Oxera, together with Arup, has prepared an assessment for the Office of Rail and Road (ORR) of the expected impact of four options proposed by the Competition and Markets Authority (CMA) for increasing on-rail competition between passenger services in Great Britain: Option 1: increasing the role of open access operators (OAO), alongside franchises; Option 2: having two competing franchise operators in each franchise area; Option 3: having more overlapping franchises, such that there is more scope for on-rail competition between franchises; Option 4: licensing multiple operators on each route.

Funders currently specify franchises with monopoly rights, for which there is robust competition ‘for the market’, to the extent that franchise operators pay more to operate services than they require in subsidy. While the current system enables the government to contract long-term (across government spending cycles) for socially necessary and politically desirable services, the system is also set up to extract monopoly rents from operators—in effect, rail fares are higher than they would be if operators had to compete more with one another for passengers. 

Of the three options for which we have quantified an effect (Options 1–3), our study finds that Option 1 is expected to provide the strongest overall net benefits, amounting to nearly £2bn over 20 years on three main routes (West and East Coast Main Lines, and Great Western). An effect has not been quantified for Option 4 as this option has not yet been specified in sufficient detail to enable an appraisal. A qualitative assessment suggests it has the potential to provide significant benefits to passengers, albeit with significant risks associated with it.