“A deficient performance”: The regulation of the train operating companies in Britain’s privatised railway system

This paper focuses on the performance and regulation of the train operating companies in Britain’s

privatised railway system. It places regulation in context by examining rail privatisation, with particular

scrutiny given to the theory and practice of the franchising process which established these

companies. The record of the regulatory authority is assessed up to the announcement in 2004 of its

planned abolition. This assessment employs critical financial analysis, and draws on non-financial

performance indicators, in order to examine the extent to which it achieved its five main objectives:

increasing the number of rail passengers; managing franchises in the interests of passengers; encouraging

efficiency and economy in the provision of passenger rail services; encouraging investment

in rail services; and securing a progressive improvement in the quality of rail services. The paper

concludes that the regulatory authority’s performance was “deficient” as it only achieved the first of

these objectives. It places this failure in context by highlighting the fundamental problem—the flawed

concept of fragmenting and privatising a loss-making rail industry in the interests of British capitalism.

The “stronger” regulation envisaged by the Blair Government is revealed as a smoke screen

behind which there is a continuing transfer of wealth from taxpayers to the owners and providers of capital.