Network Rail told by regulator to cut costs by £2bn

 
File photo dated 01/12/12 of a general view of level crossing at Wedgwood train station in Stoke-on-Trent, Staffordshire The rail regulator has approved funding to upgrade and close some level crossings

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Network Rail has been told by the rail regulator that it must find savings of £2bn over the next five years at the same time as improving punctuality.

But the Office of Rail Regulation (ORR) said the cost cuts must not come at the expense of safety.

It said at least nine out of 10 trains must run on time on all routes by 2019.

Network Rail, which is in charge of the UK's rail infrastructure, welcomed the plans and said it would respond in September after analysing the findings.

Last week the ORR said Network Rail had missed all of its punctuality targets for England and Wales last year. The figures came a day after it was revealed that the company's net debt had reached more than £30bn.

Analysis

Along with the price of a ticket, punctuality is the big issue for train passengers.

It has actually improved a fair amount under the stewardship of Network Rail but things have taken a turn for the worse recently. The company missed all of its passenger service punctuality targets for England and Wales last year.

It now has another year to improve significantly or face a fine from the regulator, which could run to about £75m. Ironically a fine could mean rail money going to the Treasury rather than being ploughed back into improving the network.

The regulator is about to set much tougher targets for punctuality, including a minimum standard for individual operators. It is easy to set targets; much harder to hit them.

Strike threat

The independent regulator set out its plans for 2014-19 after examining Network Rail's five-year business strategy, which was published in January.

During the 2014-2019 period, the ORR said Network Rail must:

  • Improve punctuality - an average of 92.5% of trains on all routes across the UK must arrive on time, compared with its target of just over 90% now
  • Complete projects to increase capacity and improve service as fast as possible
  • Give more say to rail users on how the railway is improved, putting passengers "at the heart of decisions"
  • Provide better and more up-to-date data on the condition of its tracks, bridges and other assets, so problems can be fixed before they occur
  • Improve safety for passengers and workers - the ORR has approved £67m of funding to upgrade and close level crossings in England and Wales
  • Give greater value for money - the ORR is encouraging train operators, Network Rail and the supply chain to make further savings

The ORR said its assessment showed that between next year and 2019, the cost of running the rail network should be £21.4bn - nearly £2bn lower than proposed by Network Rail.

The savings will be made through new technologies, improved management and more efficient ways of working but will not come at the expense of safety, the ORR said.

Anthony Smith, Passenger Focus, says people want "more trains, longer trains, more seats"

It added that it had approved a £12bn plan to enhance capacity to deal with the 14% anticipated increase in passengers by 2019.

Anna Walker, chairwoman of the ORR board, said regulators believed Network Rail could "do what it is promising to do for less money and more efficiently".

But Bob Crow, general secretary of the Rail, Maritime and Transport workers' union, said it would mean "massive cuts to renewals and maintenance, compromising safety and leading to more breakdowns, failures and delays".

He warned that any threat of compulsory job losses at Network Rail would lead to preparations for a national strike ballot.

Anthony Smith, chief executive of Passenger Focus, said the group was looking at the detail to see if the balance between cost cutting and efficiency was "about right".

"Passengers will judge it when the trains turn up on time," he told BBC Radio 4's Today Programme.

Mr Smith said: "We've had year after year of above-inflation fare rises that have led to money pouring into the rail industry and, in return for that, passengers expect the basics of the service - on time, clean train and more seats."

Facing fine

ORR chief executive Richard Price said the "industry must continue to improve its efficiency to reduce its dependence on public subsidy".

Anna Walker from the rail regulator: "We must have the improvements... but it must be done more efficiently."

A Network Rail spokesman said high levels of investment were needed to continue expanding the railways.

"Getting the balance right in making the choices between performance, growth and value for money is critical if we are to build on efficiency savings of around 40% achieved over the last two control periods," he said.

Michael Roberts, chief executive of the Association of Train Operating Companies, said the ORR plans were "an important opportunity to incentivise Network Rail and operators to work more effectively together".

A train is defined as on time if it arrives at the destination within five minutes of the planned arrival time for London and south-east England, or regional services, or 10 minutes or less for long distance services.

If Network Rail keeps missing punctuality targets, it faces a fine of up to £75m from the ORR.

The company is held responsible for delays caused by signal failures or relating to problems with train tracks.

 

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  • rate this
    0

    Comment number 478.

    where else in the world would any railway reduce trains at peak times...absurd, increase trains = increase revenue due to increased passengers, and not angry stressed passengers late as per ! welcome to not got a scooby doo britain. common sense out the window over money

  • rate this
    +3

    Comment number 477.

    I'd like to know what figures they've used to base their assumption that passenger number will increase by 14% between now and 2019?

    They said at the time of privatisation that passenger numbers were static and that's why there was no major investment in the railways for the first 10 years after privatisation.

    But in reality passenger numbers have increased by 50% and the network can't cope.

  • rate this
    -1

    Comment number 476.

    473. (Cont...)
    Also, people would move closer to work, which although may be expensive, would be a net gain on an over-eager price gouger too. There are various factors conspiring to drive costs down - but long term investment certainty is the biggest, and absent in the current crony short-term lease rubbish. No incentive to invest, innovate etc. None.

  • rate this
    -1

    Comment number 475.

    I like the sentiment of fully privatising something and letting the free market determine the outcome without taxpayer subsidy, but it's not a free market if someone has no choice but to use a product or service because their life or livelihood depend on it, in such cases there is a strong argument that the public should own it. It's not as if I can just build a rival rail track and compete.

  • rate this
    +1

    Comment number 474.

    Welcome to privatisation where regulation does not work and no real targets are set or stuck to.

    Still will/ can anyone explain why its cheaper to travel by air than rail pretty ludicrous situation

  • rate this
    0

    Comment number 473.

    472.Cheddar George
    Then, sadly, that is the cheapest mode of transport available. My proposal would slash costs still, as people would car pool, or, an enterprising entrepenuer would set up a rival line, seeing the huge opportunity for profit by undercutting the high price gouging existing operator.

    It's not perfect, but better than the current tripe.

  • rate this
    +2

    Comment number 472.

    391.Sally
    If they over-charge, they'll lose money to alternative forms of transport...
    -----
    In many regions such as London, the SE and many cities such as Birmingham, there are no credible alternatives to rail. The roads are rammed solid at rush hour. I've been stuck on the M6 at 6:45am in a jam.

  • rate this
    +4

    Comment number 471.

    from 464
    the largest waste is employing non-railwaymen at exorbitant salaries from the private industry to relearn and apply things that Railwaymen have known and understood for decades. Also the costs from outside the rail industry that apply to rail maintenance are over-egged because there has been insufficient challenge in the past.

    This is how £2bn can be saved safely over 5 years

  • rate this
    +4

    Comment number 470.

    429.paulmerhaba
    Make employers pay employees fares. Things would be made to change then.
    --
    Yes, they'd stop employing anyone that had to commute.

  • rate this
    +1

    Comment number 469.

    15. Or is it Corporatism replacing Democracy? Worth a thought.

  • rate this
    0

    Comment number 468.

    End the entitlement, dependent scrounger, (taxpayer subsidized "private enterprise") culture now. Make meaningful benefit cuts to the Tory cronies and really expensive hangers on.

  • rate this
    0

    Comment number 467.

    On the subject of HS2 we are continually being bombarded by propoganda about how good it will be for growth and the economy in the regions. This will only be the case if it is affordable, i.e. it is sensibly priced (unlike the situation today). I'm yet to hear any debate on this issue. HS2 may turn out to be a white elephant

  • rate this
    -1

    Comment number 466.

    ...[cont'd from 454] Same gate firm has another physical maintenance agreement with another train co, who staff the gates. NR own the kit itself.

    This is duplicated everywhere that has gates. The approach is prevalent throughout the industry, and at every interface between every company sits a %age, a cut, a taste.

  • rate this
    -1

    Comment number 465.

    "if we lived in a true democracy... it would be back under public ownership by tomorrow."

    ...and then privatised again when the public baulk at the cost of providing the necessary investment required to make them function. Thats the issue with public ownership. Politicised budgets where everyone expects someone else to pay.

  • rate this
    +2

    Comment number 464.

    We have been through a period of massive expansion on the Railways. Huge investment in Infrastructure, re-instatement of lines taken out replacement of lines under maintained for decades, stations completely refurbished and all this has cost a shed load of money. But don't look back through rose tinted glasses at BR which was in terminal decline.

    The largest waste is employing non-railwaymen

  • rate this
    -1

    Comment number 463.

    458.nugget
    Except of course any savings by moving them back into government hands will be quickly used up by union driven pay rises.So instead of some investment in private hands we will get no investment in public hands and it will end up costing more.Sad but true.I agree with you, BTW,but would prefer it to be run as a co-op or some other method to encourage workers not to ask for huge rises.

  • rate this
    +2

    Comment number 462.

    There is simply too much complication in the privatised railway structure. It is not so simple that if ORR continus to 'strangle' NR everything will be rosy. NR doesn't control rail fares or what it charges Operators to run their trains. Fewer, longer trains would help improve punctuality, but more frequent services are naturally preferred. Where do you strike the balance?

  • rate this
    -2

    Comment number 461.

    Privatise it, properly - sell off the entire line & land. Then investor(s) will have incentive to invest for the long-term to attract customers to avoid losing them vis-à-vis comment 391.

    Typical short-term franchises from government allow businesses to treat utilities like they do the Amazon on a logging licence: plunder as much as you can as fast as you can: short-termism cronyism pervades

  • rate this
    -1

    Comment number 460.

    Why does no one seem to understand that privatisation only benefits shareholders(with dividends/share trading)?That's fine with 'non essential' goods/services but infrastructure where the public has no choice such as trains and utilities(can't choose water supplier/aren't two train co's on my local railway)need to be publicly owned.Must be because people who can afford shares are rich Tory voters!

  • rate this
    +17

    Comment number 459.

    As usual, private organisations work, public organisations work, but this hybrid solution is the worst of both worlds. Right now there is:

    - no consumer choice - so consumers cannot vote with their wallets
    - no government control - so no political weight to force improvement

    Let's start with being open with how cash is being spent today and holding bosses accountable for efficiency.

 

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