IDEAS home Printed from https://ideas.repec.org/a/bla/ausact/v24y2014i1p53-65.html
   My bibliography  Save this article

Privatisation and Franchising of British Train Operations

Author

Listed:
  • Carmen A. Li
  • John Stittle

Abstract

type="main"> The Railways Act 1993 privatised the British railways industry resulting in the separation of ownership and control of the railway infrastructure (track, signals and stations) from that of passenger train operations. The Great North Eastern Railway (GNER), a major train operator, was unable to meet its contractual obligations shortly after successfully re-tendering for its second franchise. By referring to the organisational form and structure of the franchising process, this paper discusses the main financial and operational problems that specifically contributed to the collapse of GNER. In particular, the paper argues that the fragmented structure of privatised train operations, the lack of industry coordination and the inherent problems of franchising an essential transport service explain the demise of GNER and have undermined the general objectives of railway privatisation. Overall, the paper highlights that privatisation of train services has failed to deliver both travelling benefits for the public and financial benefits to the state.

Suggested Citation

  • Carmen A. Li & John Stittle, 2014. "Privatisation and Franchising of British Train Operations," Australian Accounting Review, CPA Australia, vol. 24(1), pages 53-65, March.
    • Handle: RePEc:bla:ausact:v:24:y:2014:i:1:p:53-65
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/auar.12016
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Oliver Hart & John Moore, 1999. "Foundations of Incomplete Contracts," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 66(1), pages 115-138.
    2. John Preston & Gerard Whelan & Chris Nash & Mark Wardman, 2000. "The Franchising of Passenger Rail Services in Britain," International Review of Applied Economics, Taylor & Francis Journals, vol. 14(1), pages 99-112.
    3. Yvrande-Billon, Anne & Menard, Claude, 2005. "Institutional constraints and organizational changes: the case of the British rail reform," Journal of Economic Behavior & Organization, Elsevier, vol. 56(4), pages 675-699, April.
    4. Bradshaw, W P, 1997. "Competition in the Rail Industry," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 13(1), pages 93-103, Spring.
    5. Oliver Hart, 2003. "Incomplete Contracts and Public Ownership: Remarks, and an Application to Public-Private Partnerships," Economic Journal, Royal Economic Society, vol. 113(486), pages 69-76, March.
    6. Blair,Roger D. & Lafontaine,Francine, 2011. "The Economics of Franchising," Cambridge Books, Cambridge University Press, number 9780521775892, January.
    7. Francis Terry, 2001. "Viewpoints: The Nemesis of Privatization: Railway Policy in Retrospect," Public Money & Management, Taylor & Francis Journals, vol. 21(1), pages 4-6, January.
    8. Eshien Chong & Freddy Huet & Stéphane Saussier, 2006. "Auctions, Ex Post Competition And Prices: The Efficiency Of Public‐Private Partnerships," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 77(4), pages 521-554, December.
    9. Martin Ricketts, . "The Economics of Business Enterprise," Books, Edward Elgar Publishing, number 3121.
    10. Mick Carney & Eric Gedajlovic, 1991. "Vertical integration in Franchise systems: Agency theory and resource explanations," Strategic Management Journal, Wiley Blackwell, vol. 12(8), pages 607-629, November.
    11. Sean McCartney & John Stittle, 2011. "‘Carry on up the east coast’— a case study in railway franchising," Public Money & Management, Taylor & Francis Journals, vol. 31(2), pages 123-130, March.
    12. Domberger, Simon & Jensen, Paul, 1997. "Contracting Out by the Public Sector: Theory, Evidence, Prospects," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 13(4), pages 67-78, Winter.
    13. Francine Lafontaine, 1992. "Agency Theory and Franchising: Some Empirical Results," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 263-283, Summer.
    14. Grossman, Sanford J & Hart, Oliver D, 1983. "An Analysis of the Principal-Agent Problem," Econometrica, Econometric Society, vol. 51(1), pages 7-45, January.
    15. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    16. Kay, J A & Thompson, D J, 1986. "Privatisation: A Policy in Search of a Rationale," Economic Journal, Royal Economic Society, vol. 96(381), pages 18-32, March.
    17. Martin Ricketts, 2002. "The Economics of Business Enterprise," Books, Edward Elgar Publishing, number 2215.
    18. Peter Curwen, 1997. "The End of the Line for British Rail," Public Money & Management, Taylor & Francis Journals, vol. 17(4), pages 55-67, October.
    19. Klein, Benjamin, 1995. "The economics of franchise contracts," Journal of Corporate Finance, Elsevier, vol. 2(1-2), pages 9-37, October.
    20. Robert Jupe, 2005. "The Future of Rail? An Evaluation of the 2004 Railway Industry White Paper," Public Money & Management, Taylor & Francis Journals, vol. 25(3), pages 187-194, June.
    21. Preston, John, 2008. "A review of passenger rail franchising in Britain: 1996/1997-2006/2007," Research in Transportation Economics, Elsevier, vol. 22(1), pages 71-77, January.
    22. Robert Jupe, 2007. "Rail Franchising Matters—The Award of Open Access Rights on the ECML," Public Money & Management, Taylor & Francis Journals, vol. 27(1), pages 83-86, February.
    23. Jean Shaoul, 2006. "The Cost of Operating Britain's Privatized Railways," Public Money & Management, Taylor & Francis Journals, vol. 26(3), pages 151-158, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jurikovič Martin & Tomeš Zdeněk, 2017. "Public and Private Provision of Railway Services: A Case Study from Slovakia," Review of Network Economics, De Gruyter, vol. 16(2), pages 187-201, June.
    2. McCartney, S. & Stittle, J., 2017. "‘A Very Costly Industry’: The cost of Britain’s privatised railway," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 49(C), pages 1-17.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. McCartney, Sean & Stittle, John, 2012. "‘Engines of Extravagance’: The privatised British railway rolling stock industry," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 23(2), pages 153-167.
    2. Eduard Marinov, 2016. "The 2016 Nobel Prize in Economics," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 97-149.
    3. Paul H. Jensen & Robin E. Stonecash, 2004. "The Efficiency of Public Sector Outsourcing Contracts: A Literature Review," Melbourne Institute Working Paper Series wp2004n29, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    4. Francine Lafontaine & Margaret E. Slade, 1998. "Incentive Contracting and the Franchise Decision," NBER Working Papers 6544, National Bureau of Economic Research, Inc.
    5. Francine Lafontaine & Margaret Slade, 2007. "Vertical Integration and Firm Boundaries: The Evidence," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 629-685, September.
    6. Committee, Nobel Prize, 2016. "Oliver Hart and Bengt Holmström: Contract Theory," Nobel Prize in Economics documents 2016-1, Nobel Prize Committee.
    7. Steven C. Michael, 2010. "Franchising," Chapters, in: Peter G. Klein & Michael E. Sykuta (ed.), The Elgar Companion to Transaction Cost Economics, chapter 19, Edward Elgar Publishing.
    8. David Fitoussi & Vijay Gurbaxani, 2012. "IT Outsourcing Contracts and Performance Measurement," Information Systems Research, INFORMS, vol. 23(1), pages 129-143, March.
    9. McCartney, S. & Stittle, J., 2017. "‘A Very Costly Industry’: The cost of Britain’s privatised railway," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 49(C), pages 1-17.
    10. Josef Windsperger, 2013. "The governance of franchising networks," Chapters, in: Anna Grandori (ed.), Handbook of Economic Organization, chapter 27, Edward Elgar Publishing.
    11. Paul H. Jensen & Robin E. Stonecash, 2005. "Incentives and the Efficiency of Public Sector‐outsourcing Contracts," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 767-787, December.
    12. Jell-Ojobor, Maria & Windsperger, Josef, 2014. "The Choice of Governance Modes of International Franchise Firms — Development of an Integrative Model," Journal of International Management, Elsevier, vol. 20(2), pages 153-187.
    13. Hensher, David A. & Ho, Chinh & Knowles, Louise, 2016. "Efficient contracting and incentive agreements between regulators and bus operators: The influence of risk preferences of contracting agents on contract choice," Transportation Research Part A: Policy and Practice, Elsevier, vol. 87(C), pages 22-40.
    14. González-Díaz, Manuel & Montoro-Sánchez, Ángeles, 2011. "Some lessons from incentive theory: Promoting quality in bus transport," Transport Policy, Elsevier, vol. 18(2), pages 299-306, March.
    15. Dildar Hussain & Josef Windsperger, 2013. "A property rights view of multi-unit franchising," European Journal of Law and Economics, Springer, vol. 35(2), pages 169-185, April.
    16. Gonzalez-Diaz, Manuel & Arrunada, Benito & Fernandez, Alberto, 2000. "Causes of subcontracting: evidence from panel data on construction firms," Journal of Economic Behavior & Organization, Elsevier, vol. 42(2), pages 167-187, June.
    17. Manuel González & Benito Arruñada & Alberto Fernández, 1997. "La decisión de subcontratar: el caso de las empresas constructoras," Investigaciones Economicas, Fundación SEPI, vol. 21(3), pages 501-521, September.
    18. Antonio Navarro García & Enrique Carlos Díez de Castro & Francisco Javier Rondán Cataluña, 2006. "Franchisor Types In Portuguese Franchising," Portuguese Journal of Management Studies, ISEG, Universidade de Lisboa, vol. 0(2), pages 97-114.
    19. Francine Lafontaine & Kathryn L. Shaw, 2005. "Targeting Managerial Control: Evidence from Franchising," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 131-150, Spring.
    20. Arshad Ali Javed & Patrick T.I. Lam & Albert P.C. Chan, 2014. "Change negotiation in public-private partnership projects through output specifications: an experimental approach based on game theory," Construction Management and Economics, Taylor & Francis Journals, vol. 32(4), pages 323-348, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ausact:v:24:y:2014:i:1:p:53-65. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1035-6908 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.