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

Author

Listed:
  • 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.

Suggested Citation

  • Michael G. Pollitt & Andrew S. J. Smith, 2002. "The restructuring and privatisation of British Rail: was it really that bad?," Fiscal Studies, Institute for Fiscal Studies, vol. 23(4), pages 463-502, December.
    • Handle: RePEc:ifs:fistud:v:23:y:2002:i:4:p:463-502
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    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation

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