Britain’s Railways 1997–2005: Labour’s Strategic Experiment (review)

Economic theory is not much of a guide to privatizing a railroad. The basic case for selling off government enterprises rests on the virtues of competition: forced to fight for customers and capital, a private business driven to maximize profits has different incentives than one able to tap state subsidies to meet social or political goals. But, while the economic case for privatization applies readily to a coal mine or a tourist hotel, a railway is a different matter. Some parts of the railway system, such as the running of trains or the solicitation of freight, can be opened to multiple competitors quite readily. Other parts, such as ownership of track and signals, are inherently monopolies, for which the benefits of privatization are unclear. And the government cannot simply turn the business over to private companies, for whoever controls the parts that are monopolies will have a stranglehold over the parts that are meant to be competitive.

Such details did not deter Britain’s Conservative government from breaking up the massive state railway company, British Rail, starting in 1994. The government auctioned off no fewer than twenty-five train-operating franchises for terms of varying length, and with varying promises of subsidy for commuter services. Six freight franchises were sold separately. And, while these private enterprises were told to compete aggressively, their businesses depended entirely on a private monopoly, Railtrack, which was given control of track, signals, and stations. The train operators had to pay government-regulated “access charges” to use tracks and major stations, with Railtrack left to determine how many trains could run on a given track, how fast they could run, and which operators could run them.

Suffice it to say that privatization was no panacea for the many problems of British Rail. Ticket prices rose sharply for some services, notably intercity trips without advance reservations. On-time performance deteriorated in the face of mishandled track repairs. Cancellations grew common as train operators sought to boost profits by reducing staff. Schedule information about connecting trains could be hard to come by, as each operator looked out only for itself. As a roaring economy led to strong growth in passenger numbers, the operating companies staggered under the load. By 1997, when Tony Blair and the Labour Party came to power, public enthusiasm for rail privatization already had worn thin. A series of major accidents starting in 1997 revealed Railtrack’s inability to maintain the tracks and signals, leading to nearly fifty deaths.

The Labour government dealt with this mess by creating a new bureaucracy, which is the subject of Terry Gourvish’s book. Britain’s Railways 1997–2005 is an authorized history of the Strategic Rail Authority (SRA), which was created by the government to provide strategic direction to the rail industry. The SRA’s life was short: it was set up on a “shadow” basis in 1999, given formal legal status in 2001, and abolished in 2006, when its functions were apportioned among various ministries and independent agencies. Gourvish apparently was given unlimited access to the agency’s papers and interviewed many of those involved with it.

The result, unfortunately, is a rather turgid bureaucratic history that chronicles every study, personnel appointment, and press clip, but sheds very little light on the larger issues involved with rail privatization or regulation. We learn much about the SRA’s battles with the Office of the Rail Regulator, which had responsibility for economic regulation of the rail system, and with the Secretary of State for Transport, which represented the government’s political and budgetary interests. But for those not intimately involved in this story, a text that refers to ROSCO, SRA, BRB, WCML, OPRAF, and DETRI on a single page can be daunting. Gourvish tells us so much about the trees that we lose sight of the forest.

Gourvish’s final verdict is that privatization has been less than a success. Public subsidies are far...