1. The Fourth Railway Package: are legislators passing signals at danger? Dr Ian Taylor info@transportforqualityoflife.com www.transportforqualityoflife.com

2. Essential pre-requisites for rail liberalisation A market in rail services requires: fragmentation to allow multiple competitors profit for market participants For passengers this results in a system that is: more difficult to use more expensive

3. Cost comparisons for UK rail liberalisation 40% Cost-efficiency ‘gap’ UK railway lags less liberalised comparators in Europe 109% Extra paid by UK rail passengers for an unrestricted return ticket compared with comparators in Europe 100%+ Cost increase of railway to UK Government in real terms since liberalisation - for delivery of only 33% increase in train kilometres 23% Increase in rail fares above inflation since liberalisation

4. Fragmentation costs Cost of interfaces to train operating companies£290m€410m Profit leakage Network Rail cost outsourcing renewals/enhancements£200m€280m Train operator shareholder dividend payments£227m€319m Train operator sub-contractor profit margins£ 76m€107m Rolling stock company dividend payments£207m€291m Rolling stock company subcontractor profit margins£ 15m€ 21m Total cost per year £1bn€1.4bn Costs to UK rail of fragmentation and profit

5. Does profit leakage really affect the railway? Dividend leakage from regional TOCs since 2003/4 = £555m (€781m) £300m (€420m) is urgently required to replace the entire Merseyrail Electrics fleet In 2011/12 Transpennine made a 24% profit margin = £68m (€96m) £34m (€48m) refurbished the whole Merseyrail fleet in 2003 regional train companies Total dividend payments 2003/4-2011/12 dividends as % shareholders’ funds Arriva Trains Wales£ 68m (€ 96m)54% First Scotrail£104m (€146m)137% Merseyrail Electrics£ 50m (€ 70m)223% Northern Rail£149m (€210m)269% Transpennine Express£185m (€260m)159%

6. How did the public sector operator compare? The UK’s publicly owned train operator DOR showed itself to be more cost-effective than its private counterparts, but has been disbanded

7. Liberalised asset stripping Rolling stock company Average profitTime period Angel Trains34%9 yrs 2003/4-2011/12 HSBC Trains/ Eversholt31%8 yrs 2002/3-2009/10 Porterbrook12%9 yrs 2004/5-2012/13 The claims that liberalisation would result in a new era of improvements from private sector investment have not been borne out.

8. Effects of UK rail liberalisation on passengers Fragmentation causes passengers multiple practical difficulties: trains that do not connect complex ticket pricing bewildering rules about ticket validity operators failing to work together to assist passengers during incidents or engineering lack of integrated smart tickets

9. Liberalisation prevents simplicity for passengers A simple transparent system is best for passengers...... but this requires rules and standardisation that conflict with the ‘efficient market’ that is the basis of liberalisation. The idea of ‘open access’ is a nightmare for passengers

10. Liberalisation degrades industrial relations The frequency of industrial disputes went up after UK liberalisation. Network-wide collective bargaining and dispute resolution was destroyed removing a major economy of scale Resulting disparities in pay and conditions appear manifestly unfair and are a recipe for industrial disputes An efficient railway service requires a harmonious workforce but liberalisation militates against this.

11. The cost of the Swedish railway rocketed after liberalisation, as in Britain Rail subsidy in Sweden pre/post liberalisation Liberalisation begins Source: Nilsson 2002

12. Liberalisation & rail growth: no clear relation Rail use has grown slightly more in France than in Britain, since Britain liberalised rail Rail use in France has significantly outpaced growth in Germany, since Germany started liberalisation

13. Liberalisation & regional rail growth: no relation French regions grew regional rail faster than Britain until the Euro-zone slump German regional authorities let 144 rail contracts between 2005 and 2011, each just 1/8 th the size of Transpennine Express

14. Liberalisation is not the driver for growth Economic activity (GDP) is the most obvious driver of growth in rail journeys Levels of public investment are the other obvious driver Source: CRESC University of Manchester 2013

15. Liberalisation & cost constraint: no relation Since French regions have taken over responsibility for regional rail they have driven very cost-effective deals with SNCF – in a non-liberalised situation. Annual subsidy decrease per regional passenger-km Time period for calculation France3.8%7 yrs 2002-2009 Germany3.5%12 yrs 1996-2008 Source (graph): Crozet et Desmaris 2011

16. Impacts of the draft Governance Directive Open access is in conflict with: minimising day-to-day operational costs (interfaces are costly) achieving a seamless railway network - best for passengers retaining revenues within the rail network to spend on network and service improvements using public service obligations effectively and efficiently developing the rail network to a strategic vision Separation of infrastructure and train services is in conflict with: minimising day-to-day operational costs (interfaces are costly) developing the rail network to a strategic vision

17. Impacts of the draft PSO Regulation Removal of the right to directly award a contract to a not-for-profit publicly owned operator is in conflict with: achieving a seamless railway network - best for passengers retaining revenues within the rail network to spend on network and service improvements minimising day-to-day operational costs (interfaces are costly) developing the rail network (and other public transport modes) to a strategic vision achieving intermodal integration - best for passengers

18. info@transportforqualityoflife.com www.transportforqualityoflife.com Thank you