I am against rail franchising because:

• it is a form of contracting out and I am against contracting out
• it doesn’t work

What makes you think it doesn’t work?

Mainly the experience of British rail privatisation. 

Why do you think it was a failure?

For starters the franchises were too short.  Rail is a capital intensive industry.  Trains, tracks, signalling and stations have to last a long time.  For a franchisee on a five-year contract there is no point in building a station that is not going to show a return until Year 6.

In that case surely the answer was to have longer franchises?

There are a couple of problems with this:

• There is still an end which means you have all the same problems with franchisees being unwilling to invest near the end of the franchise.
• Lock-in.  If the contract is badly drawn up - so that the franchisee has all sorts of bad incentives then it can take a long time to sort it out.  Sure, you can re-negotiate the contract but this can prove an expensive business.  And anyway, even a renegotiated contract is likely to be badly drawn up.

Why’s that?

Because the state is incompetent (See Freer is Better).  If the state is incompetent when it comes to owning, regulating or procuring it is unlikely to be much better when it comes to drawing up contracts.

Permalink • Rail • Last Updated: 08 October 2006

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