10 June 2011
Richard Wellings on rail privatisation and rail regulation
Brian Micklethwait

Today I received an IEA email newsletter, which drew my attention to a (fairly) recent (May 24th) blog posting by Richard Wellings at the IEA blog, calculated to confirm all our prejudices here about privatisation (good) and government regulation (bad).

First paragraph:

The recent history of Britain’s railways has undoubtedly brought the whole concept of privatisation into disrepute. But this is unfair. Rail privatisation was a pastiche of genuine privatisation - in many ways it actually increased the level of state control.

Final paragraph:

A truly private railway would be efficient, innovative, responsive to consumer preferences and would not require taxpayer support. It is time the critics (such as Will Hutton) stopped blaming privatisation for problems caused by government intervention.

The guts of Wellings’ argument is that in a truly free market, railway companies would have been free to integrate vertically, and being free to integrate vertically, they would have.  The irrational separation of ownership between track and trains would have ended.  The government did not allow this.

Maybe the new government will?

  1. Reading this I was struck by a mis-match between audience and responsible institution.  Dr Wellings and the IEA are based in London.  Their remarks (for the most part) are aimed at a British audience. But the responsible institution (via directive 91/440) is the European Union.

    It seems to me that this is an implicit call for Britain to leave the EU.

    If free market institutions really wanted to influence the EU I guess they would be basing themselves in Brussels.  They don’t (to the best of my knowledge) which implies to me that they think they’d lose.

    Posted by Patrick Crozier on  12 June 2011 at 01:54 pm

  2. Patrick - Directive 91/440 certainly influenced the structure of the privatised railway in the UK, though it is debatable to what extent such a high degree of disintegration was necessary. In other countries, vertical integration was maintained to a greater degree but with accounting separation between ‘track’ and ‘train’. More recently, the EU has, however, been prescribing greater separation, so your point is well made. This is yet another example of ‘single market’ legislation that uses faux competition arguments to undermine genuine markets and property rights.

    There are a couple of free-market think tanks in Brussels by the way, though they are not that radical.

    Posted by Richard Wellings on  13 June 2011 at 02:52 pm

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