Open access: DfT prefers public service obligation levy

The Department for Transport says a public service obligation (PSO) levy is its preferred option to ensure more equal competition between open access and franchised operators.

It follows a consultation launched in February 2017, after a recommendation from the Competition and Markets Authority (CMA) that such a levy, combined with reforms to track access charges, could provide greater open access operation.

In its conclusion to the consultation, the DfT says a levy based on a metric such as distance or passenger numbers (or a combination of the two) is its preferred option, and that it would prefer the Office of Rail and Road (ORR) to administer the levy. Collection would take place through existing rail industry mechanisms.

However, while the DfT says it supports such a levy, it adds that introduction would require primary legislation and that there is “limited parliamentary time” in the current Parliament.

The PSO levy would in all likelihood only apply to domestic journeys, as international operators do not compete with franchised operators on the publicly funded network.

Outlining its rationale for its decision, the DfT says the PSO levy has “significant compatibility” with existing industry and regulatory processes, including the ORR’s proposed ‘market can bear test’ which it is taking forward as part of its 2018 Periodic Review (PR18). The option garnered general support from respondents, although some suggested the legislation should be flexible enough to adapt to market changes while still providing certainty for operators and government.

The DfT has asked the ORR to work with it and the CMA to work on detailed design of a levy to fit in with its PR18 process. It says it will examine progress and “look for an appropriate parliamentary opportunity to introduce the levy when it arises”.