Rail Franchises, Competition and Public Service

Abstract

The use of franchises to deliver rail services has raised major problems. Franchises restrict competition in the market, whilst competitive bidding for franchises has met with difficulties, notably in relation to risk transfer and the recent use of short‐term contracts that have not been awarded competitively. Further, franchise agreements are detailed and highly stipulative and do not achieve the flexibility and opportunities for innovation originally intended. This reflects an underlying lack of trust resulting from the arrangements adopted on privatisation. By contrast, in Sweden regional services have been procured through contracts with limited risk transfer, and in Italy provision of services has been entrusted to a dominant operator with comparatively limited detailed service specifications; both seem to have been more successful. For the future in the UK, possibilities include greater use of competition, a return to public ownership, regionalisation, and the use of concessions with limited risk transfer to secure stability.