UK success has gone unnoticed
Debunking the myths against market opening
2019 represents a significant next step. This year, the EU Fourth Railway Package will start to be implemented. The European Commission finally wants to deliver a single European rail market - for good reason, as in the handful of cases where passenger services have already been liberalised, this has led to:
■ Taxpayer savings.
■ More frequent trains.
■ Passenger growth.
■ More private investment.
■ New jobs.
However, the new year has produced no change in the dominant narrative in the media, which is to blame privatisation for all the ills in the rail sector despite this simply not being true. In this article, we highlight some examples:
Since September 2018, Germany’s vertically integrated rail system has been in crisis. Efficiency is low, and the earnings target of 2.1 billion euros (£1.9bn) for 2018 will not be met. Delays at incumbent DB’s long-distance passenger rail operator and customer satisfaction are getting worse.
The Guardian wrote on December 20 2018: “Cancelled trains, lengthy delays, cracked bridges and wildcat strikes by disgruntled employees - a trail of chaos in recent months has caused Deutsche Bahn (DB) to become the butt of jokes and withering complaints.” But what do we hear reported in the media? Incredulously, some critics have been blaming liberalisation. The German Rail Reform of 1994 turned the incumbent into a joint stock company with a more businesslike approach. One commentator concludes that “the problems at DB show one thing more than anything else - privatisation is the wrong way!”
Others complain that the “chronic underinvestment” in infrastructure and rolling stock results from having to behave like a company. Yet others see the even closer integration of internal business units as the only viable solution.
Unfortunately, these arguments are not based upon fact. Firstly, DB remains totally owned by the German state, and its long-distance operator has 99% market share. Secondly: it has not been starved of money - debt is now close to a record 20 billion euros, just under the maximum debt limit of 20.4 billion set by the German Parliament’s budgetary committee.
On the contrary, we think that the lack of competition and too much integration are the two major causes of the crisis.
After all, on December 7 2018 Kay Scheller, president of the German National Audit Office, remarked of the non-transparent use of taxpayer funds: “There’s a real risk that the state of the railway infrastructure will continue to deteriorate - despite an increase in federal funding.”
ALLRAIL would like to break with a taboo - we argue that the German Rail Reform of 1994 did not go far enough. To put it bluntly: vertical integration has delivered sub-optimal results.
The only way to ensure taxpayer funding is spent effectively is to separate the infrastructure manager from the historical operator. This would also help achieve a genuinely open market in terms of access to slots, rolling stock and many other areas. If only Germany were brave enough to follow this path.
The UK is another example. At the start of 2019, the Government slightly increased the rail fares that it sets directly. Predictably, the narrative about the evils of privatisation dominated the national media.
But the reality is different - the rail system works well. Since market liberalisation in the 1990s, passenger numbers have doubled and satisfaction has increased much more rapidly than anywhere else in Europe.
In recent years, the European Commission determined that the UK is the only country making an operating profit from its train operators. Furthermore, it “judges there are £11bn of efficiency savings to be made across the railway networks of the other 27 member states, but zero for the UK”.
With demand being high, successive British governments (regardless of the political party) have chosen to subsidise rail fares less. Investment in new trains and infrastructure comes from private sources, not just the taxpayer (hundreds of new coaches are to be rolled out in 2019). This has also led to many new jobs.
Where we see room for improvement in the UK is not less competition, but more - allowing for more than one operator on long-distance lines. This has been a success in other EU member states, bringing modal shift to rail. For example, in the Czech Republic average fares have dropped 42% and demand has grown 92% since 2011 on those long-distance lines with on-track competition.
The upshot of all of this is that now, at the start of 2019, the European passenger rail market is at a pivotal moment in its development. The introduction of the EU Fourth Railway Package later this year could lead to higher quality services better in tune with customer needs.
However, ‘ fake news’ risks undermining everything. Fact is often drowned out by fiction. In Germany, the UK and the rest of Europe, the mainstream media repeats the dogma that rail market liberalisation in Britain and elsewhere has ‘failed’. Private rail companies are smeared as being inefficient and extracting profit from the system, despite all the data showing otherwise.
This unverified narrative largely goes unchallenged. It gets repeated so often that people simply start to believe it is true.
On the contrary, market liberalisation improves efficiencies and achieves better value for money for taxpayers. Modal shift to rail both grows the supply chain and reduces carbon dioxide emissions and road congestion costs.
However, based on false premises, there is the real risk that the benefits of market liberalisation will be missed. The European rail system risks reverting to subsidised national monoliths, unable to compete with innovation in other transport sectors.
To conclude: in order for competition to achieve results, private ownership in passenger rail needs to be encouraged. There has to be a realistic prospect of a return on investment. There has to be a genuine level playing field with the state-owned incumbents, otherwise investment will flow elsewhere. For example, Virgin Group is European-based, but Virgin recently invested in passenger rail in the USA .
Therefore, ALLRAIL calls on thought leaders (politicians, civil servants, jour-nalists) across Europe to debunk the myths against market opening and instead give it a fair and equal chance. In 2019, we are at the start of a single European rail market. ALLRAIL believes that it can be very much as vibrant as the single EU aviation market - benefiting consumers and businesses - provided ‘fake news’ is not able to ‘de-rail’ it (no pun intended). R
■ Nick Brooks is Secretary General at ALLRAIL (the Alliance of Passenger Rail New Entrants in Europe), a non-profit recognised rail body based in Brussels that represents independent (non-incumbent) passenger rail operators and ticket vendors. Members include Westbahn in Austria and the Italian high speed operator NTV.
“Fake news risks undermining everything. Fact is often drowned out by fiction.”