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The Rail Debate: Sweden's example highlights need for investment

WHILE several European countries have embarked on rail privatisation programmes, none has adopted the model being proposed by the Government.

The closest is in Sweden where, five years ago, the state railway was broken up into two companies; BV, which is responsible for the track and other infrastructure, and SJ, which operates the trains.

While this is similar to the British model, which envisages the creation of Railtrack and a series of franchises that will be granted to private operators, there are important differences.

First, the idea behind the Swedish system is to create parity between rail and road use. Therefore, the government's subsidies have been pumped into the track authority, BV, in order to reduce the marginal cost of operating services and to encourage the use of trains. Charges for the use of the track are not set on a line by line basis but instead averaged out because, it is argued, road taxes are not charged for each road but through the road fund licence. BV is expected only to recoup one-third of its expenditure and makes no charge for new investment.

By contrast, the British Government has said that Railtrack will have to recoup all its charges from train operators who will also have to make a contribution to new investment, on which the Government is likely to seek an 8 per cent return. Although the track-charging regime has not yet been announced, it is likely that charges for particular lines will vary widely.

Second, under the Swedish system, SJ is allowed to bid to continue running all services on lines. In Britain, the Government wants to reduce the number of services being run by BR and will only allow it to continue operating trains on lines where no suitable offers are forthcoming from the private sector. So far, only Sweden's 25 regional lines, which receive subsidy from local authorities, have been put out to tender and SJ has lost only four contracts, all to the same operator in the south of Sweden. The Swedish government hopes to attract more private operators when it fully deregulates the system in 1995.

Critics of the British proposals point to problems in Sweden. They argue that, as in Britain, there has been little interest from the private sector in operating a loss-making business. Second, the separation of responsibility for the track from the operation of trains has meant that the track authority, BV, has not always been responsive to the needs of SJ as they might not have the same priorities. For example, SJ has found it hard to convince BV to repair faulty equipment, even where lucrative business may be lost to the rail network, because the work does not fit in with BV's timetable for investment.

Although the Swedish government wants SJ to become commercially feasible, it has had to step in to save some services to the sparsely populated north because SJ said it was no longer prepared to run them at a loss.

The Swedish privatisation is being supported by the government with cash increases of 45 per cent per year in rail investment over the first four years. In Britain, rail investment will fall next year from its peak of pounds 1.6bn to under pounds 1bn.

(Photograph omitted)