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The Restructuring and Privatisation of British Rail: Was it really that bad?

By Michael G. Pollitt and Andrew S. J. Smith

Abstract

Following the government�s decision to place Railtrack into administration (October 2001), attention has focused on what went wrong with privatisation, and how crucial network investment will be financed in future. This paper uses a social cost-benefit analysis framework to assess whether the restructuring and privatisation of British Rail has produced savings in operating costs. The paper shows that major efficiencies have been achieved, consumers have benefited through lower prices, whilst the increased government subsidy has been largely recouped through privatisation proceeds. We find that output quality has also improved (pre-Hatfield). The achievement of further savings will be key to delivering improved rail services in the future. This paper finds that a privatised structure, where shareholders demand a return on their investment, has led to significant improvements in operating efficiency - it remains to be seen whether the new regime, with a not-for-profit infrastructure owner, will deliver the same efficiency improvements

Topics: Classification-JEL: H43, L92., Cost benefit analysis; railway; privatisation and restructuring; efficiency
Publisher: Faculty of Economics
Year: 2004
OAI identifier: oai:www.repository.cam.ac.uk:1810/297
Provided by: Apollo

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