Transport

Railway privatisation the Japanese way

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Over the coming months, Backbench will be partnering with Torrin Wilkins, Director of Centre Think Tank for a series of comment pieces. In his column, Torrin will explore prominent policy issues – some of them related to the latest news and others related to his longer-term projects. We’d love for Backbench readers and commentators to respond to Torrin’s policy analysis and ideas, so if you would like to contribute a response, please email editor@bbench.co.uk.  

Please note that all the views expressed in Torrin’s articles are those of Torrin himself and do not necessarily represent the standpoint of Backbench. 

A few months ago, I published an article on 1828 talking about how we can learn from the Japanese rail system. Whilst our railways are notorious for delays and overcrowding the only thing Japanese bullet trains are notorious for is punctuality and a flawless safety record. It’s a stark contrast between the two systems but one that could uncover not just how our railways are broken but also how we can fix them.

The original reason the article gave for the success of Japanese railways was their privatised railways and our mix of private trains and public tracks. After all, fully privatised systems can work well as an incentive to reduce delays and to increase the speed of services.

The benefits of privatisation are true to an extent for Japan. Whilst the system in the UK is complicated with privately run trains and publicly owned tracks in Japan both the trains and the track all full under the same company. This system of a single owner both the trains and tracks have two distinct advantages. The first is it will be clear who is responsible for a delay on a certain line. Regardless of whether the issue is with the train or the track, it will be the responsibility of a single owner. The second is that fixing those faults will no longer result in train providers and track owners pulling in different directions.

Yet the story is even more complex than privatisation and deregulation. Instead, it’s a story of privatisation and a heavily regulated service. One that hasn’t left the railways up to the market but in a large part still down to the government whilst being in private ownership.

Ticket prices aren’t even left up to the free market with the government setting upper ticket prices. The decision is based on whether “…a company can cut costs and run itself more efficiently than rivals [then] it can earn greater profits…” which in itself creates a goal for the company to provide a better service. It takes the profit incentive and means governments can incentivise companies to reach goals it would normally try to achieve in a publicly run service such as customer satisfaction.

This gives some background to the time a train company in Japan apologised for a train leaving 20 seconds early. Whilst its mostly about the train missing some passengers and Japanese culture, its also about ensuring passengers continue to use the train company. With increased ticket prices not under the control of the company keeping passengers with the company is vitally important to making money.

The final question is how such a railway system is funded? I mentioned in my last article how Japanese railways rent out the land around their stations to generate a large proportion of their income. If they manage these areas well then the companies will attract more people to the area and more passengers.

Within the UK the situation is very different as Network rail, which owns the tracks and the stations, doesn’t own much land. It will mean companies buying land for new rail projects to raise more money. With Network Rail spending £6.3 billion in 2018-2019 and franchises which cost “…£5 billion per year…” private investment will help to reduce the cost for the government of the rail system. 

With controlled ticket prices, all rail and train services under one company and revenue from land the companies own around stations we have a lot to learn from Japan. A Japanese style of privatisation is also something we could implement within the UK, especially if we extend our rail network which will mean more chances for rail companies to buy land. It could also be used for or other transport systems such as bus services. As we come out of the pandemic it’s time we considered this model as a possible alternative to government ownership.

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