Opinion
ATOC PLATFORM Michael Roberts
T
his autumn’s party conference season will start focusing policymakers’ minds on their coming manifesto commitments to rail, among many other areas. That is a spur to reflect on the record of franchising, particular in this year, the twentieth anniversary of the Railways Act. Our report, Growth and Prosperity, based on data collated and analysed by KPMG, provides important evidence of the role franchising has played in rail’s recent success. It demonstrates that passenger revenue rose by £3.2 billion between 1997-98 and 2011-12, with 96 per cent of the increase coming from passenger growth and just 4 per cent from fare changes. At the same time, growth in costs, such as staff, leasing and fuel has been constrained.
The result has been a major increase in the surplus generated by train operations. This has gone from £600 million in 1997-98 to £2 billion in 2011-12 and is reflected in a fall in net subsidy from government to train operators from £1.4 billion to £81 million over the last decade. Taking the combined effects of passenger growth and declining subsidy together, the impact is a fall in subsidy per passenger journey of 18 per cent. With only a small part of the increased surplus feeding through into train operator profit margins, which remain on average around 3 per cent of turnover, the money available for government to reinvest in the railway has increased more than four-fold from £400 million to £1.7 billion. We believe that the growth in journeys underpinning this increased surplus can only be partially explained by the demand drivers usually cited. Comparing economic growth and passenger growth in the last 15 years
of British Rail with the first 15 years of franchising reveals that between 1982-83 and 1997-98, journey growth was half GDP growth. From 1997-98 to 2011-12, it was almost double. In addition, since 1997-98, rail prices and motoring costs have broadly mirrored each other overall, so it is not obvious that any change in the relative cost to users of the two modes is
owned railways in France, Germany and the Netherlands. Neither does the growing UK population explain passenger growth. Rail journeys per person are outstripping population growth nationally. While annual journeys per head of population increased during the years leading up to franchising from 11.5 in 1982-83 to 14.9 in 1997-98, this figure
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driving rail growth.
The so-called ‘London effect’, reflecting the strong relationship between the London and South East economy and demand for rail travel, also does not fully explain what is happening. Rail journey growth in the region outstripped growth in Tube travel, at 73 per cent and 43 per cent respectively. Peak journeys in London and the South East increased by
17 per cent in the last 15 years, almost exactly in line with the national average. This suggests that the major growth in rail travel has not been on the back of a captive commuter market. As well as higher growth than the publicly-run London Underground, growth in the UK has exceeded that of the state-
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