Review aims to explain high UK railway costs

A costs review will centre on why railways in Britain are far more expensive than some in Europe, the Government said today.

Comparisons suggest Network Rail (NR) is 30-50% less efficient in terms of maintenance and renewal expenditure than other European railways.

Civil engineering costs in the UK are typically up to double those in mainland Europe, while train operating costs in Britain are still above their level in 1996-97 when privatisation was introduced. By contrast, rail franchise systems in countries such as Germany and Sweden have reportedly led to cost reductions of between 20% and 40%.

Former Transport Secretary Lord Adonis announced an independent review into rail value for money last December.

Today, new Transport Secretary Philip Hammond said he wanted the review, led by transport expert Sir Roy McNulty, to report back early with its initial findings this autumn. Mr Hammond said: "Passengers and taxpayers will rightly ask why it is that our railways in the UK are so much more expensive than those in the rest of Europe.

"Given the very significant financial constraints that we face, it is essential that we drive out inefficiencies and reduce costs. Better value for money is the only way we are going to protect train services and avoid very high rises in train fares.

"This report by Sir Roy McNulty will play a key role in informing how we go about creating an efficient and modern railway fit for the 21st century that provides taxpayers with value for money."

The study, and today's findings, are jointly sponsored by the DfT and the Office of Rail Regulation (ORR).

Sir Roy said: "The railway as a whole faces significant challenges in terms of costs and affordability. Finding effective responses to these challenges will not be easy in such a large and complex industry.

"The study team has been encouraged by the ready co-operation we are receiving from many people within the industry, and from ORR and DfT. Our aim, with their help and support, is to chart a route to a sustainable future for rail in this country".

ORR chief executive Bill Emery said: "In recent years there has been significant growth of passenger and freight traffic on the railway, while performance has improved considerably. However, the current cost of running the railway is too high, and the burden on the taxpayer too great.

"The study will bring together the entire rail industry to explore ways in which we can reduce these costs so that our railway can continue to grow and prosper. The study will make recommendations about how the industry can meet the challenges of the future towards achieving our vision of a railway which delivers safety, efficiency and satisfaction levels to world-class standards."

NR said: "We look forward to playing our full role in the work of the McNulty review.

"We recognise the imperative of further driving down costs across the whole rail industry and are keen to share our ideas and experience. This is a journey on which NR has already made good progress with over £6 billion, or 27%, cut from the cost of running the rail network over the past five years and a further 24% targeted by 2014."

Alec McTavish, director of policy and operations at the Association of Train Operating Companies, said: "The review represents a real opportunity to bring about a railway that delivers value for money for taxpayers and quality services to passengers in the long term.

"The view of train companies is that freeing them up to bring more commercial nous into the railways has the potential to save hundreds of millions of pounds every year."

He went on: "The review team recognises that franchise reform needs to be one of the key areas to look at. Longer and more flexible franchises that give train operators a greater stake in the railways would drive down costs and allow them to deliver service improvements more quickly and effectively. The private sector needs more of a say when it comes to issues such as reviewing the priority and scope of projects currently delivered by NR, ordering new rolling stock and managing stations.

"It is also important to focus on infrastructure projects which provide the greatest benefit to the travelling public and the taxpayer, including smaller projects which often deliver good levels of return. That is as relevant to the review's long-term view of cost in the railway, as it could be to making savings in the short term.

"We fully support the review and look forward to working with the review team and the rest of the industry."

Gerry Doherty, leader of the TSSA rail union, said: The reason our rail industry is so much less efficient than the rest of Europe is quite simple - the rest of Europe has state-owned railways operating in the passengers' interests.

"Here, we have a hotchpotch of private rail companies ripping off the taxpayer to the tune of £5 billion a year and still charging the highest fares in Europe."

Mr Doherty said "inefficient NR" was at the centre of "this money-go-round" and was "lavishing huge salaries and bonuses on its taxpayer-funded bosses".

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