The Wheels Keep on Turning: Is the end of rail franchising in Britain in sight?

The regime of passenger rail franchising in Britain, in actual fact a form of competitive tendering, has been in place for over 20 years. The developments have been reported at past Thredbo Conferences, including by the author in 2007 and 2015. The franchising regime has been remarkably resilient and has been through at least five phases. Using the concept of regulatory cycles, this paper reviews the prospects for a sixth and possibly final phase. Rail statistics are reviewed and a welfare analysis of rail franchising is undertaken, building on and updating work presented at the Thredbo Conference in 2011. This suggests that franchising has been modestly welfare enhancing over the substantive phases of franchising to date, even though the transaction costs associated with the competition are substantial and apparently increasing. However, there remain concerns. Train operating costs remain high and there is strong Union resistance to technologies such as Driver Only Operation. This is currently manifesting itself in terms of industrial disputes and poor service delivery on the Southern franchise. There are also concerns about the costs that vertical separation of operations and infrastructure impose on the system and there are plans for experiments with forms of integration, not least for the proposed East-West railway, despite the apparent failure of the Wessex virtual alliance. The commissioning of High Speed 2 may well change the franchising model for many mainline railways, whilst the Competition and Markets Authority continues to push for more open access. Given this back drop, this paper will consider the pros and cons of alternative regimes, including public and/or private concessions.Institute of Transport and Logistics Studies. Faculty of Economics and Business. The University of Sydne