Tony Lodge: Passengers are the winners when there is real competition on railways

WHAT makes Doncaster and York unique amongst Yorkshire's busiest stations? Why do passengers at these stations rate most of their inter-city train services the best and what are the lessons for the rest of the rail network?
Competition works on the railway according to Tony Lodge.Competition works on the railway according to Tony Lodge.
Competition works on the railway according to Tony Lodge.

The answer is choice. Today at Doncaster passengers heading to London can choose between three high speed long distance train operators. They can compare prices and timetables as they choose which service best fits their budget and schedule. But why is this unique to these stations?

Twenty-five years ago, John Major’s rail privatisation White Paper pledged to “improve the quality of railway services by creating new opportunities for private sector involvement, more competition, greater efficiency and a wider choice of services more closely tailored to what customers want”.

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Many passengers will roll their eyes when they read this based on their own experiences, but the latest National Rail Passenger Survey shows that many of these ambitions are now being delivered. At these Yorkshire stations the main train franchise, Virgin Trains East Coast (VTEC), faces stiff competition from two non-franchised high speed ‘open access’ train operators.

These trains compete on the East Coast Main Line (ECML) and record the highest passenger satisfaction ratings in the country. Hull Trains comes top with 97 per cent, followed by rivals Grand Central and VTEC each with 91 per cent satisfaction. Similarly these operators also come top on value for money, reliability, punctuality, getting a seat and station facilities. The message is clear. When train companies face competition, they raise their game – they deliver better services at competitive fares because they have to fight for passengers.

This rivalry has also delivered innovations such as free wi-fi, special flexible ticket deals and new routes as operators look to serve new towns and cities to boost their offering. The open access operators have connected towns with London which lost their direct rail services years ago as well as competing with the franchise at other places like Hull, Bradford and Wakefield.

But why is such competition not network-wide? Why aren’t Ministers encouraging this model? The Competition and Markets Authority wants to see more and the Labour-chaired Commons Transport Select Committee has this month called it a “success” in its long-awaited report on rail franchising.

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Centre for Policy Studies research shows competing rail services deliver more and happier passengers, lower fares, more routes and higher revenues.

It is a very different story elsewhere. The Great Western franchise enjoys a high speed monopoly on services across vast swathes of western England and Wales. Consequently, there is no competition on long-distance fares where only 51 per cent of passengers think tickets are value for money. Similarly, Greater Anglia services enjoy a ‘railopoly’ to serve eastern England and just 42 per cent of travellers said tickets were value for money. Compare this with the average of the three competing East Coast Main Line services at 66 per cent according to the latest passenger survey.

Leeds is Yorkshire’s busiest station with almost 30 million passengers last year but suffers from a chronic lack of choice on inter-city trains to London. VTEC enjoys a monopoly and can therefore raise fares in the knowledge passengers have nowhere else to go.

The old arguments put forward by those opposed to more rail competition no longer wash. A favourite was that more open access competition alongside the franchise undermines its ability to pay a premium to Government.

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But this simply isn’t supported by the facts. Office of Rail and Road statistics show that the franchise premium on the ECML grew by a significant 450 per cent between 2009/10 and 2014/15. In 2015/6 the franchise premium had grown to £205m from just £46m five years earlier. This growth occurred (alongside a deep economic slump) as open access services grew from 18 trains a day in 2009 to 32 a day in 2016.  Competition can be shown to have supported the overall growth of the railway.

At Britain’s busiest station, London Waterloo, used by almost 100 million passengers last year, there is just one train operator. A new application to bring inter-city competition to the Waterloo to Southampton line will hopefully be approved.

More competition is needed to deliver new high speed services to the North Lincolnshire coast and cities like Leeds.

Passengers should ask why there isn’t more on-track competition and choice. A competitive railway will work and Conservatives should deliver one. The halfway house of Government-sponsored ‘railopolies’ is just no longer credible.

Tony Lodge is a research fellow at the Centre for Policy Studies and author of Rail’s Second Chance – putting competition back on track published by the CPS.