Regulate the deregulation: rail traffic in Sweden

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Page context: Home > Railways > Railway Union Reports > Issue 1 - Feb 2008

SEKO, Sweden

The Swedish railway traffic of today is deregulated, with SJ AB having a monopoly of the commercial, long distance passenger traffic. In 2003, some 20 operators were operating in Sweden, among these many large foreign companies.

In 1988, the old SJ (The Swedish State Railways) was split into one public authority entity, called Banverket (the Swedish National Rail Administration), responsible for the infrastructure, and one business operator, SJ, at that time controlling all railway traffic.

The procurement system of regional public transportation services was introduced in 1990. Although the regions had already been given a certain influence and financial responsibility regarding regional public transport, SJ was in charge of rail traffic. BK Tåg was the first operator to take over traffic from SJ, later on followed by many other companies that entered the market in passenger and goods transport.

Three years later, the system of public procurement within the non‑commercial, inter-regional passenger transport was implemented.

In 1996, regional authorities were able to run private services on certain lines outside their own administrative areas and on parts of the rail network. Domestic goods transport was also deregulated at that time. Existing traffic had been granted precedence, but this exception turned out to have no practical implications. In 1999, a special public authority, Rikstrafiken, was established for the purchase of non‑profitable, inter-regional public transport. Only then new operators for inter-regional traffic were established.

In 2001, SJ was split into two entirely independent, state-owned companies for passenger and goods transport, SJ AB and Green Cargo, respectively. Those core activities were meant to remain fully state-owned, whilst all assets except the real estate properties were sold to private investors or companies. The SJ workshops, terminal services, real estate properties, and data processing services formed separate companies, which fitted into the Swedecarrier holding. However, Euromaint, providing workshop maintenance, is state-owned, while Trafficare (terminal services), and Unigrid (data processing) have been sold to private interested parties.

Banverket has gradually taken over some activities from SJ such as the responsibility for the development of the railway sector, traffic and all non-commercial property. The organisation of Banverket was changed by the introduction of a model of internal procurement in an effort to make its operation more efficient. The next step was to open the production operations of Banverket to (external) competition. There was no formal political resolution to open production for competition, it was an internal decision of the board of Banverket.

As a result, within Banverket there were six units– so-called units of results – meant to operate in a more or less competitive framework. Furthermore, Banverket has set up obstacles and reduced their internal staff to a level that has meant that managing the workload without any assistance has been rendered impossible. Consequently, about 40 companies are operating in a market dominated by large foreign companies.

In 2003, all investments were open for competition and as of 2006 the maintenance activities were planned to be entirely purchased through competitive tendering.

Preparations for full deregulation continued when the Railways Inspection was separated from Banverket in 2004, to form the Railways Agency. The Railways Agency’s purpose is to supervise the whole railway sector through laws, rules, regulations, granting of permits and general supervision; it has become the political means of control.

International freight services were deregulated in the same year, which opened up the country to the current handful of freight companies of various sizes operating cross-border services to Norway and Denmark.

Charter and special services were deregulated in 2007. Veolia from France was the first company operating chartered trains to the Swedish mountains. As rules are not clear, problems may arise in determining whether trains should be considered regular or chartered.

During the autumn of 2007, counties in southern and northern Sweden were given the go-ahead by the government to operate longer distance regional rail services for an extended trial period under their own management. These services receive tax subsidies of 40-60 percent, which might in the long term undermine the profitability of some long-distance destinations, where services are expected to be operated entirely free of subsidies.

Euromaint, which undertakes heavy and general maintenance of railway vehicles, was sold off in 2007. Its main competitors are currently train builders Alstom and Bombardier, which have recently won several maintenance contracts or sold railway stock where maintenance had been part of the deal.

The political aim remains that passenger services should be entirely deregulated by 2010. Matters remaining to be resolved include how tracks and departure times are to be distributed, either through auction or allocation, and how access to rolling stock is to be safeguarded.

Consequences of the deregulation – SEKO´s view

Changes that have occurred in the railway traffic have put the general costs of the entire sector under pressure, with a negative impact on the quality of the transport services. The working conditions for railway employees have also been neglected as the bid system has been focused mainly on the lowest price.

As levels of staff have been reduced, the increased individual workload has led to a higher level of sick leave among the overworked remaining staff. Rail employees have had to face high levels of stress, under the pressure of working time constraints and the burden of working overtime.
SEKO members experience a deteriorated working environment, as well as a worsening in pension conditions, job security, and opportunities for career development.
Poor maintenance, especially the preventive maintenance of the rolling stock, has had a negative impact on train punctuality.
The procurement system and too often short tender periods have resulted in reduced investments in rolling stock and the development of services.
The maintenance of the rail infrastructure faces the same problems in terms of reduced resources, increased number of contractors and difficulties, in the long run, in keeping competent staff. At the Swedish National Rail Administration, the number of production workers has decreased compared with administrative staff.
Finding suitable priorities and working contacts for the railway traffic companies and the National Rail Administration created new problems for the rail system.
The public’s confidence in railway traffic has plummeted as the number of cancelled services and delays has become unacceptably high.
The workload of mobile workers is undermined as safety responsibilities have being shifted onto train drivers. This development leads to poor wage progression, whilst mobile jobs are at risk of becoming temporary.
Training activities have been substantially reduced for most categories of worker. Short basic training creates uncertainty and stress at the beginning of a worker’s professional life.
Groups of employees responsible for shunting and marshalling within freight services have been substantially reduced as the driver alone undertakes all jobs with the help of a radio-controlled locomotive. There are currently only three large shunting yards left in the country.

SEKO´s demands on the employers

The levels of staff must increase in order to reduce stress and the number of days of sickness. A sufficient number of workers is a prerequisite for an enterprise providing community services of good quality.
Employers should fulfil their obligations to create a proper working environment, free of threats and violence.
SEKO members should benefit from career opportunities and have their say in improving working conditions.
Social dumping is unacceptable; wages and terms of employment should be the same for all contractors. Job security and full time positions must be granted through tender documents; temporary jobs should be limited.

SEKO´s demands on the Government and the Parliament

SEKO considers that the process of continued deregulation should be stopped until a full evaluation of the quality of transport services as well as of the terms of employment is carried out. SEKO submitted the following demands:

There should be clear targets for public services, with long-term financial resources and assessable goals.
Privatised public services not operating in a competing market should be brought back into the public sector.
The control systems for public sectors must be free of political interference and must give priority to high quality services in case of conflict between business profit and public demands.
The Public Procurement Act must be revised so that it can achieve a competent and responsible procurement practice focusing on quality and service. Working environment and social conditions must also be considered in tenders, and the Public Procurement Act should be linked to MBL (Codetermination Act). The contract periods for procured activities must be extended to at least ten years. Sweden shall also ratify the ILO Convention 94, dealing with work clauses in public contracts. It is totally unacceptable for a company to use deterioration of working conditions as a means of reducing the cost of public services.
As the owner of companies providing needed community services such as SJ, the government should set norms for quality and availability.
Concerning the infrastructure within Banverket, the government should provide current operation and maintenance work under its own management with a sufficient number of competent workers. Therefore, the production unit of Banverket should not be privatised, but remain in public ownership.

The management function was split into several divisions and units.

The supply division is in charge of procuring maintenance, train traffic control and management of rail operations. The investment division is responsible for large investments in infrastructure, including projects like Hallandsås, Ådalsbanan, Citybanan, the Kiruna move, and the Malmö City tunnel.

Expert Support (technology, society, environment) and Operations Support (human resources, financial) are the two support units.

Politicians have made proposals about a new transport authority for shipping, road transport, air traffic and railway services. This could exert a great deal of influence on the management, administration and exercise of public authority over each of these authorities.

The production units have been merged in 2007 into one organisation consisting of BV Produktion and BV Industridivisionen, so there is now one combined unit for large tenders and construction contracts as well as for maintenance. SEKO considers this positive move is a way to strengthen and improve its members’ opportunities.

The government has commissioned an inquiry into converting the BV units into separate companies. It could easily be presumed that this is aimed at selling these companies in the future.

There have been proposals to transform Banverket Projektering into a separate company that would be merged with Vägverket Konsult as soon as by 2009. It has been suggested that the recently coordinated activities of Banverket Produktion should be turned into a single company by 2010. The inquiry also proposed dividing activities into several companies, and welcomed large foreign maintenance contractors. This is an insult to common sense with regards to the slogan ”More railways for your money”. The inquiry was a pure put-up job organised by the Confederation of Swedish enterprises.

We believe these changes have rapidly led us towards similar developments that have taken place in Great Britain, New Zeeland and other countries which have paid dearly, not only financially but also with severe consequences for railway safety and working conditions.

This is the edited version of the report “Regulate the deregulation” by Melker Ödebrink, Union Official and Valle Karlsson, Ombudsman, SEKO, Sweden and presented at the ITF Railway Workers’ Section Steering Committee meeting, London, 17-18 November 2003, and updated by Valle Karlsson, Ombudsman, in December 2007.

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