On-rail competition gets full go-ahead from CMA
After deliberating upon the subject for over a year, the Competition & Markets Authority (CMA) has released its final report which calls for more competition in rail passenger services.
Citing examples of competition in Britain and Europe, the CMA argues: “The evidence suggests that an increase in rail competition could result in benefits for passengers and taxpayers, such as: lower fares and growth in passenger numbers; greater incentives for operators to improve service quality and innovate; greater efficiency by train operators; and more effective use of network capacity.”
To date there has only been limited competition in the UK and it takes two forms: competition ‘for’ the market (between companies bidding for passenger rail franchise awards); and competition ‘in’ the market provided by open access operators (OAOs), and sometimes between franchised train operating companies (TOCs) serving the same places.
OAO operations currently account for less than 1% of all passenger miles and there are only two operators, both confined to the East Coast Mainline (ECML), namely First Hull Trains and Arriva-owned Grand Central. There have only been four successful open access applications out of 19 since the system was introduced in 2000, and one of the these (Wrexham & Shropshire Railway) went out of business in 2011.
CMA says there have been no new open access applications in the last five years (Alliance Rail, which starts running between London and Blackpool in 2018, is part of Arriva).
The CMA released an interim report in July 2015 (21CR reported) and it outlined four different options (competitive models to follow):
- Option 1 – maintain the status quo but introduce more open access operations;
- Option 2 – get two successful bidders to run each franchise;
- Option 3 – have more overlapping franchises;
- Option 4 – replace the current system with a licensing regime with many competitive operators.
Option 4 is the most radical and the most favoured, but it should follow on from Option 1 says CMA. All four options are better than the current set up it argues.
However, CMA says other changes need to take place before the existing system is altered. It wants reform of track access charging system to allow OAOs to make a fairer contribution towards costs (franchised TOCs currently pay fixed track access charges whereas open access operators do not). The ORR is currently working to reform track access charges and a new system should be in place by March 2019 (i.e. for the next control period).
CMA also suggests OAOs should contribute towards the cost of providing unprofitable but socially necessary services through a PSO (public service obligation) levy. Without this protection it fears public funding for subsidised services might increase and the premiums paid on profitable ones diminish.
Both the CMA and the ORR have a statutory duty to promote competition, but the latter also has the statutory duty ‘to have regard to the funds available to the Transport Secretary’. Reconciling both duties might prove difficult.
No major change is expected before expiry of current main line franchises. The three inter-city routes most likely to see full bloodied competition are the ECML (from 2023); the WCML (from 2025); and the GWML (from 2026). CMA says that the MML would also be a suitable candidate if it can be divorced from the rest of the East Midlands franchise.
But competition would not be suitable for commuter services, the report acknowledges. Commuters tend to take the first available train and commuter routes have capacity constraints.
CMA also acknowledges that there might be practical difficulties in introducing more competition: “These obstacles fall in to three broad categories: access to infrastructure, network capacity and rolling stock; funding the network and loss-making services, and the financial sustainability of operators; and operational issues and greater complexity arising from an increase in the number of operators.”
Option 4 would require some authority to allocate and sell train paths. CMA suggests how this might be done:
“The potential for train timetables to be drawn and operations to be allocated between companies by means of an auction process has garnered substantial attention from economists and auction theorists over the past 30 years . . . taking a timetable which has been designed by a central body and auctioning bundles of paths within it is likely to be possible and may achieve many of the potential benefits of an auction approach to facilitate competition.”
CMA: Competition in passenger rail services in Great Britain; a policy document
|List A: open access proposals submitted to ORR from 2000 to 2015|
|A||2000||Hull Trains||London KX-Hull||Y|
|B||2002||Hull Trains||Additional daily return: London KX-Hull||Y|
|D||2004||Grand Central||Newcastle-Manchester via Bradford||N|
|E||2005||Hull Trains||Additional daily return: London KX-Hull||Y|
|G||2006||Grand Central||Sunderland-London KX||Y|
|I||2007||Wrexham & Shropshire||Wrexham-London Marylebone||Y|
|J||2009||Grand Central||Additional daily return: Sunderland-London KX||Y|
|K||2009||Platinum Trains||Edinburgh-London KX||N|
|L||2009||Hull Trains||Harrogate-London KX||N|
|M||2010||Grand Central||Bradford-London KX||Y|
|O||2011||Alliance Rail||Blackpool, Carlisle, Leeds & Bradford-London Euston||N|
|P||2011||Alliance Rail||Bradford, Leeds-London||Withdrawn|
|Q||2012||Grand Central||Additional daily return: Sunderland-London KX||Y|
|R||2012||Grand Central||Additional daily return: Bradford-London KX||N|
|T||2014||Alliance Rail||Blackpool, Leeds-London KX||Superceded by U|
|U||2014||Great North Western Railway||Blackpool-Queens’s Park, London
Leeds-Queen’s Park, London
|V||2014||Great North Eastern Railway||Edinburgh-London KX||TBC|
|W||2015||Hull Trains||Extension of some trains to Beverley||Y|
|X||2015||Great North Eastern Railway||Bradford-London KX
|Y||2015||East Coast Trains Ltd||Edinburgh-London KX||TBC|
|List B: overlapping & parallel franchises in Great Britain in 2016|
|Great Northern & Virgin East Coast||Parallel||London-Stevenage & Peterborough|
|Great Northern & Abellio Greater Anglia||Overlapping||London-Cambridge|
|First Great Western & Chiltern||Overlapping||London-Oxford|
|London Midland, Chiltern & Virgin Trains||Both||London-Birmingham|
|London Midland & Virgin Trains||Parallel||London-Milton Keynes, Coventry, Rugby, Nuneaton, Tamworth, Lichfield, Stafford, Crewe & Stoke-on-Trent|
|London Midland & Virgin Trains||Parallel||Rugby-Coventry & Birmingham International|
|Thameslink & East Midland Trains||Parallel||London-Luton & Bedford|
|C2c & Abellio Greater Anglia||Overlapping||London-Southend|
|South West Trains & Southern||Overlapping||London-Portsmouth|
|South West Trains & Southern||Overlapping||London-Southampton|
|South West Trains & Southern||Overlapping||London-Epsom, Dorking & Guildford|
|South West Trains & First Great Western||Overlapping||London-Reading, Exeter & Bristol|
|South West Trains & First Great Western||Overlapping||London-Basingstoke|
|Cross Country, First TransPennine & Virgin East Coast||Parallel||York-Newcastle|
|Cross Country & Virgin East Coast||Parallel||York-Edinburgh|
|London Midland, Virgin Trains, Arriva Trains Wales & Cross Country||Parallel||Birmingham International – Wolverhampton & Shrewsbury|
|First Great Western & London Midland||Parallel||Worcester-Hereford|
|Great Northern, Abellio Greater Anglia & Cross Country||Parallel||Cambridge-Ely|
|East Midland Trains, Cross Country & Abellio Greater Anglia||Parallel||Peterborough-Ely|
|Cross Country & Abellio Greater Anglia||Parallel||Ely-Norwich|
|Cross Country & First Great Western||Parallel||Bristol Parkway-Tiverton, Exeter, Plymouth & Penzance|
|Cross Country & First Great Western||Parallel||Reading-Oxford & Banbury|
|Cross Country & First Great Western||Parallel||Reading-Basingstoke|
|First TransPennine, East Midland Trains & Northern Rail||Parallel||Liverpool-Manchester|
|First TransPennine & Northern Rail||Parallel||Manchester-York & Leeds|
|First TransPennine & Northern Rail||Parallel||Manchester-Blackpool & Barrow-in-Furness|
|East Midland Trains, Cross Country & Northern Rail||Parallel||Derby-Sheffield & Leeds|
|First TransPennine & Northern Rail||Parallel||Leeds-Scarborough|
|First TransPennine & Northern Rail||Parallel||Leeds-Hull|
|Northern Rail & Virgin East Coast||Parallel||Doncaster-Hull|
|First TransPennine & Virgin Trains||Parallel||Wigan-Preston, Carlisle & Glasgow/Edinburgh|
|Arriva Trains Wales & Virgin Trains||Parallel||Chester-Holyhead|
|Arriva Trains Wales & First Great Western||Parallel||Newport-Cardiff, Swansea & Carmarthen|
|Virgin East Coast, Cross Country & ScotRail||Both||Edinburgh-Glasgow|
|Virgin East Coast, Cross Country & ScotRail||Parallel||Edinburgh-Aberdeen|
|Virgin East Coast & Scotrail||Parallel||Edinburgh-Perth & Inverness|
|South West Trains & Cross Country||Parallel||Basingstoke-Winchester, Southampton & Bournemouth|
|Abellio Greater Anglia& Cross Country||Parallel||Cambridge-Stansted Airport|
|First Great Western & Southern||Parallel||Brighton-Southampton|
|London Midland, Cross Country & Virgin Trains||Parallel||Wolverhampton-Stafford|
|London Midland & Chiltern||Parallel||Kidderminster-Birmingham & Leamington|
|Source: CMA & 21CR|
Note: Competition between franchised operators is said to be either ‘parallel’ or ‘overlapping’. The former happens when two or more operators serve the same stations on the same route; the latter occurs when the stations are served by different routes. In a few cases both forms of competition take place (e.g. between London and Birmingham).