Summary

In 1994-1995, British Rail was privatised by a right-wing Government. Public opinion was favourable, in some cases enthusiastic. Yet after only a few months newspapers were as critical of the new companies as they had been critical of British Rail.

Train reliability worsened, and there were a number of high profile accidents, and operating costs, and cost estimates for necessary major upgrade projects seemed to be escalating out of control. Public opinion condemned Railtrack, the company that managed the infrastructure. In November 2001, the Government forced Railtrack into bankruptcy. Public opinion was in favour of this move, but the Government is now finding it difficult to put a successor organisation in place.

After Railtrack, the next most prominent group of companies are the Train Operating Companies, the TOC’s. The TOC’s are finding it difficult to remain profitable, and in March 2002 it was announced that the Government would issue additional money outside the Franchise terms to keep two TOC’s from going bankrupt.

The structure of the British railway system was determined as a political act, it was done to transfer the heavy cash demands of railways out of the public domain as far as possible. Privatisation of other former state monopolies like telecommunications and electricity supply, had been seen as successful. When the railway privatisation was first planned, it was assumed that the importation of competition, availability of private finance, and creative management from the private sector, would alone resolve all the historical difficulties.

However, as the privatisation was implemented in detail, some realities forced the modification of the pure economic theories. The fact that railways were intrinsically loss-making, and the impossibility of introducing perfect competition were dominant factors; many people were concerned that private sector pressures would lead to loss of control of safety management. To manage these factors a large number of regulatory control arrangements were put in place by Government.

Railtrack itself was required to contract out practically all of its infrastructure work; the track workers and signalling equipment maintainers were now employed by contractors. Railtrack did not take a lead in giving these contractors clear signals about its own future plans, nor did it insist on the free exchange of information from and to its contractors, and in fact its relationship with them became adversarial. However Railtrack’s own staffing level for the control of the contractors and to assess the state of the infrastructure assets and the quality of the contractors’ work, was held at the lowest possible level.

At the time of writing, the Government is putting in place a successor organisation to Railtrack; and its own Strategic Rail Authority is setting out new plans for the medium and long term future of the railways. As new large-scale state funding is unlikely, these arrangements will need to be very skilfully constructed.