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March 8, 2016

UK CMA report finds increase in on-rail competition could benefit passengers and taxpayers

A report from the Competition and Markets Authority (CMA) in the UK revealed an increase in on-rail competition can result in benefits for passengers and taxpayers.

By Srivari Aishwarya

CMA

A report from the Competition and Markets Authority (CMA) in the UK revealed an increase in on-rail competition can result in benefits for passengers and taxpayers.

CMA started a project in January last year to examine the scope for greater rail competition for passengers. The competition and consumer authority identified a range of benefits that can arise from allowing other operators to run competing services against existing franchise operators.

The increase in the number of open access services or splitting franchises is anticipated to offer benefits from increased competition.

According to CMA, the increase in on-rail competition can result in greater incentives for operators to improve service quality and provide greater efficiency.

Greater competition can also result in more effective use of network capacity.

"The increase in the number of open access services or splitting franchises is anticipated to offer benefits from increased competition."

CMA CEO Alex Chisholm said: "In a more competitive environment, companies will push to be more efficient and for there to be better use of existing capacity, so there are benefits for both the network and the taxpayer who helps subsidise the railways.

"There are legitimate concerns about the impact that greater competition might have on the income received by government from franchise operators, but so far that concern has been tackled in a way that hinders new entrants."

CMA made certain proposals to grant more operators access without affecting current franchises and imminent franchise awards.

It proposes that competing open access operators should be able to make more of a contribution than at present in terms of track access charges and through a public service obligation (PSO) levy to contribute to funding important but unprofitable services, such as those in rural areas.

This would help cover any reduction in premiums paid to government that might result from increased competition.


Image: A train waiting at a platform in a railway station. Photo: courtesy of Crown Copyright.

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