Comment: More passengers, lower costs, more politics

By Alex Burrows

With the publication this morning of the 2013 Periodic Review by the Office of Rail Regulation (ORR), we have a clear picture of what the regulator considers to be the main issues for the rail industry over the five years from 2014 to 2019.

More passengers

There is a wealth of killer statistics to be found in the Periodic Review.  For example, since privatisation in the mid-1990s passenger numbers have doubled and freight traffic has increased by 60%; last year alone, passenger numbers climbed 4% and freight traffic by 3% and that growth is projected to be to be 14% for passengers and 22% for freight between 2014 and 2019.  It is widely known, especially by current rail passengers, that our railways are experiencing immense popularity to the extent that they are now a victim of their own success.

This has led to the contemporary rail paradox – rail is attracting more and more passengers, even while fares are continuing to rise and in a tough economic climate; yet the pressure is on to take costs out of the rail network while managing this growth in demand. 

Lower costs

The ORR observes that over this five year period, the government will be handing £18bn over to Network Rail to deliver an even better rail network.  Everyone, especially the politicians, wants the rail industry (read Network Rail) to reduce its costs – a legacy of Railtrack and Hatfield – and to generate efficiencies. 

I was recently struck by a statement from a senior rail executive who criticised the industry for creating inefficiencies and huge costs to the detriment of the network and the long term health of the railway.  He added that we should see railway investment, and specifically new railway, as being the equivalent of building a new road and then putting the tracks and equipment on top.  Instead, the costs are astronomical and the rail industry now has a bad reputation – which might be the reason why frustrated politicians are refusing to stop fares from increasing until the industry has got on top of its cost issues.

Perhaps though what we, as passengers, should be particularly pleased to see are the challenges being set to the rail industry.  Achieving 90% punctuality for all rail franchises, across all their services, you would think is easily achievable – it was not in the current period. 

Network Rail will also be incentivised to reduce disruption to passengers – pleasingly logical from a passenger point of view – and to drive down the costs of maintaining and improving the railway.  The ORR consider that Network Rail needs less money (£2 billion less indeed) than it thinks it does and wants to see them reduce the cost of running the railway (measured in cost per passenger per kilometre) by 28%.

More politics

This technical document (which is a draft for public consultation) will be positioned as a statement of intent that Network Rail and the rail industry must get its costs and performance in order.  To a certain extent it is, but is it sufficient?

The cost of maintaining and improving the railway is high and there are inefficiencies – but is the ORR just tinkering around the edges when what is needed is major structural reform of the railways?  With a finite amount of money available, is it being spent as well as it could be in delivering a better railway for more passengers and freight?

This comes back to the role and value of the railways.  I see the railway as a great enabler for all of us – getting us to work, to college, to see our family and friends, to go shopping and so on.  It is something that should not be treated as needing to pay its way or else be cut; instead it adds value to all of society, directly and indirectly, and therefore should be taxpayer-funded rather than solely relying on fare revenue.

As such, politicians are responsible for its maintenance, upkeep and ensure it is maximising its value as a great enabler for everyone (at a fair price that everyone can afford).  That political role is wobbling and the ORR is just about holding that up but this cannot go on indefinitely. 

More passengers and more freight using the railway is a good thing.  But the affordability, punctuality, reliability and quality must be upheld as well.  I am not sure that we have got the balance right yet in that bigger picture.

Alex Burrows is head of transport and infrastructure at Insight Public Affairs.

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