Interventions of the UK Government in the Affairs of the Railways since the 19th Century - Essay Example

Interventions of the UK government in the affairs of the railways since the 19th century Introduction There is recognition globally that Britain established the world’s first railway transport system. The Kingdom receives credit for the increased geographical density that it gained during 1914. Additionally, there have been commendations about the comfort together with its speed of express trains. Critics also noticed pitfalls accompanying the railway line. The critics assert that the construction wasted resources by duplication of routes, excessive use of capital, and high fares and costs. They also note that, the rail left a couple of market towns at dead-ends rather than hubs of indigenous lines (Forte, Mudambi, & Navarra, 2014, p.368). The services rendered trough the inherent administration of the railway that often encountered both public and private interventions. Government institutions in various states have led to the expansion of the rail sectors. Thus, there is an increased scope relating to the delivery of infrastructural services between the public and the private sector (Morales, Wittek, and Heyse, 2012, p.242). Development of the private sector and participation in the delivery of infrastructural services attribute to the capability of the sector to deliver efficient services. For example, in the public railway developments, the average actual projects are higher than the costs estimated. Indeed, the delivery of the railway services and the entire public infrastructure associates itself with inefficiencies and excessive costs. Essentially, the problems facing the provision of the railway services have the intervention of many players. The situation intervenes to align the delivery of the rail service to the benefit of the public good. In addition, the UK government has been a critical player in the execution of rail interventions to elicit better services to her citizens (Medda and Pels, 2012, p.645). Merchants and manufacturers had tried to advance the status of the road network in the 18th century by creating turnpike trusts. The schemes gained momentum during the second half of the 18th century and amid the 19th century. Undisputedly, there were nearly 22,000 miles and 104,770 miles of turnpike roads and parish highways respectively. These roads spread throughout England and the Wales. During the 18th century, there was unreliable road transport service because of the appalling conditions and unreliability because of wet weather observed in Britain. The maintenance of roads was a nightmare due to neglect from the state. It was the duty of the local labourers and unpaid farmers to carry out maintenance of the roads, as prescribed in the Act of 1555. Later on, owing to the importance of trading, the parishes took the mandate to levy the road repairs. Establishment of wooden railways took place in the 17th century in the bid to move oil over land. Later on, there was the development of the iron railway lines in the 18th and the early 19thcenturies. The rate of railway projects then increased in the 1830s due to a nourishing economy. Establishment of forty-four railway acts then took place in 1826 and 1837 and since then, there has been tremendous government interventions in the delivery of the rail services (Williams, 2004, p.232-234). UK Government Interventions Development and Enactment of the Railways Act During the 1930s, the main railway lines in Britain faced a financial crisis. The circumstances took place in spite of the government interventions to limit competition from the road haulage and passenger transport services. Gross receipts during 1948 and 1955 exceeded the total working expenditure. In 1952, the railway transport services received finances from the British Transport Commission to use in their central charges. In the 19th century, there were pervasive statutory restraints towards the market monopoly of the railways. Due to the quid pro quo to bolster amalgamation of companies dealing with railway services, the successive regimes pestered the industry with panoply of constraints. The companies were forced to accept any traffic offers at agreed and published rates, and they are not allowed to use price discrimination in the bid to upsurge their profits. The Railways Act of 1921 came to the rescue of the rail companies, and this was possible due to the amalgamation of the entire railways into only four main lines of companies. The Act continued a proximal control of the railroad rates through the active implementation of the Railway Rates Tribunal (Dyrhauge, 2013, p.26). Principles of Regulation Used By Kings Due to criticism of the railway committee, the masses could consider their advice dogmatic. In this case, opinions held that the applied principles encompassed an ideological nature. However, the condition was the opposite and the dogmatic beliefs intertwined with mere ideologies were just a characteristic feature of the opponents rather than the Railway Committee. The committee created 22 reports despite it short time in office because of involvement of small numbers of individuals. The committee then facilitated the division of the railway bills among the regional groups and drafted railway reports to base the schemes on. The projects intended to serve the interests of the regions concerned. Further, each region received attention as being part of Britain. Additionally, the committee came up with merger reports tailored to amalgamate all the railway companies to help in solving thematic problems. Indeed, the inculcation of a Railway Committee into the mainstream of the railway services saw a considerable improvement of the services. Observations regard that, the schemes presented to parliament received an approval and implemented leading to the building of several rail lines in a timely way. Further, most of the rails built in this period are still in use (Forte, Mudambi, & Navarra, 2014, p.382). Emergence of the Railway Mania and the British Government Because of industrialization and greater heights of steam engine inventions, there was a massive construction of the railway lines. The railway mania in Britain peaked in the year 1840. Seemingly, by mid-1850s it was clear that two-thirds of the railway lines were complete. It is clear that in the UK, the private entrepreneurs carried out the construction of the first railway network. Initially, railway line construction received finances from the local groups especially those businesspersons that used it due to minimal costs (Soltes, 2013, p.18). Immediately the mania took up the project, the gap between the investor and the promoters widened. The stock exchange took a centre-stage in the advertisement of the railway investments escalating the costs and reducing the numbers of the people to invest. An aftermath of investors losing life investments due to the consolidation of the rail companies later accompanied the unprofitable rail projects. Further consequent changes came into play in railway financing towards 1870, and the railway companies financed their projects instead of issuance of public bonds. Because of the laissez-faire approach implemented by the British government, competition geared among the private entities. In 1844, the British government enacted the Gladstone Act, which had a board to oversee the railway activities. Apparently, the parliament is using a piecemeal approach that discourages unfair competition as a criterion to reduce monopoly (Dyrhauge, 2013, p.23). The Merger Policy The railway alliances and mergers have shown the potential to impact heavily on the aspect of competition. Arguments show that mergers and alliances enhance a reduction in competition and consequently an increase in prices. The UK government implemented two main models to ensure a reduced competition and maximum profits among the railway investors. Regardless of the established platform that favoured an environment for competition, the British government approved the concept of mergers in 1850s. The primary aim of the mergers was to reduce further competition. Consolidation went on through to 1921 when the Railway Act formed the “big four” companies. The companies included London, Southern Railway, Great Western railway, and Midland and Scottish Railway. As the competitions seemed to be ineffective, the government further introduced more regulations. The British government decided to react to real issues and problems rather than being proactive. For instance, a substantial legislation segment in the UK focused on technical and safety issues (Estache, 2011, n.p).Through the revisions of the regulatory policies of the 170s, the railway lines started to reap more benefits (Burns, 1998, p174). Hence, whether the mergers are vertical, horizontal or of the conglomerate type, they often need a greater understanding of the geographical market (Clarke & Morgan, 2006, p.56). The Need to Go either Private or Public In the last century, the dimensions of the local corporates in the delivery of local services have seen tremendous changes in the world. After World War II, the period shows the government numerous interventions to regulate public ownership of the companies. However, there is significant evidence showing that the state companies often exhibit poor economic performances. Amid 1980s, the concept of privatization took the foci due to the overwhelming economic productivity. For years now, international interest institutions and several policymakers are adopting the privatization concept. Further, research works show that privately owned companies together with mixed companies tend to have high economic performances as opposed to the publicly owned companies (Motenduro, 2012, p.30). Privatization phenomenon has not been widespread leading to limited evidence in ascertain countries such as UK, Canada, and Switzerland. However, in UK there are traces of evidence regarding the increased efficiency pertaining to privatization. Early studies have shown that there is a significant stride in the total productivity factor associated with privatization. Arguably, several postulates garner support that private ownership has substantial positive impacts towards productivity. For example, in Switzerland where there exist both private and public ownership of integrated railways, elucidations assert that private ownership outweighs public ownership (Crew & Kleindorfer, 2012, p.56). The aspect of regulation of the railway industry should receive considerations besides the issues of industry structure. The need for effective management depends on industry structure, the degree of competition, and the effectiveness of the policy applications towards the introduction. It is noticeable that structural organization and regulation of rail services vary from place to place. In order to reap optimal profits without affecting the rail industry, regulatory frameworks should be developed to manage the risks of monopoly (Tong and Arsin, 2013 p.135). Privately owned firms and industries make more profits as compared to the publicly owned or state firms. Because of monopolistic concepts, there are decreased costs. The case is possible where single rail networks deliver services over specified network leading to low costs as opposed to two companies. The scope of economies in a state of integrated rail firms is vital. Monopoly is liable to abuse where there exist limited numbers of companies that operate in an area. Where there are weak competitions and a single rail network that can easily influence the market price, interventions are necessary to regulate monopoly. Moreover, there should be interventions in cases of rail cartels who particularly collude to sway companies (European Conference of Ministers of Transport, 2001, p.30). Ferreira, Manso, and Silva, (2012) purports that publicly owned firms are less innovative when compared to the privately owned companies. After being acquired by private equity funds, firms tend to invest in innovations that are more influential. He further suggests that, private equity funds largely affect investments that are more innovative through the bid to decide whether to go public or private (p. 257). Enhancement of the situation is by the fact that private corporations look for highly trained personnel and give out high salaries. In this context, highly qualified and experienced staff moves to the privatized companies enhancing the degree of innovation. Therefore, there are more innovations in private sectors as the leaders invest more into the innovations. Evidently, as opposed to the privatized institutions, public firms acquire newest technologies. The idea of privatizing state-owned firms often advocates implicitly by a shift that is reliable to trigger a process of restructuring corporate that lead to efficient use of resources. The situation is feared to encompass insinuations about job loss (Klein, Chapman, and Mondelli, 2012, p.2013). When a company relocates from the government to private ownership, the employees may be laid off to restructure ownerships. Often privatization is received with resistance from a diverse group of people that fear about their jobs. For instance, public firms offer an excellent security of work. Therefore, during privatizations, stagnated staffs, stand to lose their jobs. The staff members who have not advanced their careers are at a high risk of losing their jobs when the notion of privatization knocks. The situation is evident since private corporations always are on the lookout for the best employees (Bastos, Monteiro, and Straume, 2013, p.248). Public and private ownership of companies differ on the dimensions of liquidity of the investors and the ability to control and allocate resources to the managers and investors. In the attempt to achieve this situation, there is a dire need for maximum utilization of corporate governance. Choices made in the private sector involve a wider scope of stakeholders. They bring diversified perspectives on board leading to more sustainable decisions. Additionally, in the privately owned firms, the diverse stakeholders involved aid in the effective resolution of conflicts and problems. These circumstances facilitate efficiency and effectiveness of the outputs. Consequently, privatized companies to a little extent can be barred from making some decisions until there is involvement of all stakeholders. Therefore, in the bid to make corporate decisions, there is always a waste of time (Boot, Gopalan, and Thakor, 2006, p.303-304). Schneider and Valenti (2011, p.463) suggest that privatized organizations are free from any political interference. Public corporates tend to be under more political meddling as opposed to their private counterparts. In other words, the government might be under the influence of its politicians not to lay off workers because of the negative publicity. In addition, due to political forces, managers may not be in a position to make decisive decisions that may impact negatively on the politician. These reasons show why more public corporates should go private to evade political influences (Peters, Perre, and Roiseland, 2014, p.89). Conclusion In conclusion, there is considerable evidence as to why the rail system should undergo vivid numerous reforms. If the rail system in UK could be of private ownership, there will be services of high quality to passengers. Additionally, there will be quick processing of tickets with latest technology evidenced in the private sector. There will also be better capacities that will increase expansion of service delivery (Lange and Forraro, 2015, p.29). The situation will make it possible for the passengers to receive services as they travel rather than off the trains. In comparison with the Spanish train system, the railway service delivery is far better than that of UK. Therefore, privatization of UK railway system will boost a sustainable mode of taking journeys across the kingdom. Further, the privatization of national corporations allows the state to provide more policy guidelines that will facilitate health competition. Moreover, there will increased revenue for the government from the tax submitted from such private corporations. Privately owned corporations thrive in the market in the bid to maximize profits. Therefore, they will strive to ensure efficiency and effectiveness. On the contrary, government firms exist not to make profits from the public but rather offer services at subsidized prices. Hence, they lack the vigour to compete for maximal profits. For instance, private corporations such as the British Airways have tremendously shown higher degrees of efficiency and feasible profits. Hence, it is paramount to the UK railway system to remain fully privatized to start enjoying efficient, effective, and prompt rail services. 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