Trains and tracks: Made for each other or in need of forced separation? The case of Norway

All trains at Oslo Central station used to have the same logo on them. After the reforms, there are four different operators, three of them with a contract that gives them monopoly on a main long-distance line. For the passengers there is not much more choice than before | Photo: Ingeborg Eliassen

“I am against all dogmas,” says Benedikt Weibel. 

Except one. “I am deeply convinced that if you split up railway companies in different parts, such as infrastructure and other parts, you will completely fail.”

Weibel is a veteran of the European railway industry. He is chairman of the board of the private Austrian rail company Westbahn, a competitor to ÖBB, the state railways. He was at the helm of  SBB, the Swiss state railway company, when it reorganized its entire rail system. That happened at 3:00 a.m. on December 12, 2004.

“From that moment on, we had a six to seven percent increase in passengers every year,” Benedikt Weibel tells Investigate Europe.

Switzerland is neither a member of the EU nor of the EEA and therefore does not have to implement EU railway policies. But almost all railway experts say the same: Switzerland has succeeded. Trains run from almost anywhere to anywhere every half or full hour. The system is predictable as — oh — a Swiss watch.

“When I started 40 years ago, the railway was a thing of the past. Now it is the future”, he says.

“An absolute policy failure”

The EU’s four railway packages were to bring the railways back to old heights in new ways. They were to breathe new life into a railway sector that was held back by tradition and that was overtaken by cars, buses, trucks and gradually, by cheap airline tickets. The recipe was to break up state monopolies and open up to competition. “A new kind of railway is needed. It should be first and foremost a business,” said the strategy to get freight and passengers back on track in 1996.

But after 20 years of reforms, about the same proportion of goods go by rail as in 2001, and trains account for less than eight per cent of passenger transport in the EU, just like before the reforms.

“When I look at all the programs and check the EU’s goals, I see an absolute failure of the whole policy. Almost every item,” Weibel says. 

“Nobody forced us”

Norwegian governments,  conservative as well as run by social democrats, have not only implemented the four railway packages. They have out-delivered on them. 

Norway is not a member of the EU, but closely connected through the EEA agreement from 1994. The agreement gives Norwegian goods access to the single market, and Norway takes on many EU directives and rules as if it were a member state. 

In 1990, as a conservative government was negotiating the EEA agreement, it made systemic changes in NSB, the state railways, by separating the accounts of the infrastructure part and those of the train services part. This was in line with the EU directive that introduced this demand on all member states, and which came the year after. The separation aimed to prevent discrimination against new competitiors entering the market. 

The directive described two degrees of separation: “separation of accounts being compulsory and organisational or institutional separation being optional”.

The Norwegian side at the time understood that the separate accounting was sufficient, according to Torstein Rudihagen. He was a junior minister of transport in two Labour governments in the mid-90s.

That’s when the Labour party went even further. In 1996, the government introduced the organisational separation of tracks and trains that the EU had made voluntary. It reshaped the train services part of the NSB into a state-owned, commercial company, while a new National Rail Administration would manage tracks, signal systems, bridges, tunnels and other infrastructure. 

The proponents of change argued that this outcome would be inevitable in the longer run, due to the EEA agreement, Rudihagen recalls. “This was the tune of the time. NSB was a cumbersome operation. The conservatives applied pressure to break it up, and Labour followed. There were already competitors in freight transport on the railway. But the supporters exploited the EEA argument more than it merited. Formally, it was not necessary. Nobody forced us,” he says.

Norway went further

Neil Kinnock, former head of the British Labour party, was EU Commissioner for transport when the reforms took shape. “Frankly, I did not think it would necessarily be a permanent arrangement,” he tells Investigate Europe about the separation of tracks and trains. “Simply because there is this abiding logic of responsibly running the whole kit as it were. But in the circumstances, I recognise that the separation was necessary,”  Kinnock says.

Gorm Frimannslund, president of European Infrastructure Managers: Unfortunate that not all countries fully implement chosen model | Photo: Ingeborg Eliassen

Norway has been very loyal to the EU railway packages and has implemented them as intended, according to Gorm Frimannslund, CEO of Bane Nor, today’s state-owned company in charge ofinfrastructure.

“But the authorities have also implemented a lot of changes that have nothing to do with the railway packages. The railway reform in Norway goes far beyond the railway packages,” he tells Investigate Europe.

Frimannslund refers to the conservative government’s railway reform, launched in 2015 as “a total reorganization of the railway”. This reorganization has divided the tasks of the former state railway NSB between some 20 units, most of them commercial and most owned by the state. They manage train services, own rolling stock, run passenger trains, transport freight, do maintenance, sell tickets, clean trains, or run cafes on board trains. At the same time, the fundamental institutional separation of track and trains remains.

Criticisms against Germany

When the European Parliament made a count in 2011, Norway and 12 other countries had completely separated these structures. In this group were the UK, Finland, Denmark, the Netherlands, Spain, Sweden, Portugal, Slovakia, Lithuania, Romania, Czech Republic and Greece, in addition to Norway.But at the heart of the EU, several governments had interpreted the directive much more freely. In Germany, Austria, Italy, Belgium and Poland, the railway was still “partially integrated”. 

Deutsche Bahn holds on to its single management: “Successful railways have an integrated structure” | Photo: Ingeborg Eliassen

Germany’s state-owned Deutsche Bahn has different units for infrastructure and train operations, as well as a lot of other functions. But above this conglomerate they have a holding company: Deutsche Bahn Group.

This holding company seems to have great influence, says Gorm Frimannslund. The head of Bane Nor is also president of the European Infrastructure Managers, the lobby group for infrastructure companies.

It seems that some countries still want to have integrated companies, as it was before the railway reforms in the EU, Frimannslund notes. It is entirely possible to operate a railway in both ways, he adds.

“But when a common model has been chosen, I think it is unfortunate that not all countries have managed to implement it fully and completely in the same way yet.”

Germany the trendsetter

But it seems Germany is the trendsetter. France has returned to an integrated SNCF. Now the British have also pulled the emergency brake. No country went further in splitting up and privatising the railway than the United Kingdom. But after brexit, the conservative government wants to concentrate responsibilities in a new agency called Great British Railways. “We need somebody in charge,” states Transport minister Grant Shapps in the plan. The GBR will own the tracks, receive the fare revenue, run the network and set most fares and timetables. That will put an end to “years of fragmentation, confusion and over-complication,” according to the minister. 

Deutsche Bahn has not responded to Investigate Europe’s inquiries. But networks and train operations belong together at all times, a spokesman for the website Railtech said this summer. “Successful railways have an integrated structure, and we cannot see any good reason to choose a different path for the future of rail in Germany.”

Jane Brekkhus Sæthre, Railworkers’ union president: They are victims of an ideology | Photo: Ingeborg Eliassen

Jane Brekkhus Sæthre cheers the German way of dealing with EU directives. “It’s exemplary. They consider what problems to solve in their country, not what these regulations allow or not,” says the president of the Norwegian railway workers’ union.

Norwegian politicians, in contrast, are more concerned with what is legal and not, rather than searching for solutions, she claims.

“They say we must have competition, we must split up, we must break the monopoly. But then they just create new, private monopolies on each train line. They are victims of an ideology. But they must see that it does not work,” says the union president. 

The railworkers’ union fought against the original fragmentation of the former NSB. Today they don’t want that institution back, she says. 

“But we want a railway with a single management, so we know who is responsible for making sure the train between Lillestrøm and Lillehammer is on schedule, instead of today’s mess,” says Brekkhus Sæthre.

Government-led changes?

Norway changed governments in October this year. The incoming coalition of Labour and the centrist, agrarian Centre Party promises to review the organisation of the railways in order to simplify it and clarify responsibilities between the infrastructure manager Bane Nor, the railway directorate and the Ministry of transport.

The former government went too far in splitting up and reorganising the railway, but the government has not discussed whether an integrated model is the way forward, according to junior minister Johan Vasara at the Ministry of transport. 

“Nevertheless we see that such a model has been introduced by the public transport operator in Oslo, and with good results. Therefore it is interesting to see if we can profit from some experiences also here when we consider measures to improve services to passengers,” he writes in an e-mail to Investigate Europe.

The EU commission lost

It was necessary to unbundle national railway monopolies to create a single railway market, the EU Commission tells Investigate Europe by e-mail. The Commission has criticised the skewed competition that it claims results from Deutsche Bahn’s single management. The Commission has complained to the EU Court of Justice twice, but been rejected. 

Eventually, the fourth railway package (2016) takes a pragmatic position. It blesses state railway companies that have a single management, or a “joint financial umbrella”. 

Benedikt Weibel thinks holding companies are okay —  provided the subsidiaries have firewalls between them, and that the regulator is strong.

It is the task of the state to ensure that no one is discriminated against. But the states do not fulfill this duty, he claims. 

“In Germany and Austria, the large railway companies get to fix the infrastructure fees. In Austria, they are changing all the time. And the EU says nothing. At Westbahn, we have spent more money on lawyers than on marketing in these ten years,” says Weibel.

Last summer, however, the German Monopoly Commission cracked down on DB’s combined facility. There is a risk that state subsidies for the infrastructure may also flow to the train operators, which would distort competition, the commission warned. It recommended a sharper distinction than today.

Good railways costs lots of money for infrastructure. There is no cheap way to good train services, states Back on Track. Here from Fredericia, Denmark. Photo by Ingeborg Eliassen

Nothing beats good tracks

The EU’s railway packages are controversial, not only in Norway. Last spring, Pedro Nuno Santos, Minister of infrastructure in the left-wing government of Portugal, asked the EU’s Economic and Social Committee (EESC) to assess the outcome of liberalisation of the railways. One of his questions was whether the unbundling of the infrastructure managers from rail operators should follow a “one model fits all”, or if diversity should be promoted. The countries should be free to choose, responded the EESC in its report

The EU still requires that the railways be commercially operated. But there is no magic privatisation recipe that makes a good train service cheap, according to the network Back on Track, which works for better international train connections in Europe. Quality requires heavy investments in railway infrastructure, its analysis shows.

Switzerland — with its clockwork of a railway — rules on top of that rostrum in Europe. But the Swiss also spend around twice as much per capita on railway infrastructure as number two and three, Austria and Sweden.

A version of this article was published in Norwegian by Agenda Magasin.