in the next few weeks on the back of the CMA report. The Office of Rail and Road (formerly the Office of Rail Regulation) will soon rule on whether new open access high speed services can compete with Virgin on the West Coast Main Line to serve Euston, the Midlands and Blackpool. Watch this space.
With a majority now in place, Conservatives can get behind this proposal and push it through against the opposition of some BR-minded civil servants. The days of the ‘railopoly’ should be over; we need a rail network in which no train company can hike fares without fear of passengers being able to vote with their feet.
The CMA was the target of recent French claims earlier this month, when the boss of Eurotunnel, Jacques Gounon, claimed that it was the CMA’s support for “British protectionism” which had caused the recent spate of French ferry worker strikes at Calais. It was as bizarre as it was wrong. In fact this claim exposes the deep chasm which remains between ‘Perfidious Albion’ and some on the rest of the continent regarding policies designed to deliver competition and choice.
Let’s look at the facts. Since 2012, Eurotunnel, which manages the Channel Tunnel and its vehicle shuttle services, has also owned two large ferries which it operated under the brand/front name: it bought these from the bankrupt French state ferry operator SeaFrance. This resulted in Eurotunnel enjoying more than 50 per cent of cross-channel transport services. The ships were run by a French workers’ cooperative led by a militant union boss.
Reacting to this growing Eurotunnel slice of cross-channel business, the CMA objected to Eurotunnel also running two large ferries. Earlier this year, they were ordered to stop the ferry services from Dover to Calais on the grounds that it breached UK competition rules.
Consequently, Eurotunnel sold the ships to another channel ferry company (DFDS) which had the smaller share of the cross-channel market, at around 23 per cent as against the P&O Ferries share at around 30 per cent. So, in short, the CMA has done its job properly; it has broken up Eurotunnel’s unhealthy and growing market share (which could have forced another operator out of business) and sought to deliver more competition, choice and liquidity on these important and hugely strategic transport routes. Consequently the strikes were called on the back of the new owners not wishing to re-employ all of the French seamen, not “British Protectionism”.
It is revealing that some on the continental mainland still fail to understand the basic characteristics of a competitive market which delivers alternative services and more choice. I fear this is a breach which will never be bridged. At least it looks as though we are making real progress here in appreciating the potential for real and responsible competition across transport policy in the interest of the paying passenger.