News McNulty calls for vertical integration
There is no ‘silver bullet’ which will immediately cut the rail industry’s costs, the Rail Value for Money Rail Study, headed by Sir Roy McNulty, has found. But changes in government
policy, Network Rail’s structure and more incentives for private sector investment – such as longer and less prescriptive franchises – could see cost reductions of £700m to £1bn by 2019, says the report. ‘We looked at what efficiency
improvements have happened in other privatised industries and what efficiency improvements have happened on other railways and we calculated that the cost of our railway in 2008-9 ought to have been between £2.5 and £3.5bn less than it was in that year,’ said McNulty at the launch of the report. The report identifies that both
passengers and taxpayers are paying at least 30 per cent more for Britain’s railways than their counterparts in Europe, but suggests that this gap could be closed if the efficiency improvements it recommends
are implemented. Closer working relationships between Tocs and Network Rail could reduce costs, the report’s authors found, with Network Rail moving from a centralised organisation to regionally devolved units – a process that Network Rail has already begun. The report recommends having
‘at least two joint ventures/alliances in place by 2013 and at least one vertically integrated pilot in place by about the same time’. The Department for Transport
(DfT) ought, McNulty found, to be clearer with its policies and objectives and the way in which policy strands are harmonised. It recommends that all regulation be transferred to the Office of Rail Regulation – the DfT currently regulates train operators itself. More standardisation of rolling stock and improvements in the procurement process could also cut costs. Wages have become inflated within the industry, the report found, to the extent that pay increases over the past 15 years
have been double that of the UK average. Weaknesses in industrial relations are partly blamed for this. It recommends ‘salary expectations at all levels in the industry to reflect the economic climate’. Ticketing is also reviewed, with
no overall increases recommended, but with the potential identified to increase some of the lowest fares, particularly either side of the peak.
Michael Roberts, CEO of the Association of Train Operators, said: ‘We look forward to a new relationship between the public and private sectors, where government focuses more on setting overall policy and allows train operators and Network Rail to show greater leadership in providing better services to passengers at an affordable cost.’
Passengers and taxpayers are paying 30 per cent more for Britain’s railways than their continental counterparts
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