Taking stock of the 4th Railway Package

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The three legislative measures of the 4th Railway Package’s so called ‘market pillar’ were approved by the European Parliament's Committee on Transport & Tourism in July. The Committee approved the agreement reached by European Parliament and Council negotiators earlier in the year on increasing competition in European passenger rail.

Following the Committee’s rubber stamp, the market pillar must now be voted on by a plenary vote in the Parliament and Council and then transposed by Member States into national legislation.

In order to gauge the reaction within the sector to the current 4th Railway Package text, we spoke to two UITP train operating members:

  • Laurent Mazille, Director for Public Affairs (Transdev)
  • Piers Marlow, Business Development Director (Arriva)

What do you think about the 4th Railway Package as it stands? What (if anything) is missing?
Laurent Mazille: Clearly, we are very far away from the initial ambitious proposal of the European Commission. This proposal has been watered down throughout these last two years, indulging in numerous exemptions, longer transition periods, and a weakened control of integrated undertakings. Member States have a very ambiguous position on this subject. On the one hand, they committed themselves to environmental targets during the COP 21 Paris Summit and on the other hand, some of them facilitate anti-competitive behaviour in the rail sector, which directly limits the increase of rail’s modal share, undermining the achievement of the main objectives of the White Paper on transport: modal shift and sustainable mobility. Despite these weakened pieces of legislation, texts also include a couple of positive points to ensure competition on markets: competent public authorities will assess the need to ease the access of operators to rolling stock, which remains a significant barrier to market entry. Moreover, competent authorities that want to progress towards market opening have the opportunity to do so: the principle of competitive tendering for Public Service Contracts will apply as from 3 December 2019. If competent local authorities prefer to award these contracts directly, they should not disregard performance criteria as long as they aim for a decent quality of service...and I certainly believe that competent authorities care for travellers and public money.

Piers Marlow: It’s a long way from the first draft, which was not perfect, but covered what we understood as the liberalisation of the European railway market. Since then there’s been a gradual watering down process. The implementation time scale has really gone back: that could have been quicker and it’s not. The terms on direct award are so loose as to enable those who are so inclined to avoid tendering, which is particularly concerning. Even after this much longer time scale expires, there are still questions as to who regulates and to what standards.

Do you foresee any last minute modifications being made or even a 5th Railway Package?
LM
: Right now, modifications are not possible. The European Parliament and the Council have to vote in favour or against the whole text. If they vote against, they will continue in a standard second reading process. Even if the text is weak, the rail industry absolutely needs stability. Negotiations on the 4th Railway Package were long and difficult. Member States and competent authorities should have time to implement the provisions of the Package before raising the idea of a new railway package; Commissioner Bulc has already confirmed that it is out of question to evoke the very idea of a 5th Railway Package.

PM: The question of who is regulating and how has not been satisfactorily dealt with yet. I don’t see a 5th Railway Package happening; I’d be very surprised. The original text was the best the industry and customers could have hoped for. I’d love to get back to that point.

Clearly, we are very far away from the initial ambitious proposal of the European Commission - Laurent Mazille

What will this text bring concretely to where you are already operating?
LM: Member States where competition is running didn’t want to change their attribution mode for a simple raison: it works. If you look at the Swedish and German situation, competitive tendering of train services has resulted in considerable reductions in costs/reduced need for subsidies of 10-25% and an increase in the quality of service. For Germany and the Netherlands, the main problem with this text is that it weakened control of integrated undertakings. But I am sure DG Competition will keep a close eye on the implementation of the current legislation in Member States (the first Railway Packages) and assure free competition in the EU.

PM: I don’t think it will bring about real change, it’s far too weak now given the opposition there has been in certain places to tendering which has put the brakes on it. In Poland, Italy and the Czech Republic there may have been an opportunity to drive real change with the original text but I don’t see that now. I’m not optimistic as it stands.

What do you see as the most promising railway markets in the coming years?
LM: Transdev, a French multinational company is naturally interested in the French market, which is only operated by the historical operator. As you know, the situation in France is critical: the future of rail is at stake. Thankfully, attitudes are changing for a more open-minded and realistic vision of competition in railways. On 27 June, the Prime Minister of France, Manuel Valls, sent a significant signal in this direction. The Government is preparing a legislative proposal allowing volunteer regions - the ‘competent authority’ in France – to experiment opening some regional lines that are in trouble to competition and before the deadline laid down by the 4th Railway Package. Regions will now provide a list of lines that can be the subject of a Public Service Obligation contract.

Ultimately, the facts bear out why liberalisation works but politics gets in the way - Piers Marlow

PM: Well the ones that are already liberalised – Germany, Sweden, the Netherlands and the UK – are all countries where the public purse pays less for railway services, where there is better service and more value for money. I’m not convinced that other countries will follow though and the passenger and the public purse will suffer. There are plenty of untapped markets but there has to be a will to embrace liberalisation, but that will isn’t there. In places like Demark, Italy, Poland and the Czech Republic where there were some tentative steps towards liberalisation, we don’t see them moving now, whereas France I would put in the third tier where I don’t expect anything to happen. I can’t imagine France will really liberalise in the years to come. Ultimately, the facts bear out why liberalisation works but politics gets in the way.

 

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