London: Parliament Committee ask if UK Railways are value for money

Published 7th January 2013

Transport Select Committee suggest reducing rush hour fares – but are they right?

The Transport Select Committee (TSC) has published a 48 page report with their vision for the railways in 2020. This coincided with the annual Regulated fares’ increases and made sure the railways were in the headlines for several days.

The report was also timely because despite Network Rail (NR) clearly saying four years ago that the West Coast Route Modernisation was complete, the line was closed for four days over Christmas at Bletchley. This was to allow engineers to upgrade this key junction with new signalling, high speed crossovers and carrying out work to allow the Oxford services to run from late 2016.

McNulty Report 18 months on…..

The TSC supports the McNulty Report’s general approach to achieving substantial savings. But it considers his target to save £3.5 billion by 2018/19 to be challenging and expresses specific concerns about safety, staffing and the protection of passengers' interests.

West Coast Main Line comes later

The report does not focus on the lessons of the West Coast Mainline

Franchise debacle but makes some recommendations about rail franchises, to influence the current government review. In particular, the Committee sees merit in continuing with longer rail franchises but suggests the Government explores options for reviewing contracts every five year and looks at spreading premium payments over the full length of each franchise contract.

MPs also recommend that franchises which need to be re-let soon should be tendered on the basis of medium-term franchises of seven to ten years’ duration, to avoid holding up the whole process.

The Committee calls on the DfT to consider delegating the letting and management of rail franchises to an arms-length body with more commercial expertise than the DfT has at its own disposal. It also suggests that franchises should be designed to deliver wider policy objectives such as the promotion of sustainable end-to-end journeys, the quality of the passenger experience, or economic development.

The TSC’s vision for the railway includes:

• Clarity about the purpose and effectiveness of rail subsidies.

• A clear link between policy on rail and other aspects of transport policy, for example a focus on sustainable end-to-end journeys

• A strategic approach to policy-making which does not sacrifice democratic accountability, takes passenger interests more clearly into account, upholds safety standards and develops a strategy for improving the security of the rail network.

• Greater transparency about the costs of rail (and the assumptions underpinning the DfT's analysis of the ratio of taxpayer to farepayer funding on different types of rail service), to ensure that new investment, operator alliances, profit or wastage levels and various forms of franchise can be better compared and evaluated.

• More modern, flexible fares and ticketing options and a clear long-term policy on regulated fares that rules out even higher fares for commuters on peak time trains.

• A strong single economic regulator for the rail industry with capacity and credibility to deliver savings across the board

• Effective industry leadership via the Rail Delivery Group, scrutinised closely by the regulator to ensure that this strategic body acts in the best interests of the farepayer and taxpayer, rather than simply of established rail interests.

The TSC has called for an end to peak time fare rises and greater transparency about use of public subsidy. These suggestions seem to further complicate ticketing matters. On the one hand the TSC says ticketing and fares are too high and complex yet they suggest more Government control which never really works in the commercial world.

Who pays for devolution?

The TSC also says that Devolution for some rail franchises, such as the Northern franchise, to local or regional bodies should take place. The potential cost of this to taxpayers is immense. Should passenger levels drop, or a fleet of new trains be required then who pays? The very worst case is an accident which could block say the West Coast Main Line for a couple of days with the Local Authority liable for delay compensation running into millions of pounds.

Rail Delivery Group

The TSC recommends that the Rail Delivery Group, (RDG) made up of senior industry leaders, should spearhead the swift implementation of innovative ticketing technology and work with Passenger Focus to develop a clear strategy for improving retail facilities on stations and trains.

MPs also warn the rail regulator it must ensure that alliances between NR and train operators don’t disadvantage rail freight. Likewise the regulator must take a cautious approach to approving the sale or redevelopment of former railway land in case such resources may be required for rail in future.

Not Quite there yet

The RDG has yet to be formally established with any legal authority and there is a lively debate about levels of membership ongoing between the rail industry and the Regulator. The wrangling will take some more time to sort out.

Inexorable Passenger Growth

Despite the thoughts of the TSC, passenger numbers continue to grow as a result of more frequent and longer trains. This in turn boosts the economy along any given route where trains call.

50 years after Beeching, old closed routes are being opened and others electrified and this has to be paid for. Thameslink, Great Western and the Northern Hub are good examples of this. The Milton Keynes area has seen Network Rail spend over £400m there and Bletchley in the last five years allowing more and longer trains to run.

2013 Fares’ increase to fund Civil Servant’s errors?

This year’s fares’ increase may cover the costs of the DfT franchise farce last year once the final cost is known.

Many say that performance is poor but we must remember that there are twice as many trains now to travel on than 15 years ago. So how do you quantify value for money and measure performance against the quantity of choice and services now available?

TSC plan to cause overcrowding for less revenue?

The perceived lack of seats would become a reality if the TSC suggestion that peak fares are reduced. The trains really will become crammed and the revenue take will be reduced so the financial efficiency gap will widen. The TSC has said that off-peak travellers should subsidise peak hour passengers.

If this policy was extended to roads, would a small car owner subsidise a large four-wheel drive vehicle for example?

It has always been a delicate balance to attract passengers and still provide seats for them all. Seats are usually available at the back end of the train and many passengers often do not want to walk a bit further to find a seat.

Staggered flexible working hours in offices would help as would getting meetings to start at say 1030 to avoid peak hour travel. There is no let up in demand despite the fares’ rises rebutting pressure groups’ claims saying rises are not acceptable. Many city workers enjoy ‘Weighting’ allowances’ to offset cost of travel or an interest-free loan facility.

Value for money – the alternatives?

The alternative to rail travel is driving on congested roads which costs the economy billions. Railways remove millions of lorry journeys off the roads reducing road congestion. A freight train can remove up to 70 HGVs journeys for example and a road accident costs an average of £500,000 it has been estimated in Police and NHS costs.

Driving Costs’s Phil Marsh was interviewed by Radio 4, Radio 5 and BBC Kent on this subject. A season ticket holder from Folkestone said that although he paid £5500 on a season ticket, it was cheaper than driving when the cost of fuel, depreciation, car tax, insurance, servicing and parking were included.


The societal price of providing rail transport for passengers and freight includes cleaner air, less traffic congestion, less accidents which saves NHS and police costs and expenditure on road accidents.

Driving Subsidies and Climate Change costs

An EU study published in December suggests that the cost of road accidents, pollution and noise protection from traffic costs every person in the UK £600. Motorists pay an estimated £48bn a year related taxes leaving a shortfall of £10bn for the treasury to make up.

Climate change costs will have to be met by Governments and not by motorists paying related taxes to their mileage. How can we save money? Drive less, walk or cycle more improving health and reducing carbon production.

Joining The 21st Century

The Times on December 22nd had an opinion piece suggesting that Network Rail had failed to protect its assets in the recent floods. The piece suggested that in Russia, weather did not affect train services. This was ignoring the fact you can invest for climate as with snow in Russia, but floods as the UK has experienced are another matter so far as investing against. This, Christian Wolmar conveniently ignored!

They Said:

Louise Ellman MP, Chair of the Transport Committee said:

“The number of rail passengers has increased but train companies’ unit costs have not come down. The Government wants to reduce the cost of the railway to taxpayers, but it must not do so by ramping up fares which can be complex and are often very expensive. Ministers must urgently set out a long-term policy on fares and rule out using higher fares to reduce peak demand for train services.

“There are good economic, social and environmental reasons for the Government to provide a £4 billion subsidy to the railway, but to drive efficiency savings across the sector the Government and the regulator must shine a light on complacent management, waste and profiteering by ensuring greater transparency in the finances of the rail industry.

“It is vital we know far more about how public money is spent so that there is confidence it does not leak out of the system in the form of unjustified profits. The Government should publish and consult on a clear statement of what the subsidy is for and where it should be targeted. Commercial confidentiality should not be used to block legitimate requirements for information.”

“If train operating companies do not realise substantial efficiency savings over the next five years, then the case for more far-reaching structural changes to the industry will become compelling. Changes to the numbers and duties of station staff should not be pursued solely to reduce costs or at the expense of passenger safety or service quality. The Office of Rail Regulation (ORR) should also monitor safety where NR and train operating companies have formed alliances, ensuring these arrangements reflect the interests of taxpayers and passengers”.

“Confidence in the DfT has been badly shaken by the collapse of the West Coast Main Line franchise. We are not convinced that the DfT as currently structured is best placed both to set rail policy and deliver the detailed work required to run each franchise competition. A new arms-length franchising body could employ staff with the appropriate specialist and commercial skills required to let and manage effective franchise contracts. However, ministers must remain fully accountable to Parliament for the railway.”

An alternative tongue in cheek value for money railway view can be found at:

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