The British Railway System: 5 Strategies to Reduce Ticket Prices

Privatisation of British Rail was conducted between 1994 and 1997, bringing an end to the state-owned railway system since 1948. The success of this decision is still a matter of debate, but the commuting public has surely been on the wrong end of the verdict. Independent claims that in some cases, prices have hiked up by 245% since the decision.
Interestingly, one of the original claims for the privatisation decision was “a reduced cost to the taxpayer”, which has been proven wrong comprehensively. Taking the example of East Coast Mainline (Publicly Run until 2015) vs the West Coast Mainline, the government funding was £0.46 and £4.57 respectively per passenger mile in 2014. The Government, at the time of rail privatisation, also claimed that the decision will improve customer service. The East Coast Mainline had a customer satisfaction rate of 92%, higher than any other line in the region, leading to 35 Industry Awards. The East Coast Lines were later sold to the joint venture of Stagecoach and Virgin Trains in 2015.
Rail commuters in the UK pay an average of £0.50 per mile; the highest across Europe. Comparing this to other Western European Countries, French passengers pay £0.38, Dutch £0.37, Irish £0.34 and Belgian £0.29 for the same length of journeys. The complete list is provided below (Vouchercloud 2017):

The Reason
The Conservative Government in 1979, under Margaret Thatcher, started the process of selling-off state-owned businesses. The decision was in line with the forward thinking of the west, but the manner of acting upon it, especially in the rail sector, is truly “unique”. The British Government accepts bids for individual services, which is not in line with any strategy in the sector. The process creates uncertainty against the notion of long-term thinking, and lets the concept of creating competition pass-by.
Sadly, the privatisation process here was also implemented without taking in account the sustainability of the process, and its continuing effects on the commuting public. Moreover, it should be noted that the rail industry works on fiction model, i.e. the government, still, has to subsidise the price of each ticket, even though the services are operated by private companies.
Possible Remedies:
Being the worst in terms of pricing, the British Railway System can learn many lessons from its surrounding, five of which are presented below:
1. Increase Subsidies
It is well understood in the railway sector that passenger rail cannot make profit in the West and Central Europe. For the financial year of 2015–16, the British government paid a total of £4.8 billion to the train operators across the country. A year earlier, Germany subsidised its railway by €17 billion, the highest across Europe. Other countries, e.g. Spain, Italy, Austria etc. also have a higher subsidy rate than the British Railway. The conclusion here is, to reduce the price of train tickets, the rate of subsidising must be increased.
The strategy of subsidising can be viewed as a short-sighted one, but it clearly produces quick results. Moreover, the rail sector should not be viewed as an individual industry. Looking at the bigger picture, rail is an important component of transportation, and pouring more money into it will mean lower input requirement in other sectors, e.g. maintaining and building motorways. A system that can carry more passengers than any other mode of transportation is also more sustainable for the environment, and will have further long-term benefits.
2. De-Privatise and Re-Privatise with Better Planning
De-Privatisation has already been mentioned in this article, with the example of the East Coast Mainline. The service was returned to the government after two companies failed to provide the service. The result of Government take-over was lesser subsidy required per ticket, as well as a commendable customer service. Learning from other European countries, railway systems with the lowest price per passenger mile, are mostly owned by the state. This is true for Latvia, Lithuania and Poland (majority state owned), the three cheapest railway systems in Europe.
Later, Virgin trains, in partnership with Stagecoach, put in a successful bid. The joint venture has been predicted to pay higher premiums to the government, as compared to its predecessor (£3.3 vs £1 billion per year for five years). A total of eight bids were put in for the service. The government, in this case, learnt from its mistakes, and did not put the service back out for bidding straight away. Instead it showed by example that the line can be run more efficiently and with less burden on the tax payer.
(This decision has run into further complications at this point, as Stagecoach took a hit of 11% share price drop in 2017 amid Brexit, and a looming terrorism threat. The company, holding 90% of the deal, wants the central government to either take back the service, or renegotiate the deal. Stagecoach also believes that it will again make profit by 2019, if a new deal can be reached.)
3. Modernise the system: Electrify the Future
Like many other societal systems, the transportation department accumulates many inefficiencies, mainly because of outdated systems. This is true in case of ticketing, as well as the overall conditions of the trains.
In most places, the passengers are expected to produce a paper ticket, even if it was pre-booked online. This is over complicated by the fact that some stations do not have a ticketing booth or a machine. In this modern day and age, the idea that a ticket cannot be scanned from a mobile device is ridiculous. The step is unnecessary in terms of passenger timings, and adds to the overall cost of ticketing in any case.
Moreover, according to some estimates, only 40% of British trains were electrified until 2003. Luckily, the number has been on the rise, since companies like Network Rail have started the process. The corporation has identified electrification as a practice that will increase the number of available seats, rise the average speed of trains, reduce the noise produced, cut down on emissions by 20–35% as compared to Diesel engines, and require less maintenance.
4. Reduce Regulations: Learn from Cheap Airlines
Recently, Telegraph reported a story where a student wanting to travel from New Castle to London, took a flight to Menorca (Spain), explored the island for 12 hours, had cocktails, and then flew to London. This whole trip costed £20 less than the £78.50 cheapest train ticket available at the time of booking.
Instead of bashing the rail system for its inefficiencies compared to the airline business, there are many lessons that can be learnt here. The following steps are generally taken to offer the mindlessly cheap prices in the aerospace sector (Grabianowski 2009):
a. Since 1970s, regulations in terms of operating an airline have been slashed repeatedly. This has helped in attracting new players in the market. Letting more train operators in will increase competition, and reduce prices.
b. Airlines understand their fuel needs and can predict the market well ahead. This has helped airlines to pay below the industry average, e.g. Southwest saved $3.2 million between 1991 and 2008 through its hedging practices. The diesel operated trains can invest in the forecasting and hedging sector too to reduce fueling costs.
c. Budget airlines operate under a single class system i.e. Economy. Trains with empty business class sections should learn from this practice.
d. The airlines also reduce their down-time by skipping hub trafficking i.e. they do not operate from a single airport. This helps in being more fluid and stay in the air longer. Train networks can only partner to use the parking spaces per requirement.
e. The last step sounds quite simple: Cutting down operating costs. Airlines understand the bare minimum staff they require to keep operating and they keep these numbers under a close check. Looking at the train industry, operators are most of the time guilty of overstaffing and sometimes retaining inefficient workers, which needs to be tackled in a better manner.
5. Make the Industry more lucrative: Learning from Swiss Trains
This section could just easily have been titled: Learn from Switzerland. Excluding some land locked small countries, Switzerland boasts the densest rail system in the world, it is the world leader in terms of kilometres travelled per passenger (2,449 km/year), the system is 100% electrified (except some tourist trains), and 62 companies compete in the railway sector, led by the state owned Swiss Federal Railways. Moreover, the rail is used by an impressive 30% of the work force in the country. On some days, the government may pay you to take the train and leave your car back home. The measure is used to control congestion on roads, which helps in maintaining the transport system.
The Swiss government also promotes its railways to the tourists. The most popular example here is the 7.5 hour journey from the Eastern to the Western alps, starting from either St. Moretz, Chur or Davos, and ending in Zermatt (and vice versa), called the Glacier Express. It goes without saying that the train ticket is not the only income that comes along tourists, there are endless streams of income potentials associated with this phenomenon that the Swiss Government has tapped into.
Concluding Remarks:
The concepts of nationalisation and privatisation (centralisation vs decentralisation in the bigger picture) get into a headlock when the topic of trains in the UK is discussed. Even the most avid supporters of decentralisation have to pull out all their argument guns to defend this thought process. The simple supporting argument for privatisation here is: It was not conducted properly and the chances of policy change are grim, given the government current priorities.
It can be anticipated that the bidding system for train services may change, opening the market for more players to enter. These new players then, have a higher chance to learn and implement better practices, and bring down the ticket prices for the passengers. In the simplest of thought processes, the head-on treatment of the railways must change. The train should be treated in the interest of public good, where all expenditures apply to the bigger picture of public transportation and relief.
What do you think of the 5 strategies drawn here? Would you like to add to the list? Please let me know by commenting below or connecting with me.
Works Cited
Cox, J. (2014, August 19). Why are UK rail fares so expensive? Independent.
Davies, R. (2017, June 29). Stagecoach says it has overpaid for East Coast rail contract as profitability plunges. The Guardian.
Federal Statistical Office. (n.d.). Public transport (incl. rail freight). Retrieved from Federal Administration: https://www.bfs.admin.ch/bfs/en/home/statistics/mobility-transport/cross-sectional-topics/public-transport-rail-freight.html
Grabianowski, E. (2009, March 12). How Budget Airlines Work. Retrieved from How Stuff Works: http://money.howstuffworks.com/personal-finance/budgeting/budget-airline.htm
Molloy, M. (2017, June 30). Student flies to London via Spain as it was cheaper than the train . The Telegraph.
Munbodh, E. (2017). British trains cost FIVE times more than ones in Europe — what you can do about it. Mirror.
Network Rail. (2003). Electrification. London: Network Rail. Retrieved from Network Capability: Technical Plan 2003.
Network Rail. (2017). Electrification of the railway allows for faster, greener, more reliable train journeys, improves passenger services and supports economic growth in Britain. Retrieved from Network Rail: Our Railway Upgrade Plan 2017–18: https://www.networkrail.co.uk/our-railway-upgrade-plan/key-projects/electrification/
Office of Rail and Road. (2016). Rail Finance: 2015–16 Annual Statistical Release. London: The National Archives.
Swiss Federal Railways. (2014). Die SBB in Zahlen und Fakten 2014. Bern: Swiss Federal Railways.
Topham, G. (2015, March 2). Repainted and rebranded — Virgin Trains East Coast service leaves London. The Guardian.
Vouchercloud. (2017). Train Prices Across Europe. Retrieved from Vouchercloud: https://www.vouchercloud.com/blog/wp-content/uploads/2017/02/Train-Prices-Across-Europe-Map.png
Wilson, B. (2017, June 28). Stagecoach hit by Virgin East Coast rail line woes. BBC News.
