The Hindu Business Line : Lessons from UK rail privatisation

The performance of British railways has actually improved by 5-10 per cent in the past five years. We have some of the most innovative business leaders in the world. What we have now, especially on the supply-side, is just world-class.

TOM HARRIS, RAILWAY MINISTER, UK

Mamuni Das

At a time when Indian Railways is slowly increasing the private participation in several of its non-core activities like containerised services, commercial land development, station development, rolling stock investments and rail link construction for port connectivity, Business Line caught up with the UK Railway Minister, Mr Tom Harris, during his India visit, to draw key lessons from the rail privatisation experience in their country.

The Labour Party parliamentarian says railway privatisation (undertaken by the rival Conservative Party in early 1990s, when John Major was the Prime Minister) was done for the wrong reasons, but concedes that the railway industry has grown and services have improved.

Excerpts from the interview:

What were the lessons from the railway privatisation process in your country? Which were the areas where privatisation improved efficiencies and what were the areas where you could not achieve the desired results?

Privatisation (in the UK) happened for wrong reasons, in the wrong context and was done in a wrong way. Prime Minister John Major wanted a flagship privatisation (programme) so that he could compete with his predecessor Margaret Thatcher who had taken a number of high-profile successful privatisations. So, John Major looked around and all he found to privatise (that had not already been privatised) was the Railways. That was the wrong reason for privatisation.

The context was wrong because it was with an assumption that privatisation will allow the new owners to oversee the decline and death of Railways, because it was assumed at that time that the railways were finished as an industry…that it would continue to go down as it had been going down for a number of years (then).

That assumption was very wrong because, since privatisation, passengers numbers have increased to record numbers now.

And it was the wrong structure. Government at that time decided to privatise the rail infrastructure owner, which we called Railtrack. The public had no confidence in a system (wherein) Railtrack had to maintain the railways and also pay a dividend regularly to its shareholders.

At that time, there were a number of high-profile accidents on the railways. It’s fair to say it was not a happy experience. It was wound up in 2001 and was replaced by (not-for-profit body) Network Rail in 2002. (Network Rail ploughs profits back into the rail infrastructure.)

Actually, historically, the British Railways’ safety record had been extremely good and has also continued to improve since privatisation, despite the high-profile crashes. So, whether that accusation (privatisation led to a decline in safety record) was true or not, I would leave it to other people to decide.

When the Labour Government returned in 1997, we did not want to return the railways back to public sector, for a number of reasons, not least of which is cost.

I now believe we’ve got more or less the right structure. My question (to those who want it to be nationalised) is what will re-nationalisation give us that we don’t already have.

We have vastly increasing numbers of people wanting to use the Railways, more weekly services than ever before, the youngest railway fleet in the whole of Europe because of the amount of investment that has gone in. We are about to procure 1,300 carriages, which is the largest change in terms of capacity addition.

But there are problems. They arise from the fact that demand is high and there is not enough capacity in the peak time to accommodate everybody who wants to use the Railways.

Personally, I think it’s a very good time to be the Railway Minister (laughs)….

Well, you share that with your Indian counterpart…

Not many of my predecessors had a chance to say that. There’s more optimism in the British rail industry than ever. When I was growing up, British rail was seen as a joke — it actually was a subject for many stand-up comedians — and we are still trying to shake that because people who don’t use the railways still think the performance is fairly bad.

But performance has actually improved, gone up by 5-10 per cent in past 5 years. As an industry we have some of the most professional, innovative business leaders in the whole world. What we have now, especially on the supply-side of railways is just world-class.

Indian Railways is in the early stages of privatising. Which are the areas where you could lend your expertise?

There is a big opportunity for British companies to lend their expertise in consultancy. A lot of big projects being done in India need a strategic overview.

Some British companies are very experienced in providing project management, can deliver value for money. Signalling systems, sliding doors, innovative products to capitalise on environmental aspects (like regenerative braking). We are trying to devise new ways to improve energy efficiency of products.

Given the importance that you attach to environmental issues, at a policy level, in terms of the regulated fares, what do you do to encourage rail transportation compared to other modes of transport?

Interestingly, we don’t tell members of the public to get on a train. I, as a minister, consider them adults who can make their own choices — whether they want to move in a train, car, plane. We must make sure if people do wish to use a train, then it should be affordable and efficient.

Actually, 80 per cent of people who use trains in Britain use fares that are regulated or discounted; very few people use full, or unregulated, fares.

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