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The restructuring and privatisation of British Rail: was it really that bad?

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  • Michael G. Pollitt
  • Andrew S. J. Smith

Abstract

This paper uses a social cost-benefit analysis (SCBA) framework to assess whether rail privatisation in Britain has produced savings in operating costs. The paper shows that major efficiencies have been achieved and consumers have benefited through lower prices, whilst the increased government subsidy has been largely recouped through privatisation proceeds. We also find that output quality is no lower (and is probably better) than under the counterfactual scenario of public ownership (pre-Hatfield). The achievement of further savings is key to delivering improved rail services in the future. This paper finds that a privatised structure, where shareholders demand a return on their investment, has led to significant improvements in operating efficiency. It remains to be seen whether the new regime, with a not-for-profit infrastructure owner, will deliver the same efficiency improvements.

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Bibliographic Info

Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 23 (2002)
Issue (Month): 4 (December)
Pages: 463-502

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Handle: RePEc:ifs:fistud:v:23:y:2002:i:4:p:463-502

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References

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  1. Antonio Estache & Ginés de Rus, 2000. "Privatization and Regulation of Transport Infrastructures: Guidelines for Policymakers and Regulators," ULB Institutional Repository 2013/44116, ULB -- Universite Libre de Bruxelles.
  2. Chisari, Omar & Estache, Antonio & Romero, Carlos, 1999. "Winners and Losers from the Privatization and Regulation of Utilities: Lessons from a General Equilibrium Model of Argentina," World Bank Economic Review, World Bank Group, vol. 13(2), pages 357-78, May.
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Citations

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Cited by:
  1. Smith, Andrew S.J., 2005. "The role of efficiency estimates in UK regulatory price reviews: The case of rail," Utilities Policy, Elsevier, vol. 13(4), pages 294-301, December.
  2. David Parker, 2004. "The UK's Privatisation Experiment: The Passage of Time Permits a Sober Assessment," CESifo Working Paper Series 1126, CESifo Group Munich.
  3. Siew Hoon Lim & C.A. Knox Lovell, 2009. "Profit and productivity of US Class I railroads," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(7), pages 423-442.
  4. Smith, Andrew S.J., 2012. "The application of stochastic frontier panel models in economic regulation: Experience from the European rail sector," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(2), pages 503-515.
  5. Hakam Kamleh, 2005. "La nouvelle organisation ferroviaire britannique : sur la frontière entre intégration et désintégration," CAE Working Papers 28, Aix-Marseille Université, CERGAM.
  6. Wolf, C. & Pollitt, M.G., 2009. "The Welfare Implications of Oil Privatisation: A Cost-Benefit Analysis of Norway’s Statoil," Cambridge Working Papers in Economics 0912, Faculty of Economics, University of Cambridge.
  7. Smith, Andrew S.J. & Wheat, Phill E. & Nash, Chris A., 2010. "Exploring the effects of passenger rail franchising in Britain: Evidence from the first two rounds of franchising (1997-2008)," Research in Transportation Economics, Elsevier, vol. 29(1), pages 72-79.
  8. 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.
  9. Vickerman, Roger, 2004. "Maintenance incentives under different infrastructure regimes," Utilities Policy, Elsevier, vol. 12(4), pages 315-322, December.
  10. Lalive, Rafael & Schmutzler, Armin, 2008. "Exploring the effects of competition for railway markets," International Journal of Industrial Organization, Elsevier, vol. 26(2), pages 443-458, March.
  11. Lalive, Rafael & Schmutzler, Armin, 2011. "Auctions vs Negotiations in Public Procurement: Which Works Better?," CEPR Discussion Papers 8538, C.E.P.R. Discussion Papers.
  12. Anthony E. Boardman & Claude Laurin & Mark A. Moore & Aidan R. Vining, 2009. "A Cost-Benefit Analysis of the Privatization of Canadian National Railway," Canadian Public Policy, University of Toronto Press, vol. 35(1), pages 59-83, March.
  13. Prandini, Alberto, 2007. "Good, BETTA, best? The role of industry structure in electricity reform in Scotland," Energy Policy, Elsevier, vol. 35(3), pages 1628-1642, March.
  14. Luisa Affuso & Alvaro Angeriz & Michael Pollitt, 2009. "The Impact of Privatisation on the Efficiency of Train Operation in Britain," Working Papers 28, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
  15. Preston, John & Robins, Dawn, 2013. "Evaluating the long term impacts of transport policy: The case of passenger rail privatisation," Research in Transportation Economics, Elsevier, vol. 39(1), pages 14-20.
  16. Bernardino, João & Hrebícek, Zdenek & Marques, Carlos, 2010. "Applying social marginal cost pricing in rail PPPs: Present state, drawbacks and ways forward," Research in Transportation Economics, Elsevier, vol. 30(1), pages 59-73.
  17. Russell Pittman, 2002. "Chinese Railway Reform and Competition: Vertical or Horizontal Restructuring?," Development and Comp Systems 0204004, EconWPA.
  18. Abay Mulatu & Nicholas Crafts, 2005. "Efficiency among private railway companies in a weakly regulated system: the case of Britain's railways in 1893-1912," Economic History Working Papers 22552, London School of Economics and Political Science, Department of Economic History.
  19. Khan, Iram, 2006. "Public vs. private sector : an examination of neo-liberal ideology," MPRA Paper 13443, University Library of Munich, Germany.
  20. Kennedy, J. & Smith, A.S.J., 2003. "Assessing the efficient cost of sustaining Britain’s rail network: perspectives based on Zonal comparisons," Cambridge Working Papers in Economics 0317, Faculty of Economics, University of Cambridge.
  21. Nash, Chris, 2008. "Passenger railway reform in the last 20 years - European experience reconsidered," Research in Transportation Economics, Elsevier, vol. 22(1), pages 61-70, January.

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