Slow-track approach to rail revival

Date: 11/06/1998

By Chris Johnstone

IF THE European Union and the United States were on the same tracks on rail management, Europe would transport nine times as much freight as it does now and employ seven times fewer people.

Having spent millions of ecu on high-speed rail services, Europe may be able to teach the US some lessons about transporting passengers, but it is not even in the same league when it comes to moving goods.

While the single market has undeniably delivered faster journey times for road transport as customs formalities have disappeared, Europe's railways are still in a time warp when it comes to cross-border services and, in some cases, domestic management.

German and French railways have talked for years about finding a more efficient way of transporting freight across their border. At the moment, even for the shortest cross-border journeys, one company's train must meet the other's at the border for the cargo to be transferred.

The result is highly inflated charges for short trips and a sort of no-go frontier area as this deters customers and forces business to flock to road hauliers. Railways now carry 14% of Europe's freight, compared with 32% in 1977, and passenger traffic has fallen to 6% from 10% over the same period.

Three years after publishing its strategy for revitalising Europe's railways and seven years after EU transport ministers agreed a first set of measures aimed at forcing railways to react to market forces, the European Commission is back again with what could be described as 'Rail Liberalisation Two - the Sequel'.

Even without EU intervention, the railways could do a lot to improve their performance. An independent survey for the Commission has estimated that around 15 billion ecu, out of the sector's annual turnover of between 65 billion and 70 billion ecu in the EU, could be saved if the worst railways copied the practices of the best.

Next Thursday (18 June), Transport Commissioner Neil Kinnock will put a series of fresh proposals to EU ministers aimed at reinforcing past moves to create competition between independent transport companies, and going further on down the line.

Firmer guidelines on what charges should be set and when access to track should be given or can be denied will form part of the new proposals, with plans for clearer rules on state aid to railways set to follow in the next three months.

The real twist in the sequel is a more audacious proposal for the staged opening of Europe's freight market to be explored.

The Commission will argue that in an expanding market, Europe's national rail companies should allow newcomers to take up to 25% of the cargo market over ten years. For this to happen, railways should be able to launch international freight services without having to find a partner first.

The institution concedes that it is pushing proposals in those areas where there is a chance of success, and admits that cargo is less politically sensitive than passengers. "A similar proposal for passengers would be far too disruptive for networks," said one official.

A plan to introduce more competition for European passenger services has been strenuously ignored ever since it was tabled three years ago, and the forthcoming Austrian presidency shows no sign of changing that policy.

The freight-first policy does appear to be working.

France, Belgium and Luxembourg are said to be isolated in their opposition to the latest plans. Spain and Italy, which have often lined up alongside the slow-track trio in the past, are now prepared to support the Commission as long as it gives more details of how the market opening would operate.

The railways' main lobby group, the Community of European Railways (CER), has, however, given a lukewarm response to the proposal, arguing it will only be acceptable if the Commission introduces parallel measures to ensure road hauliers and airlines pay the price for infrastructure and pollution.

This is the sort of hard-of-hearing dialogue which has blighted the sector in the past. However, the Commission is pushing ahead with an overhaul of transport charges, with congestion payments by road-users set to play a large part in its plans.

Even though the 1991 measure was timid, in that it looked to create a small degree of cross-border railway competition but left domestic markets untouched, it has still been selectively ignored.

Separate accounts for train and track operations are not ready - or no information is available - in Belgium, Denmark, Greece, Italy, Luxembourg and Portugal.

Rights for railways to join forces to offer international services have not been granted in Italy and Luxembourg, prompting warnings from the Commission that it will launch court action against both governments.

Only four member states have notified action on accompanying measures for licensing new railways, access to track and charges for infrastructure, with the rest again facing court action.

It therefore comes as little surprise that only two companies have used the 1991 law to launch cross-border services.

Only the encouragement for national railways to cut some of their heavy debt has had an effect, freeing some companies of excessive interest payments but at the same time reinforcing their links with government paymasters and making it more difficult for new companies to compete. "States still tend to limit managerial independence to an unjustified extent," says the Commission's latest report.

The question of railway finance should be addressed in the next three months, delivering on a 1996 promise to deal with the issue.

For the first time, the Commission will lay down what is state aid and what is not.

Apart from three categories of payments - for clear public services, to compensate rail for its disadvantages in external costs compared with road, and for infrastructure investments - all the rest will be vetted as state aid.

In an attempt to wipe the slate clean, the Commission will encourage all railway debt which pre-dates 1993 to be written off.

Measures to prevent some railways abusing their power to set safety standards, and their domination of other services such as freight terminals, stabling facilities and maintenance workshops, are also to be investigated.

Major feature.