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The Restructuring and Privatisation of British Rail: Was it really that bad?

Author

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  • Pollitt, M.
  • Smith, A.S.J.

Abstract

Following the government’s decision to place Railtrack into administration (October 2001), attention has focused on what went wrong with privatisation, and how crucial network investment will be financed in future. This paper uses a social cost-benefit analysis framework to assess whether the restructuring and privatisation of British Rail has produced savings in operating costs. The paper shows that major efficiencies have been achieved, consumers have benefited through lower prices, whilst the increased government subsidy has been largely recouped through privatisation proceeds. We find that output quality has also improved (pre-Hatfield). The achievement of further savings will be 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

  • Pollitt, M. & Smith, A.S.J., 2001. "The Restructuring and Privatisation of British Rail: Was it really that bad?," Cambridge Working Papers in Economics 0118, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:0118
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    References listed on IDEAS

    as
    1. 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 357-378, May.
    2. Antonio Estache & Gines De Rus, 2000. "Privatization and Regulation of Transport Infrastructure : Guidelines for Policymakers and Regulators," World Bank Publications, The World Bank, number 15199, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Cost benefit analysis; railway; privatisation and restructuring; efficiency;

    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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