On UK Railway Privatization And Its Aftereffects

The first train in the world appeared in the UK and the prosperity of the UK benefited a lot from the first Industrial Revolution represented by steam locomotives.This paper aims to study the UK railway after WWII,its privatization and the issues thereafter,in an attempt to better understand the UK government's thoughts when making railway-related policies and its solutions to the follow-up issues.Previous studies either explore privatization theories or evaluate UK privatization policies in general,which provide a solid basis for academic research in this respect.However,many existing materials have not carried out a comparatively comprehensive and systematic analysis of the situation before and after UK railway privatization,and some even take the issues occurred after privatization for the proof that the reform is a failure.Based on this,this paper analyzes and summarizes UK railway development after WW?,railway privatization and its aftereffects in as clear a way as possible.The methods involved in this paper is chronologically analysis,qualitative analysis supported by data and historical analysis.This paper is innovative in furthering in-depth discussion of UK railway privatization and making up for insufficiency in this topic's recognition.Firstly,current studies mostly focus on problems caused by privatization and very few indicate causes of the problems.This paper seeks to restore a true privatized UK railway and lay emphasis on causes of the problems.Secondly,form of ownership is often referred to in postwar UK economy.Mrs.Thatcher ended the postwar consensus and privatized most UK industries during her terms,but railway privatization was led by her successor John Major.Thus this paper tries to explore whether the railway sector contains a certain particularity that renders its reform be carried out with caution.After WW?,many industries in the UK were nationalized by Clement Attlee.The UK railway sector also went through such a process,regulated by British Transportation Commission.Then in 1963,BTC's regulatory function was transferred to British Railways Board,executed by its brand name British Railways and later British Rail.British Rail functioned until the early 1990s when privatization of the UK sector took place.The general picture for the UK railway sector after WW? included great competition from the road transportation,excessive stations and routes and old-fashioned trains,as shown in the Beeching reports,who served as British Transportation Commission chairman.But to serve the public needs,the UK government had to maintain the sector's well functioning.The maintenance of these,however,generated huge costs to the UK government,who later formed the notion of cutting this sector's public spending.Operating costs are solved by deficit financing,resulting in a deadly worsening circulation.These laid the foundation of the thought for the railway's privatization.The Railways Act 1993 declared the process of UK railway privatization.The Conservative government adopted the mode of vertical separation between infrastructure and transportation operations(franchising).The two layers will be separated from each other at the outset of the reform,while the layers in themselves will also be split horizontally with various companies involved in this layer only.Railtrack as a regulatory body was in charge of providing infrastructure such as signals.Train operating companies(TOCs)would bid for franchising and lease their rolling stock from Rolling Stock Leasing Companies(ROSCOs).As for franchising,Office of Passenger Rail Franchising(OPRAF)was created and began to sell passenger railway franchises to the private sector.Between 1994 and 1997 the organizational structure of the railway sector was fundamentally rebuilt.After this period,regulatory bodies with regard to these two layers had changed,which will be mentioned in the main body of this paper.During the early post-privatization period,the UK railway situation did improve.For example,growth in passenger as well as in freight markets was much more than anticipated.But the central issue,public spending in this sector,remained not optimistic.Owing to the fragmented nature of the new railway structure,costs have increased substantially.The cost of BR had been approximately GBP 4bn per annum,consisting of around GBP 3bn of passenger and freight revenues and GBP]bn of government subsidy.After privatization government subsidy would increase to approximately GBP 1.8bn per annum initially.Early evidence of infrastructure cost savings has either been reversed or a result of reduced maintenance.Where the money(subsidy)went will be pointed out in the paper.In nominal terms,the annual cost of the UK railway had doubled during the period 1995-2005,with most of the increase being funded via a higher government subsidy of over GBP 3 bn per annum and by passenger revenues increasing to over GBP 4bn per annum.Though the Conservatives proclaimed that they would introduce competition,privatization of the railway sector left the government with extensive powers over the railway system.The privatized industry was even subject to more regulation than its nationalized predecessor had ever been.At the same time the sector was faced with problems related to service quality,profitability and safety.The UK government become aware of the problems of weak performance and cost escalation,and saw an urgent need to figure out the reasons.This paper holds that the main aim of UK railway privatization was to cut its public spending,regardless of the market's role and common people's reactions to privatization.The dispute over whether the public utility should go for profits in BR's era indicated reforms in the future would focus on economic efficiency and social responsibility,yet the UK government failed to improve economic efficiency through privatization.One reason is the government's multiple roles required its dedication to the whole UK economy.Next,separation of train operation in the private sector from infrastructure in the public sector weakened collaboration and impeded information exchange among the infrastructure provider and TOCs.Besides,franchising's flaws exist in contract length,payment charges,open access.The lost social responsibility in the process of pursuing economic efficiency still had to be borne by the government in the end.Since the UK government suffers a lot from deficit financing in the nationalization period and high subsidy after privatization,this paper holds that cutting public expenditure is the starting point when railway policies are stipulated.The UK government hopes to invest the least amount of money possible to maintain a well functioning of the railway system.