Trains run side by side

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The debate on the future of the British rail network started again this week.

While the government lukewarmly defended its system, unions and passengers joined forces to attack it, as prices once again exceeded the government's preferred level of inflation.

Even the Department of Transportation called the current model "flawed" when it announced that FirstGroup should take over the operation of the route from London Euston to Glasgow Central.

Transport Secretary Grant Shapps welcomed the deal as a change to a new rail model.

But RMT General Secretary Mick Cash described it as "another political solution of a government whose privatized franchise model is collapsing on its ears."

It all comes down to the fact that rail punctuality across the country is at a 13-year low.

And despite the growing anger of passengers, next year's tariffs will increase by 2.8% in line with the discontinued retail price index and not with the lower consumer price index.

"The system clearly does not work, everyone agrees that it does not work," says tracker Christian Wolmar the BBC.

What's wrong?

The government obviously did not hope for such a response in the privatization of the system in the 1990s, with the promise of boosting investment and improving services.

Network Rail, then known as Railtrack, was set up to service the tracks, tunnels and signaling equipment. In the meantime, private companies could compete for the operation of the trains.

At the time, the government hoped that these private companies would compete on most routes through a system known as "open access." Instead of offering whole lines, the services themselves were offered.

She also called on companies to apply to run lowered franchisees on deficit paths.

However, the taxpayer had the opportunity to take over the overview of all loss-making services. If the network had been publicly owned, it would have been subsidized by the profitables.

As a result, whole-line franchise contracts have become the norm in order to stop the curves of profitable services, and less than 1% of passengers now travel with open access services.

"Little control"

This has led to poor competition amongst rail operators, says Professor Mark Barry of Cardiff University.

"We have a system that promotes competition after the privatization of the railways and gives companies the opportunity to drive innovation and take risks to add value."

"The reality, however, is that there is not much competition on the railroad – apart from the franchise system itself."

This may indicate that rail operators are finding it easy to make a profit, but the opposite is often the case.

In fact, as Mr Wolmar points out, the railway undertakings have very little control over their revenue. They can introduce Wi-Fi in their trains and start advertising campaigns, but much of their assets depend on factors beyond their control, such as employment levels and economic growth.

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Tariffs will rise by as much as 2.8% next year

In a competitive bidding environment, this may mean that rail companies suffer losses over the course of the rail franchise agreement, which typically lasts seven years.

This partly explains the failure of the Stagecoach and Virgin Trains East Coast Main Line license agreement returned to the government last year.

Prof. Barry believes that the franchising model should change so that the franchisee is not exposed to revenue risk.

Instead, the government should award contracts by telling bidders how much money is available and encouraging them to compete in terms of quality.

He said Transport for Wales had successfully experimented with this model.

Former British Airways chief Keith Williams, who was tasked with verifying the franchise system, could have an even more radical proposal.

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Punctuality in British trains is at a 13-year low

He said a government-independent fat controller should be responsible for daily operations.

Mr Williams has also said that he believes rail franchise should in future be based on punctuality and other performance-related goals.

The government initiated the review after passengers in the north and south of England experienced chaos last summer following the introduction of a new flight plan over several weeks.

His review of the rail system will be released this fall.

A spokesman for the Ministry of Transport said: "The recent West Coast Partnership is a crucial step towards a new model for rail, a partnership supported by Keith Williams, who has the flexibility to respond to his recommendations and make fundamental reforms to a weak point perform system.

"The Transport Minister has asked Keith to present his recommendations for a White Paper with fearless proposals that will provide a consumer-oriented rail system suitable for the 21st century."