Saving money on the railways

 One of the worst examples of large scale spending of questionable effiicacy is the big UK railway budget.

I am going to take up again the whole issue of the unaccountability of Network Rail. An independent review has found that it could be much more efficiently run, with large cash savings. Its strange structure designed by the last government tries to hide the fact that it is in effect a nationalised monopoly.

Ministers need to examine how and why members of the company are appointed and reappointed or dropped. They need to find out whether these members – who are meant to work on the taxpayers behalf – ask the right questions and create the right atmosphere to encourage more efficient operation at Network Rail.

The members should ask why Network Rail has a reputation for holding up development projects adjacent to the railway, and why they often demand ransom payments for anyone wishing to bridge the railway or develop adjacent to it.

They should ask why Network Rail has taken on foreign currency and index linked debts, and how it plans to repay the massive £30bn debt built up so far.

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73 Comments

  1. Nina Andreeva
    Posted July 29, 2013 at 5:35 am | Permalink

    Apart from the banks the railways are the most in your face example of crony capitalism at work in the UK at the moment. Look at the “entrepreneurs” who are at work here and you will find their companies at also work wherever else there is public money on tap e.g. the NHS. Whoever would have guessed that the UK now has Korean style chaebols that provide everything from health care, to rail transport to flogging you CDs

  2. alan jutson
    Posted July 29, 2013 at 6:01 am | Permalink

    Not much to add really

    Too many questions, never enough answers.

    You sum it up, a monopoly which is taxpayer funded, but then the so called privatisation of the railways was always a sham, as they are not and never will be in competition with each other, because they run in different regions, thus they are a private monopoly regional franchise which still gets taxpayer support.

    • waramess
      Posted July 29, 2013 at 10:19 am | Permalink

      They compete with road and air travel. Never underestimate the strength of this competition; it is awesome.

      We should privatise each line, lock stock and barrell, without government subsidy, and let them prosper or fail. Should they fail then that is not the end of the story; they will be bought by someone else at a knock down price that may enable them to become viable.

      Ultimately they will be more likely to become viable as privately run companies than under the sloppy state system presently in place.

      • Bazman
        Posted July 29, 2013 at 2:48 pm | Permalink

        The lines would be sold for scrap the land sold off and the most profitable lines plundered with the passengers put on the road and the railway companies telling us that they have a business to run. It called infrastructure.

        • Lifelogic
          Posted July 30, 2013 at 3:18 pm | Permalink

          There is little sense in subsidising trains and hugely taxing cars. It rather shows how inefficient he former is. This even more so when it is clearly run so badly, as indeed most of the state sector now is.

          Door to door and power station to motion and including staff and the track there is nothing green or energy saving about trains. HS2 is an outrage on every rational analysis.

          MPs use the trains, often at taxpayers expense, rather more than the public in general and thus have a rather misleading impression of them.

          They are also a good excuse to force people to sell their property and do huge property developments at others expense with an unfair advantage to the competition.

          • Bazman
            Posted July 31, 2013 at 5:32 pm | Permalink

            If you removed all of the trains then how would London cope with all the cars not to mention the practical limitations of driving? Commuting in a car in Journeys of more than a hour each way is not practical though I’m sure many do much more driving than this. Much of the rest of the Europe and the world has many thousands of kilometres of high speed rail links, so to say it is not necessary or practical is not real, though true the rest of the transport infrastructure needs upgrading. You will have to explain how tax cuts will fund this. Just because you do not use a service does not mean you do not benefit from it.

        • Bazman
          Posted July 31, 2013 at 5:38 pm | Permalink

          Another point I forgot is what about all the freight put on the roads and would there be enough capacity? Do tell us how much a 42 tonnes lorry can carry? Your road fantasy is just that.

  3. Jerry
    Posted July 29, 2013 at 6:12 am | Permalink

    John I would far prefer that you to take up why private Train Operating Companies (TOCs) need -and seem to expect- the UK tax payer to invest, subsidise, bail them out -call it what you like- in their private business plans when the UK tax payer doesn’t benefit from the profits raised.

    Most people are happy with NR, just like most people are happy with the current ECML operation, I do have to wonder if the Tories (if they can get it passed the LDs) are heading towards the re-privatisation of rail infrastructure company – the income from which could come in very handy to cut taxes just before the June 2015 general election… Me being cynicle, you bet!

    • Nick
      Posted July 29, 2013 at 7:52 am | Permalink

      Are the people happy with NR those who use NR? What about the others that are subsidising the happy.

      Were they told about their share of the debts?

      Put the debt servicing on the tickets.

      Axe the subsisidy and put it on tickets.

      NR needs to pay its way.

      Oh, I get it. No one would use NR if they had to pay the full price so you need to tax some poor bugger in Cornwall to pay to make your travel cheap.

      • Jerry
        Posted July 29, 2013 at 10:41 am | Permalink

        @Nick: Sorry but you couldn’t “get it” is it slapped you in the face, judging from your last sentence you don’t even seem to understand the difference between NR and a TOC…

        • waramess
          Posted July 30, 2013 at 9:19 am | Permalink

          Jerry, technicalties, dear chap, technicalities. Nick “gets it” you on the other hand know the difference between NR and TOC. Bravo.

          • Jerry
            Posted July 30, 2013 at 2:38 pm | Permalink

            @Waramess: What ever Nick has “got” it most certainly is not a clue as to how railways work, nor am I surprised that you think as you do as you don’t seem to have a clue either – the whole point is that I know the difference between NR and a TOC, I also know the difference between Bullhead and Flat-bottom (rail) for example; mere facts you might cry, but one means that the trains have to travel a lot slower…

    • David Price
      Posted July 29, 2013 at 5:14 pm | Permalink

      I don’t know how you can say “most people are happy with Network Rail” since with the exception of a dozen or so stations their principal customers are the TOCs. Perhaps you are refering to the quality of signalling delays? If it is their stations then on my last trip via Paddington I was quite disatisfied – no clear markings to the Hammersmith & City line and the usual guessing game as to the departure platform on return with very little seating while waiting for the latter to be revealed – not very helpful if you have a medical condition.

      The TOCs get criticised all the time yet NR gets away with a stonking debt for which the tax payer is liable and the execs appear to receive very large bonuses for doing less than is expected of them in normal duties.

      • Edward2
        Posted July 29, 2013 at 9:09 pm | Permalink

        Indeed David I agree.
        It is also the huge “rents” NR charge the TOC’s that drive the extraordinarily high fares.

      • Jerry
        Posted July 30, 2013 at 9:20 am | Permalink

        @David Price: That’s a bit like suggesting that people congratulate their local Odeon cinema for the production qualities of the latest blockbuster instead of the Hollywood studio! TOCs are no more than the cinema, without NR there is no ‘film to show’ nor any need for the cinemas…

        • David Price
          Posted July 30, 2013 at 3:18 pm | Permalink

          Not at all, I was quite specific and there was no need for an analogy. Network Rail alone is responsible for the track and Paddington Station.

          • Jerry
            Posted July 31, 2013 at 9:58 am | Permalink

            @David Price: Thanks for agreeing with me then, the TOC are irrelevant, thus the commuter knows it is NR who get the them home at night – now there’s an idea, lets just do without the TOC’s, allow NR to run the trains themselves, I now we could call them -err- British Railways…

          • David Price
            Posted August 2, 2013 at 5:54 am | Permalink

            Jerry: you have a warped view of what constitutes agreement. Can you see the flaw in your statement that I agree with you after declaring you disagree with me?

          • Jerry
            Posted August 2, 2013 at 7:30 pm | Permalink

            @David Price: It is very clear to anyone who actually knows anything about railways or the industry…

  4. margaret brandreth-j
    Posted July 29, 2013 at 6:30 am | Permalink

    Travel really needs to benefit the customers and be competitive, which is why rather than spending billions on HS2 the existing networks should be improved and if selling off would benefit the national debt and provide an improved service..so be it.

  5. Anonymous
    Posted July 29, 2013 at 6:52 am | Permalink

    Network Rail is yet another example of damage by a British ‘professional’ class that is not half as clever as it thinks it is.

    In the seventies our problem was the Trade Unions. Now it is the rip-off ‘professional’ elite that will take their bonuses and pensions how ever badly they mess things up.

  6. Andyvan
    Posted July 29, 2013 at 7:15 am | Permalink

    Why is anyone surprised? A nationalized industry that loses vast sums through incompetent management, troublesome workforce, political interference or some combination of them is hardly a new phenomenon. Governments can’t run railways. They can’t even keep their own office admin budgets under control so what chance is there that an extremely complex transport network can be managed effectively? More political meddling will make things worse, it always does so if you want good, efficient well maintained transport get government out of the equation and find a way to let private business run a really free market network.

  7. oldtimer
    Posted July 29, 2013 at 7:23 am | Permalink

    All good questions that demand an answer.

  8. Chris S
    Posted July 29, 2013 at 7:23 am | Permalink

    You are right to raise these issues, John.

    I have direct experience being the developer of a site for houses right next to the railway.

    Network Rail has a long list of requirements which are expensive to meet and are probably a bit over the top however, we cannot ignore the fact that the Railway is one of the safest modes of transport and this is entirely due to the care that Network Rail takes in controlling what happens around the line.

    When operating a large crane adjacent to the site we were required to employ a Banksman from one of their preferred contractors who supervised our operations on their behalf. He had direct communication with the signalmen in either direction. It was far too expensive because there was a monopoly supplier but I would not argue with the requirement.

    A change of attitude is definitely needed : On every occasion one deals with Netweork Rail their timescales and requirements take precedence and they are both slow and inflexible. The commercial needs of other organisations should be given equal weight so that they can get on with their own business without undue delay.

    Turning to the cost of running the Railway, in truth, there is little competition for railway maintenance and infrastructure work so, while I’m sure that it’s far more efficient in terms of time for Network Rail to use specialist sub contractors, it must be much more expensive than employing labour direct because their profit margins are huge.

    This is the reason why HS2 is scheduled to cost £50bn ( although it’s obvious that the final bill will be double that ).

    Properly managed, it would probably be far cheaper to employ the maintenance and construction workforce direct – after all, the vast majority simply move straight from one railway project to the next.

    There will be never be a return to direct labour and it would be difficult to ensure that there are enough specialist contractors to see proper competition and therefore lower costs.

    What would probably be better would be to demand complete transparency from the limited number of contractors and put an overall cap on their profits from railway work.

    • Alte Fritz
      Posted July 29, 2013 at 10:43 am | Permalink

      This strikes several chords. Railtrack was well known for charging ransom payments, something presumably inherited from British Rail. But ransom payments are common enough in the private sector and always have been.

      Your point about direct labour is well made. Main contractors employ many sub contractors so there are layers of profit and inefficiency to ramp up the cost.

      The scandal here is that NW’s structure is teflon coated for those who should be answerable.

  9. Mike Stallard
    Posted July 29, 2013 at 7:39 am | Permalink

    What are you discussing all this for?
    “Transport policy directly affects everyone in Europe. Whatever age we are, and whatever activities we undertake, transport and mobility play a fundamental role in today’s world. The issues and challenges connected to this require action at European level; no single national government can address them successfully alone. By working in concert, European Union Member States and European industry can ensure our transport infrastructure meet the needs of citizens and our economy, whilst minimising damage to our environment

    The European Commission’s Directorate-General for Mobility and Transport manages work in this area”.

    • miami.mode
      Posted July 29, 2013 at 11:03 am | Permalink

      I’ve often suspected an EU involvement in HS2, as currently under construction is a new high speed line from Berlin to Palermo via Austria. In many places it is being built alongside existing lines.

      This is apparently being constructed under EU project TEN-T and grants are available. Perhaps we could get the EU to pay for the unnecessary HS2 in its entirety!

      How many people want a high speed link south of Naples to Palermo?

      • uanime5
        Posted July 29, 2013 at 5:49 pm | Permalink

        How exactly will HS2’s London to Birmingham track meet any of the goals of TEN-T, which focuses on linking EU states together?

        • Edward2
          Posted July 29, 2013 at 8:49 pm | Permalink

          Just check on the web Uni
          Its not just London to B’ham the HS2 project goes much further North.
          There is a long term EU plan to link all EU capitals by high speed rail.
          Surely you know this?

        • Jerry
          Posted July 30, 2013 at 7:10 am | Permalink

          @U5: Doesn’t HS2 connect with HS1, and is is not the aim to extend HS2 all the way to Scotland?…

  10. Mike Wilson
    Posted July 29, 2013 at 7:44 am | Permalink

    Unless they ever introduce comfortable trains with windows that open – instead of the sealed tubes they have now – and with manual doors you can open in an emergence – I will never travel on a train again. Used to enjoy rail travel. Now it is as hateful as the sardine can experience they call ‘flying’.

    • Leslie Singleton
      Posted July 29, 2013 at 1:29 pm | Permalink

      Mike–I have never agreed with anybody more in all my life. Soon after they brought in what you correctly call these sealed tubes on my commuter line in to the City I literally had a chap opposite, in a crowded train, try to open a window on the way home with a view to chucking it which he of course couldn’t do so he threw up all over the carriage and my fellow passengers (sorry customers) missing me Thank God. I rang British Hi-Speed Rail or whatever it’s called these days to be told that if the chap had been able to stick his head out of the window he might have had it chopped off by a bridge. I asked exactly how many heads had been so chopped off, ever, but answer came there none.

  11. Nick
    Posted July 29, 2013 at 7:50 am | Permalink

    They should ask why Network Rail has taken on foreign currency

    ===============

    Weren’t they buying German trains? Doh

    • Jerry
      Posted July 29, 2013 at 10:44 am | Permalink

      @Nick: NR doesn’t by “trains” (although they do buy track maintenance equipment), do feel free to find a clue or two as to the difference between NR and a TOC. 🙁

  12. Richard1
    Posted July 29, 2013 at 8:16 am | Permalink

    Why isn’t Margaret Hodge’s committee looking at this, I thought that’s what its there for, instead of silly posturing and grandstanding in attacking companies like Google (which provide innumerable public benefits) and attempting to humiliate the Queen by nitpicking on the civil list?

  13. miami.mode
    Posted July 29, 2013 at 8:47 am | Permalink

    Well done John – more power to your elbow.

    I believe Network Rail was set up ostensibly as a private company with government guarantees with a view to keeping the debt off of the National Debt.

    It would be interesting to know how much extra they pay per annum for their debt as a private company rather than as government gilts

    As far as repaying the debt is concerned, I feel that many governments of all colours seem to think that as long as they can cover the interest payments each year then repayment of the capital is of no consequence in the hope that inflation will take care of it.

    If Network Rail was inveigled into purchasing currency and index debts by a “financial adviser”, is this not a case of mis-selling?

  14. Acorn
    Posted July 29, 2013 at 9:10 am | Permalink

    They had the same problem a century back, we never learn. Oxford Economic Papers 39 (1987), 699-718 NATURAL MONOPOLY AND RAILWAY POLICY IN THE NINETEENTH
    CENTURY By J. S. FOREMAN-PECK. Conclusion:-

    “Competition in the railway system had burnt itself out by the end of the nineteenth century because both suppliers and customers found it incompatible with the technical conditions of the industry. Regression estimates of a cost function based on Railway Returns data suggests that, at the level of the individual railway in 1865, before the onset of substantial regulation, there were unexploited economies of system integration or economies of scope.

    National economic and topographical conditions alternatively may have been entirely responsible for high British railway capital costs, but two other experiments do not support that explanation. Even allowing for general expensive improvements in service between 1840 and 1910, and recognising that country characteristics could raise the level of capital costs, Britain still showed the greatest increases in capital costs per rail mile. Around the turn of the century British capital costs per train mile were far more expensive than most other countries, though revenues and variable costs were comparable to those of other national systems.

    The most credible inference is that the largely unregulated free enterprise system of railway investment probably raised construction costs by 50% and lowered national income per head by at least 1% in static terms around 1906. The counterfactual is a more interventionist, but competent regime in the early years of railway development that planned a national trunk layout and prevented wasteful competition, either by state ownership (the conventional solution) or by effective regulation. Such a regime is not perhaps a historically plausible alternative, but it is one that places the liberal order in perspective.”

    Exactly the same argument applies in the electricity – gas industry. You have to consider them as one system now, because a lot of electricity generation is by gas; hence the monopoly transmission and distribution networks. Britain is too small and too dense to have free-market type competition in very high fixed cost utilities. Be thankful that Cellular phone transmitters aren’t as big as wired telephone exchanges hence, marginally avoided being a natural monopoly on fixed costs, with or without paying billions for radio spectrum.

    PS. Conservative ideologues should have a lie down at this point. 😉 .

    • Acorn
      Posted July 29, 2013 at 6:35 pm | Permalink

      My PS above, (originally on another platform) has prompted the usual reaction. Suffice it to say, that the problem with nationalised industries like British Rail, British Coal, British Leyland, was not the state ownership per se. The problem was managers who didn’t know what they were allowed to manage and workers who didn’t know how to work. State owned industries were taken over by left wing trade unions, and the managers were powerless to impose any control, even if they knew how; they were bypassed by a government – trade union cartel. The managers knew that the government would not back them. Then there came Mrs M. Thatcher, and the rest is history.

      Conditions are now much different. Trade unions are on the back foot, and employment tribunals are (the government hopes), no longer a free lottery ticket. To me, that actually makes sense. My proviso is, that if labour is to become more casual like the old days of standing at the Dock gates waiting for a foreman to say, you, you and you, then there should be state jobs that act as a buffer between private sector real jobs and unemployment. Full employment, doing something that contributes to the “public purpose” should be the prime directive, even if the state is temporarily paying for it. When the private sector picks up then there is a ready pool of skilled workers to call on, who are used to getting up in the morning and haven’t forgotten how to use a bag of tools.

  15. Atlas
    Posted July 29, 2013 at 9:11 am | Permalink

    The railway system needs to be broken up into viable companies which have control over all aspects of the running of the services on their patch. They already have serious competition with cars and air travel – so there is not so much of a monopoly situation as there was seventy years ago.

    • uanime5
      Posted July 29, 2013 at 5:54 pm | Permalink

      The problem with breaking them up into several companies is that travelling between company areas will be difficult. At worst you’ll have to change trains between companies.

      • Jerry
        Posted July 30, 2013 at 7:45 am | Permalink

        @U5: Passengers and the railway companies seemed to manage quite well enough between 1923 and 1947, whilst changing trains was not so uncommon even during BR days.

  16. Neil Craig
    Posted July 29, 2013 at 10:06 am | Permalink

    A good example of why bankruptcy is a vital, if unattractive, part of the free enterprise system. When free enterprise projects go bankrupt they close and what parts are at least potentially capable of being run commercially get sold off to those willing to risk it.

    When government projects fail they invariably get more subsidy.

    Thus, even though there is an argument for the state to run something short term just to get things going, hardening of the arteries develops and it inevitably fails in the long term. As the former citizens of the USSR can testify.

    • uanime5
      Posted July 29, 2013 at 5:59 pm | Permalink

      The problem with what you’re suggesting is that if tracks are closed because they’re not profitable enough then this means whole parts of the country will be without a railway. It’s nothing more than wishful thinking to believe that private companies would want to run unprofitable rail tracks.

      Funny how you complain about that communism is bad while ignoring that the current capitalist system used to increase competition in the railway industry has made things worse.

      • Edward2
        Posted July 29, 2013 at 8:56 pm | Permalink

        Maybe it is a hint Uni, that these lines that are losing money even at the high fares now being charged and could be unpopular.
        Like many buses travelling nearly empty round towns near me all day, being paid for by tax payers money.
        What you are asking for is money that could be better used to save lives being redirected to keep a rail line open forever more, just in case you or yours suddenly decide they want to use it.
        It would be cheaper to give these remaining rail passengers the money to go and get a taxi.

        • Jerry
          Posted July 30, 2013 at 7:55 am | Permalink

          @Edward2: It was that sort of thinking that lead to Dr Beeching and his report. Just think if the same ‘logic’ was used to decide which parts of the national road network should remain open to the private motor car…

          • Edward2
            Posted July 30, 2013 at 8:07 am | Permalink

            So carry on running empty trains and buses on unpopular routes for ever more then Jerry just in case one odd day you might want to use the route.
            Money wrongly diverted away from providing better roads for millions of road users.
            We need another modern day Dr Beeching to cut the huge losses.

          • Jerry
            Posted July 30, 2013 at 9:51 am | Permalink

            @Edward2: We also need a Dr Beeching of the roads too by your logic, lets start closing all the uncategorised roads that simply cost far more money to maintain than their use creates (from VED, Fuel or perhaps even any future per-mile road charge), perhaps even many an underused B and C road would also close! Or do we recognise that these roads a are part of the socail and business requirements of the country as a whole, if so, why can’t the railways be so recognised?

            Lopsided decisions made simply from socail or political dogma are never good, which is one of the reason why the Greens are as irrational in their opinions as the car lobby are.

          • Edward2
            Posted July 30, 2013 at 4:30 pm | Permalink

            Difference between the roads and the railways Jerry, is that taxes paid by motorists in vehicle excise duty alone, are many times the sum invested back into roads, whereas the railways are just a huge drain on the taxpayer.

          • Jerry
            Posted July 31, 2013 at 10:06 am | Permalink

            @Edward2: Err, both (roads and railways) are funded by the taxpayer but only one is a drain on the taxpayer. How is life on Mars?!

            It is very clear that you are simply dogmatically anti railways, even though you would not know one end of a locomotive from the other – perhaps you can Google the answer…

          • Edward2
            Posted July 31, 2013 at 1:04 pm | Permalink

            I will explain this slowly for you Jerry.
            Motorists pay more in VED taxes than is spent on the road network by the Government
            So there is a surplus from the tax motorists pay to use the roads
            Railways cost the Government more than they get in taxes from them
            Thats all.

          • Jerry
            Posted July 31, 2013 at 2:12 pm | Permalink

            @Edward2: If it quacks like a duck, waddles like a duck and swims like a duck it most likely is a duck! Both are taxpayer funded, the money has come from the same place, the same pocket, if one should not be taxpayer funded then nor should the other, taxpayers should not be funding transport, if people want to travel then they should be made to pay… Ho-hum.

            Put your dogmatic rhetoric away Ed2 and try actually thinking about the issues, if you don’t know/think that railways are (like it or loath it) a social requirement then you are far to young, you obviously do not remember the railway strikes of the 1970s and ’80s when one either had grid-lock on the roads in and around major cities and metropolitan areas or people simply gave up trying to get into work. Oh and it’s not just motorists who pay VED either.

          • Edward2
            Posted August 1, 2013 at 9:25 am | Permalink

            You are twisting my words to suit your own dogma, taking what I originally said, jumping to a most extreme fantasy version set up by you.

            Its what you do on here regularly Jerry
            In effect you set up an false argument with yourself.

          • Jerry
            Posted August 1, 2013 at 10:51 am | Permalink

            Edward2: “You are twisting my words to suit your own dogma

            Oh what irony, talk about the pot calling the kettle black…

        • Edward2
          Posted August 1, 2013 at 5:46 pm | Permalink

          I would refer you to my post of 31st July at 1.04pm Jerry.

          • Jerry
            Posted August 2, 2013 at 7:41 pm | Permalink

            Ed2: Your comment (regarding the amount of tax paid by the taxpayer) of the 31 July is utterly irrelevant, the amount is not the issue, it is the fact that both are being funded via the tax payer.

  17. Terry
    Posted July 29, 2013 at 10:09 am | Permalink

    So, Network Rail has a “trading room” of sorts? You are quite right to ask such questions, John. Especially, when it is the tax payer footing the huge account.

    What worries me is all these efforts by yourself and your colleagues fall on deaf ears.
    What happens in Government when there is such a debate and there are ‘promises’ to do something but nothing is actually done? Is there any other course of enforcing action open to you? Or is there no such thing as an Appeals process in Parliament?

  18. David Hope
    Posted July 29, 2013 at 11:02 am | Permalink

    “a nationalised monopoly” – yes this is the heart of the matter. The private sector is considered more efficient because of competition, not because of technicalities of the definition of private sector. As you suggest ministers need to take some control as it is really a state organisation.

    The railway has no real competition. On rail most routes are only one train company. With the tracks there is no debate – it is only network rail. Roads could offer competition but don’t – surely one reason for the growth of rail travel. Population has gone up and up but the only road investment is more humps and traffic lights! Listen to the traffic news daily – nothing is moving, everything is closed for hours! Infrastructure is at capacity.

    As an aside, there is one route I can think of with train company competition and that is London-Birmingham. Unlike say Leeds-london or York London where an on the day ticket is just under £100 for the Birmingham equivalent it can be less than £30 on the day…..

    • Mark
      Posted July 29, 2013 at 11:51 pm | Permalink

      £30 return is just about competitive with the fuel cost for a single occupant of a diesel vehicle doing 45 mpg and paying all that duty and VAT. Add a second passenger, and it starts looking expensive.

  19. Lindsay McDougall
    Posted July 29, 2013 at 2:11 pm | Permalink

    There are three ways to go here. One is to assert, which is the simple truth, that Network Rail is a nationalised industry, and to subject it to the constraints and scrutiny that are normal for such an industry.

    The second is to reinstate Railtrack, offloading Network Rail to the private sector; the selling price would depend on whether the State took on Network Rail’s accumulated debt or not. Railtrack’s success would depend on its being allowed to charge market rates for track access . When Railtrack last existed, that was a complex process of negotiation, based on willingness and ability to pay. The original Railtrack failed because Prescott and Byers ended that freedom, imposing low track access charges.

    The third is much most radical, to create regional rail monopolies, the competition coming from air and road with all restrictions removed. In the past, people with limited means would take a bus from Reading to London rather than a train. The problem was that the journey took 2.5 hours.

    I do have a preference for limiting taxpayer contributions. The people who pay for a transport service should be the people who use it.

    • uanime5
      Posted July 29, 2013 at 6:05 pm | Permalink

      There’s no way to increase the competition by road and air. Unless the place you want to travel from and to both have a nearby airport then their won’t be any competition by air. Bus travel will always take longer than train travel as buses take a longer route and have more stops. As a result rail monopolies will face little competition from buses and planes.

      • Edward2
        Posted July 29, 2013 at 9:02 pm | Permalink

        Obviously wrong Uni because we citizens weigh up the costs of the various types of travel methods versus the time taken to complete the journey from one place to another all the time.
        Take a journey from London to Glasgow
        Available choices are by car, coach, train and plane.
        The train only has a monopoly on its tracks.

      • Lindsay McDougall
        Posted July 30, 2013 at 1:16 am | Permalink

        Commuter buses to London need not travel much further. I think that you will find that there are restrictions on the number of locations where bus stations are allowed in London. Also that subsidies to buses are much less than subsidies to trains.

        We shouldn’t be surprised. Rail commuting is the preferred mode of travel for most Civil Servants and the London Mayor’s staff. They have it nicely organised with travel cards so that there is a cross subsidy from tourists and occasional users of the tube to commuters by rail + tube. But hey, turkeys never vote for Christmas, do they?

        If we got all the London airports to compete with each other and allowed any that want to to provide extra runway capacity, you’d get your competition from air. Birmingham airport also wants to expand. Let them all go for it but not with taxpayers’ money. It’s called supply side economics and it works.

  20. uanime5
    Posted July 29, 2013 at 5:12 pm | Permalink

    They should also question why the 5 heads of Network rail are being paid a combined salary of £11 million over 3 years, of which £5 million is in bonuses, despite their company being fined £75 million for poor performance.

    Another area that needs to be investigated is the 111 non-emergency phone service. At present NHS Direct is trying to pull out of their 11 regional contracts because they’re “financially unsustainable”. This will cause problems if another company is not willing to cover these 11 regions (there’s 46 regions in total, so NHS Direct covers 24% of them).

    • Edward2
      Posted July 29, 2013 at 9:04 pm | Permalink

      Thanks Uni for two excellent examples why the State should keep out of commerce and let competition in.

      • Jerry
        Posted July 30, 2013 at 8:12 am | Permalink

        @Edward2: Or why the State should have more direct control of such public services, you seem to be forgetting that both of the examples given by U5 are being run as “faux private” companies/businesses and are thus making their own decisions on employee remuneration even though it is public money and politicains end up taking the flak…

        • Edward2
          Posted July 30, 2013 at 4:32 pm | Permalink

          The State has the power to intervene and curb these excesses now, but they choose not to, so having full nationalisation wont make any difference in my opinion.

          • Jerry
            Posted July 31, 2013 at 10:12 am | Permalink

            @Edward2: Or the state, the government, doesn’t want to admit that they got it all terribly wrong…

  21. forthurst
    Posted July 29, 2013 at 9:33 pm | Permalink

    “They should ask why Network Rail has taken on foreign currency and index linked debts, and how it plans to repay the massive £30bn debt built up so far.”

    There is no cause for alarm as the value of the network also appears to be increasing by leaps and bounds, from £39,577m in 2011 to £46,411 two years later, as, fortunately, depreciation does not appear to be making too much of a dent in the balance sheet. (see note 12 of the latest accounts: “The depreciation charge for the year is calculated using the average carrying value for the year and the estimated weighted average remaining useful economic life of the railway network. The weighted average remaining useful economic life of the railway network was calculated using the engineering assessment of serviceable economic lives of the major categories of asset that comprise the railway network. The estimated weighted average remaining useful economic life of the network is currently 30 years (2012: 30 years).” The depreciation for the last year was assessed at £1,491. It would be better if the depreciation charge was calculated explicitly on each class of asset and the figures given in the accounts separately, and without recourse to a notional total value of the network or its notional average useful life expectancy.

    Reply The value of the network canot be released to repay the taxpayer debts unless you are advocating the privatisation of the whole system, and then without subsidy I doubt it would be worth anything like the stated value

    • forthurst
      Posted July 30, 2013 at 9:16 am | Permalink

      “Reply The value of the network canot be released to repay the taxpayer debts unless you are advocating the privatisation of the whole system, and then without subsidy I doubt it would be worth anything like the stated value”

      Exactly: the debts are increasing and the book value of the network also, but what value can be placed on a business which cant make money? This looks like sunk cost masquerading as investment unless it could be shown that the network could become profitable without direct and indirect subsidy.

  22. Mark
    Posted July 30, 2013 at 12:58 am | Permalink

    The reality is that government is tipping £7.5bn of subsidy into rail every year already. It works out as 7.5 pence per passenger mile on average – 9.6 pppm for Network Rail, less a net payment by franchise train companies of 2.1 pppm. So doing the sums, Network rail is effectively subsidised by £9.6bn p.a..

    Now, it is easy to argue that this divide is somewhat artificial in that track charges would clearly be much higher absent the subsidy, leaving train companies being subsidised instead. Either way, rail is not cost effective.

    That has also proved to be the case for the Cambridge busway, which makes use of redundant rail lines for part of its route. However, it is at least an attempt to make use of the rail route. Future innovation with vehicle automation may make it rather cheaper to establish trackways that can be used by freight trucks or smaller commuter vehicles despite the narrow spacing of rail. That is probably the logical future for most of our railways. Some may remain as tourist attractions. Those who wish to travel at higher speed over medium distances will resort to air travel which needs no subsidy.

  23. Matt
    Posted July 30, 2013 at 5:59 am | Permalink

    I don’t doubt the merit in the questions you pose. However the ultimate objective for the railways is for them to play a part in moving goods and people from A to B. Where is the joined up thinking between rail, road and air? Why does the DfT split itself into separate road, rail and air teams with apparently minimal communication between them?

    Until the bigger issues around what we want our transport network to look like and deliver are addressed you are in danger of dealing with the trees and missing the forest altogether.

  24. Robert Taggart
    Posted July 31, 2013 at 10:42 am | Permalink

    Guessing ‘Notwork Rail’ be still suffering the ‘culture of Coucher’ (Iain Coucher – former MD / CE of NR) (etc ed)

    • Robert Taggart
      Posted August 1, 2013 at 10:28 am | Permalink

      (etc ed) – do you not accept there be such a thing as crony capitalism ?

  • 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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