By Phil Marsh

5th annual report on UK Rail finances published by Rail regulator

Published: 24th March 2016

Where your ticket money and taxes get spent, and by who

The Office of Rail and Road (ORR) has published its annual report 'GB rail industry financial information 2014-15’ which enables everyone to see how the rail industry finances work.

The ORR provides a detailed analysis of the latest financial data from train operators, Network Rail (NR) and governments. Key findings published are that in the last financial

In 2014-15, the rail industry’s income reached a massive £13.5 billion. Passengers contributed 71% of this, governments providing 26% and ancillary trading such as property contributed the remaining 3%.

Performance regime – Two million pounds a week

There is an internal rail industry payment system covering such things as delay compensation that NR pays when it delays services because of for example, trespass away from stations, flooding or signal failures. After adjusting for these, the overall cost of running Great Britain’s railways was £13.6 billion with 54% of the costs spent on train operations and 46% on rail infrastructure. Of this NR accounted for £6.3 billion of expenditure including £100 million compensation to train operators.

Fares paid increased by just over a million pounds a day or £400million over the year, up by 5% to £8.8 billion. This was a combination of slightly higher fares but mainly because of the extra passengers now travelling in record numbers on UK railways. Passengers also spent another £800 million on car parking and refreshments in conjunction with their journeys.

And it is because passenger journeys increased by 4% overall that Governments’ funding of the rail industry fell by the same amount, £400 million or by 9%, from £3.9 billion to £3.5 billion in the last year. This is still £10million a day and includes funding from all government sources, including devolved administrations and passenger transport executives. Network Rail was funded by the Government to the tune of £3.8billion and the Welsh Government received £400 million while Transport for London and regional PTEs received £100 million.

Financial swings and roundabouts

Franchised train operators’ contributions rose significantly from a net subsidy of £100 million in 2013-4 to an actual contribution of £700 million to governments. This does not mean that the railways are running at an overall profit as rail infrastructure net funding from governments increased by £500 million or 12% to £4.2 billion in 2014-15. This reflects the changing government policy of subsidies being paid to NR rather than the train operating companies rather than franchises running profitably.

Train operators spent £1.3billion leasing trains and double this on staffing while other costs such as fuel accounted for another £3.6billion and train operators also paid NR £1.4billion on track access charges.

Rail Industry costs rose by 7% or £900 million in the last financial year. This was put down to increased NR maintenance and renewals costs plus train operators’ costs increasing.

Train numbers in financial terms

One of the ‘nerdy’ statistical facts highlighted by the report was that Government subsidy varied from £1.66 per passenger journey in England to £6.70 per journey in Scotland and £9.14 per journey in Wales.

The variance is a combination of the high fixed costs of the railway, some estimate these at 75% so the differences can be explained by the varying average passenger densities per train with an average of 129 passengers per train in England, 81 in Scotland and 69 in Wales.

ORR says that the average journey fare ranged between £4.45 in Scotland, to £5.35 in England and £5.86 in Wales. This is a function of the comparatively shorter distance travelled in England, compared with Scotland and Wales. The average fare per kilometre was £0.10 in Scotland, £0.12 in Wales and £0.14 in England with average journey distances 37 km in England (with 1,517 million journeys), 45 km in Scotland (101 million journeys) and 47 km in Wales (36 million journeys).

The rail industry, for every train kilometre travelled, spent £27.44 in England, £23.07 in Scotland and £23.53 in Wales. These figures are obviously heavily influenced by the amount of trains on a given route triggering different levels of maintenance.

Why is this extensive report compiled?

The ORR says in the report that the complex structure of the British rail industry makes it difficult for stakeholders to understand the income, expenditure and government funding of the industry as a whole. says

that this type of reporting ORR carries out brings a measure of understanding as to who sends what and where the money goes which in turn allows us to question if money is being spent wisely. It also helps passengers and other taxpayers understand where their money goes.

There are 19 franchised train operators working under contracts with the Department for Transport or Transport Scotland. Transport for London and Merseytravel are the franchising authorities for the London Overground and Merseyrail franchises respectively.

They said:

ORR chief executive, Joanna Whittington, said:

“Railway use continues to rise and as passengers are a significant source of funding for the industry, they must lie at the heart of the railways’ continued evolution. Our industry financials publications provide an open and comprehensive explanation of industry income and expenditure to help passengers understand how the money they pay in fares is being used.”

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