Deja Vu all over again? Rail franchising in Britain

This paper reviews the progress of passenger rail franchising in Britain since the mid-1990s, building on earlier contributions to the Thredbo Conferences and identifies five main phases. A welfare assessment suggests that the reforms were mildly welfare positive up to the middle of the third phase, but some concerning trends have emerged, not least the spiralling transaction costs associated with franchise bids and the apparent prevalence of strategic bidding. The problems that emerged, and some of the lessons learnt, in the aborted award of the West Coast franchise in 2012 are assessed. A detailed assessment is also made of the East Coast franchise. The awards that commenced operation in May 2005 and December 2007 (both of which failed) are compared with the new franchise that commenced operations in March 2015. Issues related to the cap and collar regime, GDP support, subordinated loans facility and parent company support are examined. The prospects for movement towards a more variegated set of franchise contracts will be considered.