A Simple Model of Rail Infrastructure Capacity and Costs.

The recent White Paper on "New Opportunities for the Railways" (Cm 2012, 1992) proposes that British Rail's responsibilities for operation and infrastructure will be separated. A new track authority, Railtrack, will be established and will operate without subsidy, except for capital grants in cases where a satisfactory cost-benefit return is achieved. It is acknowledged that these new arrangements will lead to some difficulties in allocating and charging for infrastructure, especially where rail infrastructure is congested, and consultants have been hired by Government to examine this issue. The principles that Government has specified should underly the access and charging regime are that it should: (a)Promote efficient operation (b)Promote competition and innovation (c)Encourage efficient use of infrastructure and other resources (d)Not discriminate unfairly between competing operators and services (e)Provide the means for financing Railtrack's infrastructure.

The relevant theory is embodied in the literature concerning peak load pricing and optimal investment for public enterprises as expounded in standard text books (Turvey, 1971, Rees, 1984, Brown and Sibley, 1986.) and put into practice in most areas of the transport sector (eg Hansson and Nilsson, 1989, for rail, Small and Winston, 1988, for road, Bishop and Thompson, 1992, for air). The aim of this paper is not to make a contribution to this theory but to use it in conjunction with simple models of rail's infrastructure requirements and costs to highlight the key problems in infrastructure allocation and charging.

The structure of this paper is as follows. In section two we consider a hypothetical rail line and the likely costs of different service levels. In section three, we relax the assumption that all trains are operated at the same speed and re-examine the likely costs of different service levels. In section 4, we go on to examine the pricing implications of our findings. In a final section, the implications of this analysis for policy are assessed.