rail monopoly news – France and Germany’s railways are falling apart!

Lord Berkeley

Rail monopoly news.

 An irregular comment paper from Tony Berkeley, 7 November 2015

 France and Germany’s railways are falling apart; other member states may not wish to follow them.

France and Germany still lobbied the Transport Council against the changes that could revitalise their railways. Now, with the EC/EP/Council Trilogues already started, I reflect on where these railway ‘leaders’ have got to.

I challenge the Commission to stick to their principles!

France and Germany have conspired to kill much of the governance parts of the 4th Railway Package that would bring competition and growth to the sector.  Instead, they are dragging the whole sector into what could be terminal decline – on the basis that, if DB and SNCF fail, they will ensure that no other rail company will succeed; the winners will be road transport.

In Germany, there are reports that DB is in severe financial trouble, seeking to sell off parts of Arriva and DB Schenker and cutting 30% of its freight network A senior DB manager admitted at a conference in May ‘DB cannot survive without transferring funds from Infrastructure Manager to its Railway Undertakings.’ This all may explain Germany’s very strong actions against any liberalisation and transparency proposals in the 4th Railway Package.    . ‘Several diplomatic sources indicate that Germany had a crucial influence on the development of the project compromise on governance, making it easier for financial movement within the holding companies (Article 7d). This governance reform does nothing to improve the current situation and favours the incumbent.’ (Contexte.com). DB’s forthcoming restructuring could reduce its rail freight by 30%.  Will it sell its assets to competitors to enable them to take it over?

Hidden subsidies from DB Netz itself part financed by the German states, will also help DB buy more rail companies abroad as well as Chinese trains.   Here trade union ‘IG Metall’ and the supply industry organisation ‘VDB’ have complained jointly to the German government about DB’s intention to buy trains and spare parts from China in the next 3-5 years. They argue that it is unacceptable that a German state-owned enterprise buys subsidised Chinese products with German tax payer’s money which jeopardises the German rail industry and its prices.  All good reasons for keeping transparency in the 4th Railway Package.

The general rail situation in France has clearly got worse as a result of the reintegration of SNCF and RFF into a vertically integrated monolith that does not seem to know what it is doing. SNCF is said to be the most hated company in France and, according to FNAUT, the infrastructure is degraded, lines are closed and the quality of the services is no longer acceptable. Increases in passenger fares and freight access charges are driving customers to road.’

Now with the French Transport Minister stating publicly that transparency should be put into the system, taxpayers will discover how much money is actually spent on what and where.   In the meantime, SNCF is still trying to stifle competition in the passenger sector by seeking to delay it until 2030, by which time its senior management will have retired; it is also doing its best to wreck any attempts by freight competitors to improve their service quality and grow.

SNCF is also in trouble financially, so their easy way out is to put up access charges, using the extra cash to subsidise its incumbent operators and preventing by all means any fair competition with other passenger or freight operators.

So France and Germany have led the way to ensuring that the Transport Council allows these crumbling monopolies to stagger on, with no transparency or regulation on possible unfair subsidies.

In the UK, Network Rail and the Regulator are both in trouble over cost increases of enhancements to the network, but the network is generally in good condition. Our problems are one of managing growth – a possibly doubling of traffic in 20 years.  We have transparency and an inclusive and fully independent infrastructure manager.

So where are the other member states in all this? Still frightened of Germany and France?

Where is the competitive single market to which EU institutions and members states have signed up?

Now there are indications that the European Commission is bowing to German pressure once again and accepting the dilution of the transparency clauses so as to allow DB and SNCF operators to receive subsidies without any disclosure and, along with all the other barriers to entry (such as incumbents having priority input to infrastructure managers), to make any competition as unfair and as risky as possible.

The European Parliament can still put this right in the forthcoming trilogies with the EC and Council, by strengthening the rules on transparency, resisting hidden financial subsidies, and going back to the original role of the infrastructure manager with full and independent responsibilities.  

That is what will attract private investment and grow the rail sector.

Tony Berkeley

7 November 2015

Tony Berkeley is a member of the UK House of Lords, Chairman of the Rail Freight Group and a Board Member of the European Rail Freight association. The opinions expressed here are his own.

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