The best description of this I've seen is "playing at shops": there's no real market, it's just set up to look like one.

The other crazy side to it is that the government still own and pay for the track - the only bit that doesn’t even make any money. And is crazy expensive!

Privatise the profit, socialise the loss.

Tracks are certainly very valuable infrastructure, it's just hard to monetize (and very expensive to build, as you say). So in a way it makes sense for the government to handle it.

The way to monetize is property development and rent around stations. That's how it works in Japan, where private companies sell tickets at a loss and still make profits.

In the UK that land got sold off to private equity and the like who are making the real dough while they funnel some of that into donations to the Tory party.

> The way to monetize is property development and rent around stations. That's how it works in Japan, where private companies sell tickets at a loss and still make profits.

Yes. It's just really hard to do afterwards - having the government expropriate land around the stations and giving it to the railway companies is guaranteed to be wildly expensive and unpopular.

Japan's private passenger railways IIRC make about 50% of their income from ticket sales, the rest comes from leveraging the (very!) high value land around the stations. Many other metropolitan rail systems also get about 50% of the income from tickets, but since the railways don't own the land they have to get the rest through some form of government subsidy.

I think some of the problems with the British privatized rail system is how fragmented it is, with nobody responsible for the whole. And there's lots of government meddling in every interface between all these myriad private companies, providing ample opportunity for corruption and massively misaligned incentives. I suspect it would be better to either nationalize the whole lot under one roof, or then go back to the old pre-nationalization type regional monopolies with a single company owning tracks, trains, stations as well as operating them (a bit like the privatized Japanese railways).

>Yes. It's just really hard to do afterwards - having the government expropriate land around the stations and giving it to the railway companies is guaranteed to be wildly expensive and unpopular.

Expropriation of land would be unpopular (it would get the tabloids in a jitter as they fearmonger that the government is going to expropriate your garden next) but introducing a special tax on nonresidential property within 500m of a train station and subsidizing the price of tickets with it - probably not so much.

"Oh look my season ticket got cheaper" while private equity reports lower earnings and google's tax bill shoots up - this is going to be popular.

It could then be extended to residential property. The government could also go into business itself - building a shopping mall or two and funding government budgets.

This is a frog that could be boiled.

Yes in the Netherlands the railway operator makes a lot of money from their train stations as well.

A train station in 2021 is basically a big shopping mall in a prime location with massive foot traffic.

The Dutch Railways even made a slim profit in the UK in 2020 after getting €1,5 billion in subsidies from the UK government through Abellio.

No idea how this new nationalisation will work out for either party, though.

Track is what defines the railway, maximum speed, 85% of maintenance cost, etc.

UK tried to privatise it, but the firm collapsed and had to be nationalised.

What do private companies add, if on a good day they earn the profit and on a bad day tax payer picks up the tab.

> Track is what defines the railway, maximum speed, 85% of maintenance cost, etc.

> UK tried to privatise it, but the firm collapsed and had to be nationalised.

Yes, absolutely.

> What do private companies add, if on a good day they earn the profit and on a bad day tax payer picks up the tab.

I think the best way to run a railway is to either completely nationalize it all under one roof, or then have it completely privatized, with a single company being responsible for everything. Yes, this would create regional rail monopolies, but OTOH they wouldn't be completely free to extract monopoly prices since there's still competition from other modes of transport (cars, airplanes, buses, trucks).

The current UK system with a myriad public and private entities with very complicated contractual relationships is just a mess. Unfortunately it seems the EU is hellbent on imposing the same model across the EU.

I feel like the decision to do this is based on an outdated idea about how to do business effectively. Take car makers. It used to be that the winners were outsourcing everything except their core competence (engines and assembling/marketing vehicles). But these days it seems like vertical integrated companies are the winners, with Tesla being a good example in the car industry. I think politicians that have pushed for this was inspired heavily by all this out-sourcing happening at the end of the previous century.

It's not that vertical integration is good everywhere. But neither is avoiding vertical integration. You have to use your brain and look at what's beneficial in a given market. And train operation strikes me as a place where vertical integration is essential to long term success and efficiency. If it was actually a free market, I'm sure that it'd converge to a few vertically integrated companies with monopolies in large geographic areas.

I'd also argue that government owned corporations have become better at operating efficiently. Business has almost become a science. You're not as reliant on brute force through competition.

And when government corporations are more expensive, it's usually just because they treat their employees better.

The 'vertical integration vs. outsourcing' seems to be largely a fashion thing. When giant vertically integrated conglomerates are the status quo, you have the self-appointed thought leaders writing business books and speaking at expensive dinners arguing for outsourcing and focusing on core competences. Then as the tides turn and 'outsource everything' becomes the norm, the next generation of self-appointed business thought leaders argue for vertical integration. ¯\_(ツ)_/¯

I see the same in our company. Every few years we have a leadership shuffle, which then cascades as the new leaders replace all the layers underneath them in the months afterwards. Once things become stable, a new leader is hired and the whole things starts again.

All the new management hires will then want to put their own stamp on things which means doing things differently than before. So we've been going back and forth between different paradigms. Sometimes within months! We seem to be going back between role-based teams ("we have too many silo's, we need to join all technologies of a role in a team!!") to technology-based teams ("we have too little focus, we need to focus on all responsibilities for one technology per team!!"). Literally several times we've made this switch over the last years, back and forth.

It just feels like each new hire just has to change it just to be seen to be doing something by their bosses. No newly hired manager every wants to leave things the same even though they are working just fine.

The thing is that we are very versatile. We can deal with the drawbacks of each model. We collaborate even though we're not in the same team. We can't work properly with all this ongoing reorganisation though. It's like the chair is being pulled out from under us for no reason.

The seperation of track ownership and operation from actually running the trains is mandated by EU directives, so that part is going to be the same pretty much anywhere in the EU. I think some countries like Germany bend the rules a bit by having them run by nominally independent divisions of the same state-owned company (and sometimes go father than is allowed and end up on the losing end of court battles), but the UK is probably going beyond what it could do as a member of the EU here.

What is the EU's reason for that rule?

Before this rule all tracks AND rolling stock would be owned by single, national entities in every country. If you were a Austrian train operator wanting to run trains to Germany you'd have to ask Deutsche Bahn for space on the rail, and they would (obviously) give priority to their own rolling stock.

This would happen to the point where it was almost impossible to organise cross border rail connections.

By seperating the track from the train you can make the train companies compete with each other on a (more) equal footing.

Ironically, most of the 'private' train companies now running on UK tracks are actually Dutch, German and French state owned railway companies competing with each other.

In theory this is meant to be a good thing because it allows for competition between train operators which sounds like it should lead to better outcomes for customers. There's also a desire for companies to be able to operate commercial trains that don't have government backing on an equal footing with the government-chosen operators, which only works if the other train operators also have an arms-length commercial relationship with the track owner and operator.

Also, you need to bear in mind that European governments benefit from the other governments strictly following this rule because it means their train operators can run trains in those other countries, but are often less keen on doing so themselves. So there's an interesting dynamic where a lot of countries insist that of course they're following the rules, it's all the other European countries that are unfairly bending them to benefit their train operators.

Ah that makes sense, yeah I can see say Country A not being keen on giving Country B's trains a fair shake if their own rail company wants time on the tracks.

Control & standardization.

They don’t have to lease their trains from the government, they can bring their own trains if they’d like, but leasing is likely cheaper.

The company maintaining the trains do have to bid on the contracts, as well, and can bid for contracts in other countries if they wish.

The directorate of railway was there pre-privatization.

It’s the infrastructure company that decides the timetables, not the directorate. The directorate assigns the contracts, and the contracts specify the minimum fee for a ticket.

Operators are free to decide the interior of the trains, and any additional products on top of the minimum fee. Meaning they can charge more for better seating, reserved seating etc. Vy has their own ticketing service in addition to the government provided one, which they use to sell bus and taxi services to cover as much of your trip as possible. GoAhead doesn’t have their own ticketing service, instead relying on Vy and the government service to sell tickets. This saves them money on development, but makes them lose out on any additional revenue that Vy makes for extra sales.

GoAhead has higher customer satisfaction than NSB (the national train company pre-privatization).

Idealy you’d have more competition between the operators, but since Norway is mostly single track that is difficult to do.

Still, the government will save an estimated 12 billion NOK over the next 9 years based on the current contracts.

That’s not to say it’s all good. Long range travel has gotten more expensive (more than one operator involved) and there are now more directors with million kr saleries. Not to mention that the effects of one of these operators going bankrupt will be worse than if one national company did everything.

I'm one of those (many) people that don't believe in that 12B figure. It is only based on "we used to pay X for this route in the old model, and now we pay Y", but that's two different things to compare and ignores lots of new costs as well. All the offers were also based on traffic growth, meaning subsidies for the tickets in 7-8 years would go down. This would have happened irregardless of the bids (except the contractors have budgeted with it and now carries the risk).

And before when it was the government paying the government owned NSB, it was basically the government giving themselves money. Now whatever profit the new companies make are instead going out of the country. Government takes the cost, others take the profit.

So unless this happens to result in a much better experience for the customers I think it will be a net loss for society. But time will tell, hard to say too much based on the last year.

Considering most train routes operate at a net loss, «we used to pay x but now we pay y» is really the only interesting metric, no?

Profits from subsidies aren’t really profit when you’re the one paying the subsidy.

Keep in mind, that before any profit, the government still makes money taxation (sales tax, employee income tax etc.) and several companies are going to operate at a loss for a few years until trafic picks up. I think government saving money on this isn’t unlikely.

That’s not the same as customers saving money, though.

I agree that time will tell. Until Norway has more double-tracks and can have proper competition, this could go either way.

"Operators are free to decide the interior of the trains, and any additional products on top of the minimum fee."

So by the sounds of it, you have tp hunt fpr tickets on different websites and exchequer looses out, but in exchange I get a different of seat, and packet of crisps?

I am really not getting 'free market innovation' vibes here

If all you care about is the cheapest possible ride, you’ll get that through the government ticketing service.

If you travel the same distance often and want to pay extra for more comfort or whatever, you’ll benefit from using whatever ticketing service the operator wants you to use.

It's a very similar case in Finland, case-in-point when HRT (Helsinki Region Transport) requested bids from operators to run the trains in the greater capital area (Helsinki, Espoo, Vantaa and the neighbouring municipalities).

- Rolling stock is owned by HRT

- Transport Infrastructure Agency (Väylävirasto) is responsible for the tracks and stations

Which means the bid is mainly for personnel operating the trains.

There were couple companies that placed bids for this, most of them withdrew before the end of the call, essentially leaving one competing bid along with VR's (then and now current operator).

In the end, nothing changed and VR still operates the trains using HRT's own rolling stock. The only real change going forward are the plans to have a dedicated maintenance depot for HRT's own stock, since VR does not want to have the burden of maintaining stock they don't directly own.

At least with freight, it's going to be different... right?

There's a law giving HRT the right to handle rail operations in the Helsinki metropolitan area. In the rest of the country VR has a monopoly, and sadly seems completely uninterested in developing commuter rail services in other metropolitan areas. As a result, there are efforts to amend the law to allow other regional authorities the same kind of rights HRT has. We'll see what happens.