Privatizing Rail, Avoiding the Pitfalls Lessons from the British Experience, by Iain Murray

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The U.S. national passenger rail carrier, Amtrak, is in crisis once again.  The failure of its much-vaunted Acela high-speed train service between Washington and Boston has demonstrated its ineptness in both asset management and strategic planning.  Congress must look closely at ways to return the passenger rail service to the private sector to take advantage of private industry’s skills of management, innovation, and foresight.

Britain’s experience with privatization provides valuable lessons in this respect.  This Issue Analysis examines the history of British government involvement in the management of the rail industry, from earliest times through nationalization to privatization.  It finds that the British rail industry was never truly privatized, because the coercive fragmentation of the industry that was chosen as the method of privatization allowed too much room for government interference.  Over-mighty regulators chose to exercise their powers just as the industry was starting to find its feet and choked off any hope of the industry operating independent of government control. 

A better route is the American model of freight rail deregulation.  An industry that is vertically integrated and free to decide its own routes and prices without government interference is more likely to provide a better service at a lower cost than a highly-regulated industry.

Part of Amtrak’s problem is also its crumbling infrastructure.  The history of underinvestment in Britain’s rail network during nationalization is remarkably similar.  The UK had an opportunity to allow a privatized infrastructure owner the freedom to solve this problem using private sector funds and resources, but instead made all infrastructure spending dependent on political decisions.  As a result, the UK is committed to spend vast sums on rail infrastructure with no genuine prospect of private sector funding approaching those levels.  Congress must ensure it does not go down that route. 

Congress has much to learn from Britain’s tribulations over the future of its rail system, and thus avoid fundamental mistakes in the process of making the America’s passenger rail system a net contributor to the nation’s prosperity.  Calls to reregulate significant parts of the freight rail system would send America down the British road of underinvestment in essential railroad infrastructure.  These must be rejected in order to keep America’s freight capacity at the levels the nation needs.