Why are train fares so dear?

It is a scandal that train fares are going up by between 6% and 10%, with some off peak prices soaring. This morning on the Today programme the BBC interveiwer got through a discussion and commentary without ever once mentioning the word “costs”. There is one simple reason why train fares are so high and rising so fast – the costs of train travel are too high and rising too fast.

In the “good” years of the credit boom and higher sterling we got used to many trhings being such good value. Mass produced clothes, TVs, cars, foodstuffs and many other items in our daily budgets have been great value. They have been so because they have been supplied by a fiercely competitive world market. They have often been produced by cheap labour, they have benefitted from a huge surge in automation and from the digital revolution slashing costs and improving accuracy and efficiency. They have been brought to us by competitive retailers and suppliers in the UK, fighting to win our custom.

Train services are supplied in a very different way. There are strong monopoly elements. They depend largely on UK labour. Their management often sees satisfying the government as being more important than looking after the rail user. The UK has failed to regulate railways for better safety and fuel efficiency in the way it has regulated road travel for these requirements.
As a result we have a high cost service, which often does not look after the customer in the way we would like. It is short of capacity at peak times, runs lots of poorly utilised trains at off peak times and on less popular routes, runs many older engines which are very fuel inefficient, and pulls around very heavy carriages which again burns large amounts of fuel. The main contact you have with staff on the railway is to check your ticket to make sure you are not on the fiddle, rather than contact to enhance your journey and help you navigate the system which does not help the staff-customer relationship.

So which costs could the ralways cut?

1. The fuel bill. The UK standard of very heavy trains needs amending. Far from being green, our trains are fuel inefficient through old engine technology combined with heavy weight of carriages. The trains are usually left running when standing in stations. Switching to electric trains means even less fuel efficiency, when you factor in the large energy loss at the generating station.

2. Manning levels. Large numbers of people are engaged in ticket issue and inspection. Sometimes people check tickets at barriers before joining or when leaving a train. In addition other staff inspect tickets on trains. There needs to be a more automated way of ticket checking, and some commonsense over whether to use a station or a train based system of inspection.

3. Types of train purchased. There is not a lot of competition in the train supply market which makes it more difficult. The requirement for very heavy trains seems to have come from worries that trains can leave the tracks and when they do there needs to be a very rigid structure to coaches so they remain intact.There are lighter ways of creating this strength.

4. Regulation. Applying road vehicle standards of fuel efficiency and safety could drive much needed change. Why do I get a seat belt in my car but not on train ( I also get one on a plane)? Why does my car have a crumple zone in the event of a crash but a train does not? Why are there still unpadded and hard edges in train carriages whereas the interior of cars has been made safer? Why aren’t there tougher emission standards applied to engines as to road vehicles? That would drive fuel saving changes which would help cut costs.

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42 Comments

  1. Jonathan Cook
    Posted January 2, 2009 at 11:19 am | Permalink

    John,

    The current Labour government are going nowhere – albeit very expensively. From them we just hear meaningless phrases like “building tomorrow today”. What sort of vision is that?

    Is it not time for the Conservatives to spell out 5 or 6 priorities in each policy area? Put some meat on the bones. Give people a reason to vote Conservative and a vision of what can be achieved.

    Labour have wrecked the nations finances – so the Conservatives don’t want to be drawn on spending plans. Thus why can’t you just say “these are our priorities and we will seek to implement them as we repair the economic damage that Labour has inflicted”?

  2. Nick
    Posted January 2, 2009 at 11:49 am | Permalink

    Not necessarily a scandal.

    Abolishing subsidy is a good thing.

    Not cutting taxes as a consequence is the scandal

  3. Nick
    Posted January 2, 2009 at 11:51 am | Permalink

    The main reason why tickets are so expensive is that all the money is going on things like Cross rail.

    The interest charges alone will never be matched by ticket prices.

    That means the money has to come from other ticket holders or as a subsidy from the tax payer, or reductions in the quality of service.

    nick

  4. James Strachan
    Posted January 2, 2009 at 12:14 pm | Permalink

    Where to start ?

    All modern trains are built to very high crash safety standards – which is one major reason for their weight. They do have crumple zones – normally at the ends of the carriages where the luggage racks are. And they do have soft, rounded furnishings and high seat backs. And laminated glass to stop passengers being thrown out of the train.

    The result is that, even in an accident, a train is a very frightening but relatively safe place to be. Remember the West Coast Pendolino accident where the whole train derailed at 90 mph and only one person was killed ?

    The same process of weight bloat has occurred to your family car. A Morris Minor weighs 16cwts, a modern equivalent close to 25 cwt.

    But these things, although expensive, do not account for the high price of your rail fare.

    It is true that railway companies employ staff who act both as ticket inspectors and as customer service staff. It is worth their while because of the level of fare evasion. Installing automatic gates at a railway station is reckoned to increase ticket revenue by 20%.

    The serious, underlying problem is the cost of providing and maintaining the infrastructure. The best guide to these costs is Roger Ford of Modern Railways. He calculates that the cost of the infrastructure trebled (yes, 300%) during the period in which Railtrack was in administration. It has come down a little since then but is still far above the cost levels at which BR and Railtrack ran their operations.

    So passengers are paying for the New Labour experiment in creating Network Rail.

    • Lola
      Posted January 2, 2009 at 4:13 pm | Permalink

      That’s interesting. I have been wondering about this for some time, and like you, I had come to the conclusion that the fixed infrastructure costs are the main problem. Coupled with their under-utilisation. Rail is a very inflexible mass transit system – you go from point to point on an expensive thing. Then you’ve got to walk or get a bus to where you really want to be. To make rail ‘efficient’ you’d need to build a lot of high density housing in place A and a lot of high density work in place B and shuttle people between them. With cars and road transport the transport unit is much smaller and more flexible.

      Why not pour all the money that goes into rail in road transport? Or better, cancel all subsidies and see which one wins out. My bet is that within oooo say 20 years we’d all be able to travel in fuel cell powered automated personal transport modules from Point A (one’s home) to point B (any bloody where else you like) efficiently and quietly and ‘greenly’. Get there and you push a button and the PTM takes itself off to its next passenger assignment.

      And that’s another thing. Why does the railway call me a customer? I’m a bloody passenger! Grumble grumble mutter mutter….

    • Robert
      Posted January 2, 2009 at 6:30 pm | Permalink

      Why is it in many other countries they have occasional ticket inspections and much higher automation and efficiency? Because fares are much lower! My Peterborough to London annual season ticket (2nd class) equates to a ‘National’ First Class German saeson ticket. Why have we got is so wrong?

  5. Ian Jones
    Posted January 2, 2009 at 12:21 pm | Permalink

    When you throw money at projects they simply swallow all the extra cash without giving anything in return. Unfortunately Labour still have not worked this out so keep chucking more and more cash at it. Someone has to pay for the “profit” of companies like Stagecoach (big Labour donor).

    Watch out for the significant price increases from imports in 2009. Once the current currency hedges run out then prices will need to be jacked up just to break even on a sale. The pound has fallen so much!

  6. adam
    Posted January 2, 2009 at 12:57 pm | Permalink

    Why do they increase prices together? It doesn’t sound competitive.

    Government interference distorts the market. They are doing their best to stop peopled using cars.

  7. Nick
    Posted January 2, 2009 at 1:30 pm | Permalink

    Is it not time for the Conservatives to spell out 5 or 6 priorities in each policy area? Put some meat on the bones. Give people a reason to vote Conservative and a vision of what can be achieved.

    Doesn’t work.

    Labour’s entire election strategy is to wait for a long as possible for Cameron to make a mistake.

    Don’t say anything until the end, unless it’s negative about Labour

    Nick

  8. DBC Reed
    Posted January 2, 2009 at 2:51 pm | Permalink

    It seems like stating the obvious but the railways have been privatised for some time and now get four times the subsidy that they did in public ownership.What radical conservatives should now be saying is what Henry George used to say: rail routes are a natural monopoly and no two companies are going to lay rails side by side and try to compete with each other.They would both provide a complete infrastructure but only attract 50% of the customer base each.
    The case of Crossrail is important.Steve Norris has admitted that the Henry George method of financing the tunnel is a no-brainer: levy a land tax on the increases in site values that Crossrail brings and the project pays for itself.The same goes for a lot of railway infrastructure: the existence of railway stations puts up and maintains land values and you only have to tap into this to make railways self-financing . When Dave Wetzel in London tried cross-subsidising transport fares out of property taxation (the rates) in Fares Fair, he was taken to court by the Conservatives.And when Boris was elected in London, he slung Dave Wetzel as vice chair of tfl out in the street.Very foolish.
    Some radical Tories are beginning to latch on to Henry George but Dave Wetzel’s transport expertise is not going to be available for ever.
    On a minor point I can understand why the train companies don’t provide seat belts (vandalism),but I can’t understand why they don’t provide metal fastening-points to clip on to any seat belt you might want to provide for yourself and travel with (With no need to clunk-clink,these could very plain and straight forward .)

    • Robert
      Posted January 2, 2009 at 6:35 pm | Permalink

      New Railways should not be financed by train fares, nor equity but by bonds as these are long duration projects. The Tories were wrong to privatise the Railways using equities but should have issued corporate bonds.

      • Nick
        Posted January 3, 2009 at 8:06 pm | Permalink

        New Railways should not be financed by train fares, nor equity but by bonds as these are long duration project

        ————–

        And how pays the interest and repayment of capital on the bonds?

        Ticket payers, or there is a subsidy going on.

        The problem is that with Crossrail, the cost of building when funded by bonds, the ticket cost still can pay for the interest.

        It’s a bonkers.

        I suspect a major reason why John Redwood is in favour is that it goes near his constituency. Quite a few of his constituents then get a huge subsidy. It might be a good policy for an MP, but is still pork.

        Nick

        • Robert
          Posted January 3, 2009 at 9:46 pm | Permalink

          How was any railway built? Answer that!

        • Nick
          Posted January 4, 2009 at 1:42 pm | Permalink

          Most were built by bonds (borrowing) and then the users pay the interest via tickets.

          Robert what you missed or not articulated is how the interest on the bonds gets paid.

          A bond is just another form of borrowing.

          Either the users pay for the interest and capital repayments via tickets, the company goes bust, or someone else pays for the users to get their tickets on the cheap.

          There is no other choice.

          Nick

  9. Alan Wheatley
    Posted January 2, 2009 at 3:32 pm | Permalink

    In a transport free market, rail fares should find a level that users are prepared to pay. Fares should not be subsidised by the taxpayer.

    Overcrowded trains suggests the fare is too cheap.

    • Robert
      Posted January 2, 2009 at 6:42 pm | Permalink

      Sadly, I have noticed that on my commuter route the trains are getting emptier, the cold wind of recession is already starting to bite resulting in the train company offering more cheapo advance fares. So Alan, I will be interested to see IF commuter fares come down next year if demand falls. Sadly, I think not as they only go up! It will be only the occasional advance booking user who may benefit, as there is no real competition. Only when a severe recession of reasonable duration bites will you get the train companies reducing fares for season ticket holders!

    • Blank Xavier
      Posted January 2, 2009 at 11:03 pm | Permalink

      Which means, of course, that you and I are paying for someone else to be able to live in a nice farm outside London and commute to work.

      Well, I say you and I – I left six months ago. It’s just you and I’m paid in euros now! 🙂

      I gotta say, I don’t miss it. NYE in Amsterdam was *unbelievable* – it was like a giant party throughout the whole city. People drinking, smoking (tobacco and cannabis), fireworks everywhere – everyone having a fabulous time! I have the most amazing memories 🙂

      I remembering five or so years ago being in Trafalger Square. The police cordoned it off. You could go in, but ANY drinks – including water – were taken from you and thrown away. No fireworks, they were banned. Everyone waited till midnight, did the count, sang the song, and filed out…and with one particular especially arrogant policeman threatening to close down a Tube station if the crowd didn’t behave (which they were; they were just filing along).

      Hope you like living in a barracks.

    • Stuart Fairney
      Posted January 3, 2009 at 8:06 am | Permalink

      “Overcrowded trains suggests the fare is too cheap”

      It may also suggest that overall supply is insufficient.

      • Alan Wheatley
        Posted January 3, 2009 at 8:01 pm | Permalink

        If supply is insufficient than then there is a business opportunity waiting to be exploited.

        • Stuart Fairney
          Posted January 3, 2009 at 10:02 pm | Permalink

          Ordinarily, yes, but they won’t let me build a private road to drive people into London (regulatory constraints) they won’t let me run another train service (Waterloo is full), they don’t want me running another cheap airline (taxed out of competitiveness) and the state run-roads are also full so forget a competing bus service.

          I’m still waiting on the Star-Trek transporter but you now have me wondering how many people I can fit in a Chinook helicopter, how fast they fly and how much people would pay to fly-in with Wagner* blasting out as we approached South London’s communists? Also how long it would be before Green Peace found fault with it.

          (‘Apocalypse now’ reference for those of you who haven’t seen it).

  10. Nick
    Posted January 2, 2009 at 4:40 pm | Permalink

    The case of Crossrail is important.Steve Norris has admitted that the Henry George method of financing the tunnel is a no-brainer: levy a land tax on the increases in site values that Crossrail brings and the project pays for itself.

    So lets analyse this bunkum.

    Cross rail benefits people so the land values go up because people move there.

    Not all people will benefit, but they are going to be taxed anyway. ie. You get taxed for something you don’t use.

    Is there a simpler, fairer way that means you tax just the people who benefit?

    Let me see, we could put a tax on the use of Cross rail. ie. Everytime you use it, you pay a tax that covers the difference between the ticket price and the cost.

    Doh! It so simple, its called a ticket.

    No subsidies. No stupid mad uneconomical schemes like cross rail

    You could have 150+ DLR systems across london for the same cost

    Nick

  11. mikestallard
    Posted January 2, 2009 at 4:51 pm | Permalink

    Now look, I am an expert on this because, for my sins, I gained a gold medal in the very highest level of Railroad Tycoon. I got several other gold medals too, for instance, building a railway in the Newly formed German Empire after 1871 and, indeed, filling America with railroads too.
    If the people in Climate Warming can work from Computer models, why can’t I?
    What you need is big stations with large amounts of people to move regularly. Failing that, lots of things, like factories that need raw materials and then delivery of products.
    You can cut down on costs by fuel, maintenance and not borrowing too much money. But the best way is to get the very newest and most efficient trains on the line.
    Given a free hand (or King Ludwig of Bavaria who just hands out some money every year with his very best wishes), you can soon become, personally, a millionaire and run a company worth hundreds of millions of pounds/dollars.
    Given John Prescot with his intergreated rail sistem and thats another thing, what can you expect?

  12. Robert
    Posted January 2, 2009 at 6:54 pm | Permalink

    James Strachan – Agree completely about the technical aspects of trains, John your blog on this occasion has not targeted the correct issues. Although I do agree that things like restricting train idle could be introduced and better ticketing solutions. I also agree that any business that produces large amounts of pollution should be guided to clean up it’s business, however this can be done in better ways than by creating layer upon layer of bureaucracy or taxes (Labour do that so well already, no need to copy). Also I don’t know where this fascination with the need for seat belts has come from, trains are very safe in comparison with cars and comparing them to planes is inappropriate. A plane coming into land is doing 150mph and attempting a manoeuvre that at best could be categorized as risky.

    For healthy competition in business you need companies competing for customers. Currently train companies run distinct routes with only a moderate amount of overlap, therefore there is little competition on price because most routes are unique. Train companies should be encouraged to run routes along side other train companies creating competition on the route. Prices would then become competitive and the train companies would indirectly be encouraged to make their rolling stock more efficient. This would also promote efficiency and scheduling and open up customer choice. Would the Chiltern line still be running 90mph trains if another company offered a faster service? Or would they be able to charge £80 return to London if another company undercut them?

  13. Blank Xavier
    Posted January 2, 2009 at 7:52 pm | Permalink

    JR wrote:
    > It is short of capacity at peak times,

    There was a scandal a few years ago. Turned out the Government were forbidding operators to run extra trains at peak times *because it would cost the Government more money in subsidy*.

  14. Blank Xavier
    Posted January 2, 2009 at 7:59 pm | Permalink

    JR wrote:
    > Why do I get a seat belt in my car but not on train ( I also get
    > one on a plane)?

    Why are the seats in trains not all facing backwards, to protect passengers in case of accident? in military transport aircraft, for example, all seats face backwards.

    • The Half-Blood Welshman
      Posted January 3, 2009 at 11:56 am | Permalink

      Blank Xavier – trains travel both ways – so what is forwards on the outward journey becomes backwards on the return! When was the last time you were in a plane that flew backwards?

      While Richard has a point about the complexity of the current system (too many lawyers’ fees to try and reconcile all the needs of the companies, for instance, pushes up costs) – but the main reason the railway is so expensive is because it is an expensive form of transport. Compared to say, a road haulage business, the overheads are absolutely colossal. Once track, and signalling, and the need to train drivers and guard staff to a high standard (a regulatory requirement laid down after bitter lessons in the Victorian era) stations and station maintenance and the sheer cost of rolling stock (none of which is made “off the shelf” in quite the same as a car or a lorry) are taken into account, rail travel is about four times as expensive as road travel even before fuel costs and overstaffing.

      This is the reason why no railway company in all recorded history has been a profitable investment in the long term (even the Great Western repeatedly flirted with bankruptcy in the Victorian era, when the railways’ monopoly position meant that they were in a stronger financial position than they are now).

      On the plus side, it is very much safer and usually faster and more reliable than road travel (even with its current troubles). The sad fact is that at no time have people been willing to pay extra money to reduce the chances of having an accident – as Nevil Shute commented of the airline industry, “you can’t sell safety.”

      Reintegrating the track, trains and operating companies would be a good start towards bringing down costs, and getting rid of the completely unaccountable Network Rail is essential, but the brutal fact is if we want railways we have to be willing to pay a high monetary price for them.

      • Blank Xavier
        Posted January 3, 2009 at 9:35 pm | Permalink

        THBW wrote:
        > rail travel is about four times as expensive as road travel

        The inexorable questions is then; *why do we have railroads?*

        If we can get from A to B at a cost of say 5 units, why on earth would we use – and keep using, and massively subsidized – a method of getting from A to B that costs 20 units?

        • adam
          Posted January 4, 2009 at 12:19 pm | Permalink

          Sustainable development.
          read the documents, i have copies of them, The United Nations runs the Environment for Europe/eco-forum process.
          Its a transnational executive consensus group, they call them issue and working groups. The executive sets policy in Europe not the legislative.
          As best i can make out its where minor domestic issues are ironed out, the policy comes from on high, but i have read their conclusions and summaries.

          Private vehicle ownership and road travel is to be discouraged.
          Pedestrianisation and bicycles are to be promoted.
          When i look back, pedestrianisation of city centres has been happening for decades, forms of public transport like trams and railways and ‘underused’ means such as waterways, are supposed to be encouraged. Private vehicles, especially automobiles and road use, discouraged.
          Channel Tunnel is a rail link not a road link, the European Federation is being connected up by rail.

          They claim it to be more environmentally friendly.

          Thats the reason. Believe it or not as you choose.

        • Alan
          Posted January 4, 2009 at 4:31 pm | Permalink

          Agree entirely – but when you do the maths for true costs you suddenely find its the road network that wants abolishing in high traffic areas.

          The US has enormously subsidized road networks, they still have railroads mostly for freight and despite the huge distortions caused by the road subsidy they are profitable. Remove all the subsidies and most long distance road transport is uneconomic.

        • Blank Xavier
          Posted January 5, 2009 at 1:25 am | Permalink

          Adam wrote:
          > Sustainable development.

          What does that mean, exactly?

          > They claim it to be more environmentally friendly.

          So is it to do with environment impact? but environmental impact, really, is simply one of the costs of a given form of transport. To properly pay for a form of transport, you must pay all the costs, and this is simply one of them.

          Now, it may well be that rail has a lower environment cost than road, but what about all the other costs? another reply here asserts rail is four times as expensive as road. I wonder if that includes an environment cost assessment? if it does, then rail may well have a lower environment cost than road, but its other costs are so much greater, its still much more expensive. If not, road will have to have one hell of an environmental cost to make rail competitive.

          The thing about environmental cost is this; if you pay that cost, you ameilorate the environmental damage. That’s the point of it. So if you’re doing that, the amount of cost is per se meaningless; all that matters is the overall cost of a given form of transport. There’s nothing magical about a given form of transport having a low environmental cost, which means that it then inherently becomes a good choice.

  15. Richard
    Posted January 2, 2009 at 8:35 pm | Permalink

    John Redwood asks “Why are train fares so dear?”

    A. Because of the ludicrously complex system he and his colleagues foisted on the country when they privatised the railways.

    John Redwood and other right-wing Tories created this system in the 1993 Railways Act. Too many profit centres, with nearly 100 different organisations leasing the trains, running the trains, operating the track and stations, and maintaining the track and stations. All of whom had to make money

    This chaotic splendour starved the railways of investment until the cancerous Railtrack went bust, and despite public subsidy being three times more in real terms than under British Rail. This organisational chaos and neglect of basic maintenance was also a key factor in several fatal rail accidents in which scores of people died.

    John Redwood shouldn’t be asking this question because he knows the answer. He should be saying sorry.

    Reply: What nonsense – the old nationalised industry used to charge too much and put them up too much. If the inherited system was so bad why didn’t Labour change more of it over the last 11 years?

    • mikestallard
      Posted January 3, 2009 at 9:15 pm | Permalink

      You are not being fair here. There are lots of sites about the privatisation of railways and the EU.
      I think this one is the most fun – and you get music too!
      http://www.sovereignty.org.uk/siteinfo/newsround/mailtrain.html
      John Major was implementing EU Directive 91/440. France and Germany have had enormous trouble implementing it too.

  16. Neil Craig
    Posted January 3, 2009 at 12:57 pm | Permalink

    I dopn’t knopw how much of train cost is the driver. On buses it runs from about 50% to 70% but for trains part of this service is syupplied by ticket offices & collectors. Nonetheless I think it clear that a fully automated system would be substantially cheaper.

    • Robert
      Posted January 3, 2009 at 7:25 pm | Permalink

      As I mentioned in my previous post, here is where Europe has got it basically right or so it seems. High level of Automation, cheap fares (yes I guess they are subsidised, to what degree I don’t know) therefore people generally tend not to try and cheat the system and public transport is a cost effective way to travel. As I have already stated the system in the UK is ludicrossly expensive, something needs to be done and soon !

  17. Bazman
    Posted January 3, 2009 at 6:12 pm | Permalink

    The answer is simple. They are expensive to limit the number of passengers using the railways. If they where cheap to many people would use them and the system could not cope. Exposing the lie of private rail companies and the dogma of having to make a profit, like banks really. when in reality are part of the state infrastructure like the roads and banks. Make the railway system truly private and there would be no railways. An inescapable fact.

  18. Puncheon
    Posted January 3, 2009 at 8:09 pm | Permalink

    Why all the fascination with an obsolete 19th century transport system that has never in its entire history been profitable, whether in the private or public sector? Public transport is socialist rubbish – it takes people from where they don’t want to go from to where they don’t want go to at times that suit the provider and not them. Get rid and ensure that everyone can afford their own transport – ie cheap, energy efficient, non-polluting vehicles.

    • Alan
      Posted January 4, 2009 at 4:37 pm | Permalink

      “cheap, energy efficient, non-polluting vehicles”

      That is what China used to do but then people could afford cars, cars polluted the cities and it went the same way the UK has

      Ban the car from cities and make people cycle. Cures the obesity epedemic, parking problems and reduces pollution a lot (which saves NHS costs) as well as reducing accidents. It also dramatically reduces the enormous amount of state money burned every year on road repair, rebuilding, and infrastructure.

      Cars kill 1000 people a year – thats more than gun crime. Car accidents and poor drivers maim hundreds of children a year.

  19. Richard
    Posted January 4, 2009 at 12:16 pm | Permalink

    mikestallard Reply:

    It is disengenuous to blame the EU for this one. What the EU directive said was that national governments were required to separate the accounts for the operation of the track and the trains. There was nothing in it about privatisation or breaking up train operations or track maintenance into small profit-seeking units. Other countries across Europe have complied with this directive, but generally have a single state-owned operator while drawing in private capital in certain areas – particularly rolling stock leasing. In some instances, local and regional governments have put services out to tender in competition with the state operator leading to a better deal for the taxpayer

    • mikestallard
      Posted January 4, 2009 at 5:36 pm | Permalink

      OK, I accept that the Major government played a part in the settlement. So did the Labour government under Mr Prescott.
      This is, also, of course, a political question.
      For my own point of view, see:
      http://www.ukipwales.org/EU/eumadness.html#E.U.%20dictates%20railway%20policy.
      I also accept that both Germany and France have had their problems with their own railways – France’s seem to drift on into today.

  20. Alan
    Posted January 4, 2009 at 4:25 pm | Permalink

    We know why the railway costs are high. The conservative government in the 1980s made British Rail very efficient, but they then split it up wrongly and sold it to a bunch of people who ran off with the money and the costs went through the roof.

    Labour inherited the mess and made it worse by creating Network Rail rather than making it nationalised (the road network you will note is nationalised and works…). This was all done to keep the debt involved off the government figures so they could try to join the eurozone (along with other crud like PFI) but also meant the debt wasn’t government debt so the costs of debt servicing were far higher.

    On British Rail costings the current railway network and ticket prices would be very profitable. Probably the same would be true of a non screwed up privatisation. Elsewhere in the world private railway networks are almost uniformly arranged so that they own their own track, trains, stations except where they share running rights with other companies. In Japan on a private railway line you know who is to blame for a problem, you know who is to thank for good service. In the UK everyone is busy finger pointing and funding an entire industry that exists solely to apportion blame.

    As to removing subsidies – this would only work if airlines paid fuel duty, and the road network was also required to break even and buy carbon credits. The sudden appearance of enormous road tolls everywhere would destroy the country because the nation is now built on subsidised transport – road, rail and air.

  21. Nick
    Posted January 5, 2009 at 10:11 am | Permalink

    road network was also required to break even

    ————–

    Forget carbon credits, global temperatures are falling. The Met Office have never got one of their year forecasts correct.

    The road network generates a profit. A huge profit for the government.

    Hypothecate all the taxes such as VED and fuel duty on desiel and petrol for vehicles to maintaining the road system, plus a bit for new roads and policing. Then set the level of VED and fuel duty the same all over.

    If you want carbon taxes, start putting carbon taxes on all things, including electricty generated from coal, heating oil the works. I think you will find that you’re the target for the lynch mob

    Nick

  22. Alan Wheatley
    Posted January 5, 2009 at 12:01 pm | Permalink

    I doubt there is a long term future for railways in the form we now know them. But in the meantime we should make best use of what we have got.

    My suggestion for maximising effectiveness and accountability is to convert Network Rail into a special form of private limited company where the shares are owned solely by the train operating companies. Shares would be given as part of the granting of an operating licence, and would be forfeited upon ending of the licence. It would not be possible to buy and sell these shares, or otherwise acquire and dispose of them. Dividends would not be allowed. The operating companies would pay the infrastructure company for the use of the infrastructure.

    The shareholders would set policy, the infrastructure company would be run by a board to implement the policy. The infrastructure company would have to be run in the best interests of the operating companies. It is in the operating companies interests that the infrastructure company is operated in the most efficient and effective way. Capital infrastructure projects would have to be funded out of profits, which in turn comes from fees charged to the operating companies. So policy would have to be set such as to balance costs against revenue from passengers and freight.

    Thus, there is a virtuous circle of common interest between those directly responsible for the infrastructure and those directly responsible for operating trains. It is in both their interests that the end users are satisfied. If things go well the operating companies make a good profit; if things go wrong they are ultimately accountable, both to their own shareholders and the public at large.

    I appreciate it will be possible to ague in many detailed why such a scheme might not work, but if the BIG PICTURE is fundamentally sound then the details can be got right (assuming a sensible and competent government, of course).

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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