Privatization and Deregulation of Transport

Citation

Jessop, A. (2001), "Privatization and Deregulation of Transport", International Journal of Public Sector Management, Vol. 14 No. 6, pp. 522-525. https://doi.org/10.1108/ijpsm.2001.14.6.522.1

This book is a collection of papers given at a Regulatory Policy Research Centre Seminar in September 1997. As the editors note, this was soon after the election of the first Labour government for 17 years. Now, after another election, this perspective lends a certain piquancy to some of the papers presented here. It is useful to have in this volume descriptions of and opinions about the regulatory situations of all transport modes at a point in time.

Following two introductory chapters, a further 18 are grouped according to mode: three on buses, eight on railways, one on road freight, four on aviation and one each on seaports and the Channel Tunnel. Of the 23 authors, 13 are academics, four are consultants and six are from the industry in some form.

Most coverage is given to the railway. It is difficult when reading these papers not to be influenced, perhaps too much, by Paddington, Hatfield and the aftermath. While, quite rightly, most contributors are concerned with the effects of the new regulatory frameworks in the UK on competition and performance, it is notable (with hindsight) that the unglamorous business of maintaining the infrastructure to ensure not just efficiency but also safety is not mentioned. In the one paper on the privatization of Japanese railways, the authors note that “opponents of privatization were concerned that safety would suffer because the profit‐oriented private sector would spend less money on safety precautions, and would reduce the number of employees to dangerously low levels in the name of efficiency”. This could be the Mayor of London speaking of the proposals for the Underground. Given that the background of most of these authors is, I think, in transport economics, it is perhaps unreasonable to regret the absence of any discussion of the altered culture that was supposed beneficially to flow from privatization and deregulation. However, there is a case for combining with the economist’s view those of the organizational and behavioral theorists. Were this seminar, and this book, to be repeated, such an augmentation would certainly be worthwhile.

Many of the points raised in 1997 have continued relevance today. Nash notes that the former British Rail network was divided into 25 franchises (in Japan there were six) resulting in a degree of fragmentation “unparalleled anywhere in the world” and is skeptical that this is required to achieve the levels of competition needed for improved performance, noting particularly the “intricate web of contractural arrangements” in which the allocation of responsibility is unlikely to be easy. Deregulated systems do not, in the long run, result in large numbers of competing operators. At the time of the seminar the 25 franchises were operated by 11 groups or companies. Michael Schabas sees this as a result not of the pursuit of scale economies, which he believes to be small, but rather as a classic portfolio strategy, the purpose of which is to combine in one ownership franchises with different risk profiles, thereby reducing the overall risk for the owner. Was this the intention of the privatisers?

Russ Haywood reminds us that transport is a derived demand: people only travel to get somewhere. Using Manchester and Sheffield as illustrations he shows how a relatively deregulated land use planning system results in large agglomerations of activity situated at the peripheries of cities such that access by car is made easier and by public transport, particularly rail, is made harder. In calling for a more interventionist approach to ensure that development occurs in ways more favourable to rail, the ambiguous relation between that which is derived and that from which it is derived is underlined.

Of the four papers on air transport two are concerned with slot allocation. It is a characteristic of the air transport business, not nearly so prominent elsewhere, that the interaction between the operators of the static infrastructure and of the vehicles (aeroplanes) is of major interest. The same tensions exist within all modes and on occasion surface but it is that between airports and airlines with which we are most familiar. The intricacies of planning international air routes between time zones and the pressures on particular time slots for landing and takeoff have made the allocation of these slots contentious, not least because ownership of them may act as a barrier to new entrants. Chris Castles sets out alternative allocations by three principles: first come first served, lottery and auction. The financial time‐bomb that is the result of the 3G auction among mobile phone operators must give pause for thought here. But it is clear that some better system is needed. David Starkie examines the effects of the creation of a secondary market in slots in which, following some initial allocation (randomly would be interesting), airlines might buy and sell the slots. This issue, like many of the others described in this book, will be with us for many years yet.

The final paper in this collection examines the errors in the forecasts used to justify the construction of the Channel Tunnel. This refreshing exercise gives us the usual suspect: overoptimistic demand estimates (shades of the Dome). This seems such a persistent characteristic of bids by the sponsors of large infrastructure investments requiring public money that one is constantly surprised that the Government in general, and the Treasury in particular, are not more cynical (which is to say, realistic). Perhaps for all the modelling and quantification that surrounds the adoption of one policy over another, it is the otherwise predetermined outcome which must prevail.

This book contains much that is useful and of interest. Most papers contain data which will give the reader a reliable picture of how things were. The opinions and views expressed are sufficiently various that the flavour of the debates is well portrayed. The extent of regulated behaviour in transport, as in much else, is likely to be an increasing feature of management in the public sector and in this collection of papers we have a worthwhile addition to the literature.