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PA IN THE MEDIA

Customers lose out when ideology takes control of the trains

The article was first published in Dagens Næringsliv

The Labor Party and the Centre Party want to stop the current tendering process for railway lines. Customers and taxpayers will lose out.

The Labor Party and the Center Party want fewer private players in Norwegian transport. That is not a surprise. But the government's new plan for transport and railways could be very expensive and difficult to implement in practice. What do the statistics and surveys tell us about the experience of competition on Norwegian railways under the policy that has been in place since 2015?

First, we can save a lot of money through competition. The Ministry of Transport and Communications estimates that the first three traffic packages will lead to cost savings of a total of NOK 12 billion in the period up to 2031. Despite the fact that this calculation is disputed, these are funds that are freed up to be reinvested in a better train service for customers.

The experience from abroad shows the same trend. Sweden, Germany and the United Kingdom have all seen  that exposure to competition has led to reductions in public costs. While Sweden has almost seen a doubling in the number of passenger kilometres travelled, public spending has either remained at the same level or been reduced. The Norwegian government's new plans therefore will effectively reverse the cost-saving measures.

Secondly, there is a high probability that customers will receive a better service as a result of competition. The experience so far shows that market competition on Norwegian railways is helping to improve the offer to travellers.

In the first two traffic packages, Go-Ahead Nordic and SJ Norway delivered the best tenders after an overall assessment of, among other things, the quality of the services and price.

In the tender competition for the Sørlandsbanen (Traffic Package 1), the bids from the three competitors in the final phase were of the same high quality and the differences were marginal, while Go-Ahead Nordic stood out as being the most reasonable on price.

In practice, this means that new players are committed to running a higher quality transport service at a lower price than they would have before the introduction of competition. Experience on the Gjøvik line shows that competition can lead to a greater focus on the local provision and on investments in the section where the company operates.

Thirdly, anti-competition policy runs counter to EU policy. This spring, the Storting voted in favour of Norway accepting the EU's railway package four. The first three packages have already been accepted. This means that in future it will be very difficult to discontinue competition on Norwegian train lines when the rest of Europe has chosen a competitive model.

The EU Railways Directive addresses the challenge that European countries have long had their own national plans and rules in railways. These have probably prevented Europe from developing well-connected train traffic across national borders.

The plan for pan-European rail solutions based on competition is about enabling countries to offer affordable, high-quality train services. The question is what part can Norway now play in this future-oriented European project.

Fourth, the policy may have major consequences for the market. Increased unpredictability in market conditions, both for employees and market participants in the railway sector, may hinder important future investments in capability and innovation. In the long run, Norway risks scaring away foreign investors and losing the competition for innovation.

In the Hurdal platform, the Labor Party and the Centre Party have chosen to reverse a railway policy that has provided better service and more trains for the money. This political turnaround operation seems far more motivated by ideology than by a solid socio-economic analysis.

Saying no to competitive tendering and privatization, means Norwegian train customers and taxpayers will be the big losers.

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Contact the authors

PA Consulting in Norway

Knut Erlend Vik

Knut Erlend Vik

Financial services expert

Lars Erik Maurud

Lars Erik Maurud

Energy and utilities expert

Tom Krohn

Tom Krohn

IT transformation expert

Grete Kvernland-Berg

Grete Kvernland-Berg

Ali Rana

Ali Rana

PA agile expert in Norway