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The Rail Industry.

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31 101 Economics I - General Essay The Rail Industry Table of Contents 1 The State of the Railways 2 1.1 The History of the railways in the UK 2 1.2 The UK Railways Since Privatisation 3 1.3 The Current Status Of Regulation Of UK Railways 3 2 The Economic Case for Regulation of a Monopoly 5 3 Assesment of Regulatory Requirements 6 3.1 Areas Governed by Competition 6 3.1.1 The Case for Privatization / Competition 6 3.1.2 Competition Applied to the Rail Industry 6 3.2 Areas Requiring Direct regulation 7 3.2.1 The Case For State Regulation 7 3.2.2 The Case For State Ownership 8 1 The State of the Railways 1.1 The History of the railways in the UK The 1921 Railway Act enabled 123 private railways to be merged into just four geographic groups The London, Midland and Scottish Railway, The London and North Eastern Railway, The Great Western Railway and The Southern Railway. During the Second World War the British government took control of the nation's railways in order to ensure the transport of men and materials to aid the war effort. The transport act of 1947 nationalised the railways and set up The Railway Executive. ...read more.


Therfore there is a requirement some form of regulation to control the price and level of service in the railways, especially considering the levels of subsidy paid to the railways under the current situation. It would not be prudent to re-privatize the functions of Network Rail and the status quo should remain. Railtrack is widely accepted as being a failure, primarily in terms of its finances. In one week Railtrack announced losses of �300 million and proposed to pay out a dividend to shareholders of �100 million. Under the current set-up (Network Rail) this dividend could have been re-invested into the rail infrastructure. Railtrack attempted to introduce competitive tendering in the maintenance of the railway infrastructure with little success. Poor communication between contractors was cited as a contributory factor in the delays in maintenance that led to the Hatfield derailment of October 2000. The diagram above depicts the number of fatalities on the railways in a given year / period. Looking at the brief period the privatized Railtrack was in charge of rail maintenance (between 97/98 - 2001/2002) there are an alarming number of fatalities around this time. This is an indication that profit may not be the best driver for the organization in charge of track maintenance. ...read more.


Another problem arises with the consideration of ticketing. The above suggestion would almost certainly be unworkable due to the complexity of finding connecting services with the same operator or buying several tickets with several TOCs for one journey. At the moment tickets are sold from A to B and are valid on any TOC. The current situation eliminates competition on price. It may be possible for the private sector to invest in expansion of the rail infrastructure in certain highly congested areas, this has been achieved already on the road network with the introduction of the M6 Toll near Birmingham. The competitive tendering of ancillary services, such as cleaning and food and beverage provision (of both rolling stock and in stations) would be a feasible one. The only objection may be the provider of food may well operate it's own monopoly on a train forcing up prices. This, however, is a minor objection. The SRA is currently involved in the process of replacing all the passenger rail franchises that are due to expire by 2004. The SRA has created new long-term franchise contracts of up to 20 years. This introduces the incentive for the TOCs to invest in the railways for the long term, although this may reduce the authority of the SRA to regulate the operators. 31 101 Economics I Page 0 ...read more.

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