TRAINS are not quite the third rail of European politics. But they are still causing lots of angst. France has already endured three months of strikes, as railway workers protest against a planned liberalisation. In Britain, meanwhile, nostalgia for state ownership is on the rise. Around 60% of Britons support renationalisation of the railways, according to a poll published in January by Sky, a broadcaster. A botched timetable change in May, resulting in up to 43% of trains being delayed or cancelled each day by one operator, will not have improved commuters’ mood. The strikes and surveys show that rail competition is controversial. It is to be embraced nonetheless.

Governments will soon have their chance to do just that. By June next year, new EU rules called the “fourth railway package” will force state rail firms to open their tracks to private operators. Some countries, such as Britain and Sweden, have done this already. Others, like Germany and Italy, are in the process of doing so; Belgium, France and Spain have hardly got started. Many countries want to do the minimum necessary to meet the rules, by putting a “Chinese wall” between the train and track divisions of state firms rather than separating them completely. The case for national governments to go further when they implement the reforms—and at the least, to separate these areas into two different businesses—is strong.

First, the broader case for competition. It is possible to have good rail services without liberalisation. But those that do, in Switzerland and France, consume some of the highest levels of subsidies in Europe. Eliminating state rail monopolies cuts costs. Take Sweden, the first European country fully to separate track and train, in 1988. As research from the University of Gothenburg has found, the costs of operating trains fell by 10% in the decade after deregulation due to competing firms battling it out. Passengers benefit from cheaper tickets. On lines in Austria, the Czech Republic and Italy where there is genuine competition between operators, fare wars have broken out. The average ticket price from Prague to Ostrava has fallen by 61% since the state rail firm lost its monopoly in 2011.

Platform capitalism

By nudging firms to use innovative marketing and pricing systems, competition helps boost train use. In 2007-12 passenger numbers on Britain’s East Coast main line, which runs from London to Edinburgh, grew by 15 percentage points more and fares by six percentage points less at stations with competition compared with those without, reckons AECOM, a consultancy. Between 1996 and 2016, rail passenger-kilometres grew fastest in European countries with the most liberalisation.

Nor does liberalisation in rail lead to corner-cutting on safety, as many trade unionists have argued. Between 2004 and 2015 deaths due to accidents on Britain’s railways fell by 74%, compared with a 36% fall in the EU as a whole. Fear of losing out on contracts is a genuine spur to taking safety seriously.

The full benefits of competition are less likely to materialise, however, without a complete separation of track and trains. A state-owned track company that also runs trains will have a clear incentive to cheat in order to best its private train-operating rivals. In 2017 NS, the Dutch state rail firm, was fined €41m ($46m) for using information it had as a track owner to win a rail contract unfairly. Lithuanian Railways was fined €28m for removing a section of track on a cross-border link with Latvia in order to hobble a rival operator.

It is clearly possible to do liberalisation the wrong way. In Britain, where higher passenger numbers often mean sardine-like commutes, the mistake was to give rail franchises to firms which then have a near-monopoly for the duration of their contract. The vast majority of passengers have no meaningful choice between operators, meaning most have nowhere to go when service quality declines. What’s more, the rail franchises are run by the Department for Transport, resulting in more day-to-day political fiddling than ever occurred under British Rail.

A better model is to be found in Sweden. There, the system is run by a quasi-autonomous government agency, which reduces political meddling. Half of the trains are run by “open access” operators that can compete against government franchisees for passengers, keeping them on their toes.

The gains to be had from competition on the railways are real. But only if governments get the implementation right.