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RAILTEX 2011


Speaking at this year’s Railtex exhibition, Network Rail chairman Rick Haythornthwaite made a plea for the company’s critics to work with it to change – not carp from the sidelines. This excerpt sets out his thinking.


T


he numbers that were presented in Sir Roy McNulty’s value for money report


did not look rosy; they showed that indus- try unit costs had not changed since 1996/7, despite 57% growth in our numbers. We saw that costs overall have risen over that time by £4bn, to £11bn, and yet revenues were only up £2.7bn. Net, our revenue re- quirement was up by £2.7bn; subsidy to the industry had grown by £1.7bn.


The only good news was that freight sector costs had gone down, but all in all this was not a good advertisement for our ability to work together, manage costs, introduce in- novations and deliver effi ciencies between ourselves.


Sir Roy talked about a number of barriers to effi ciency. The role of government – too intrusive – means we don’t take enough responsibility as an industry; we are too fragmented with too many interfaces; we’re poorly run, with too many ineffi ciencies between those interfaces, and there are not enough cross-industry initiatives; the cur- rent disposition of key players like Network Rail – too centralised; the operating com- panies – too short term; incentives – inef- fective or misaligned, particularly between the operators and Network Rail; franchises – too short, too prescriptive, they lack risk and are very infl exible. Fare structures are overly complex and do not manage de- mand. There is insuffi cient best practice in the country in leadership in terms of as- set management, project and programme management, supply chain management and the list goes on.


The fact that we have weaknesses in our HR and IR (human resources and industrial re- lations) management with excessive wage


20 | rail technology magazine Jun/Jul 11


drift and still ineffi cient working practices, legal and contractual frameworks that are complex and have an adverse effect on relationships, all of which adds up to say whole system approaches – that are vital to effi ciency in any industry – are very dif- fi cult to apply.


Figures


And McNulty tried to put some numbers to this; he talked about an effi ciency gap of 20-30% based on, as he termed them, ‘should cost’ studies. Our CP4 determina- tion, and the ORR’s assumptions for CP5, say that we should bridge the effi ciency gap by 2019, but that still leaves a gap of £500m to be identifi ed. It’s a big challenge. And it is clear that there is a need for sav- ings relevant across the industry, as the train operating companies and the rolling stock companies need to fi nd about £1.2bn savings as well by 2019.


We have already begun working towards meeting many of these challenges; reforms that we believe are completely in line with the study’s recommendations. We are de- volving power and decision making from the centre to routes that are better able to respond speedily to the needs of customers and passengers.


We have begun negotiations with some of the train operators about setting up com- mercial alliancing arrangements where ca- pacity enhancing schemes can be unlocked and management can be co-ordinated far better to reduce costs and to share benefi ts.


We were pleased to see the report describ- ing the initial work with train operators as ‘encouraging’ and there is a sense that


At the same time, we are very clear in our minds that we mustn’t allow the reforms to compromise existing commitments. We have to meet our CP4 commitments; we made a promise we would deliver those and they make up a third of the savings the industry as a whole must make, but we have to retain our focus. That does not mean to say we have a chunk of our work that we continue to do on our own and the rest we are willing to reform: quite the op- posite. I would say the work we have done in CP4 so far has been delivered somewhat still with our inward focus and that can- not continue. To deliver CP4, our targets, which are incredibly stretching, can only be delivered with a collaboration that we are increasingly seeking and enjoying with the rest of the industry…


…All I can promise, along with my col- leagues from Network Rail, is that Network Rail will do everything in its power to drive reform from its end. My only request is please engage with us and tolerate us when we stumble – because a smooth process it will not be. If you see something that you think is behaviour running counter to our public declarations then challenge us.


Do not say ‘I told you so’ – that is the quick- est way to kill reform. Network Rail is here, ready to change, and we need you to be our partners in that process.


people can sense a sea change; but I think there is an understandable healthy scepti- cism as to whether this change is here to stay. Please hear me when I say it is here to stay. Be sceptical – but then watch and work with us as we go forwards.


Challenging targets


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