UK railways – value for money?

We are constantly being told by the popular media that Britain’s railways are less efficient and more costly than those of our European counterparts. So strong is this belief that successive governments have commissioned expensive consultative studies to determine the reason and to put forward recommendations by which this perception can be reversed.

Imagine, therefore, the surprise when an evening seminar was organised back in February by the Community of European Railways (CER) and ATOC entitled “Value for Money in Railways – what can Europe learn from Great Britain?” Is all the press talk just so much hot air? Do the British actually operate a railway system that is the envy of many others? The Rail Engineer went to Brussels to meet Libor Lochman, Executive Director of the CER, to find out what had prompted this seminar.

The perceived UK scene

Britain’s railway organisation is the only one where there is true structural separation of infrastructure from train operators. Despite the traumas of the early privatisation years, the significant increase in passenger numbers that the British train operating companies have attracted is being noticed within Europe and particularly by the EU. The scope for innovation is seen as impressive, with many new journey opportunities having been developed along with a general improvement in rolling stock quality and train service frequency. The quality of stations is much higher with bright, welcoming signage and better train running information.

Whilst the franchise system is noted, so has been the emergence of open access operators where bottom line accountability is the key to survival. Perhaps the prestige high speed lines within mainland Europe have a better image than the intercity lines of the UK, but these are very much the exception. The general train service offering within Great Britain is viewed as better than equivalent countries in Europe.

The EU Vision

The European Commission would like to see this perceived best practice implemented elsewhere. The implication is that the majority of train operations remain dominated by the state owned railway organisations with very little competition having emerged as a result of EU initiatives to split infrastructure from operations.

A vision has emerged that, in order to compete successfully against road and air, both of which now largely exist in open market conditions, the railways must do likewise. The model seen by the European Commission to achieve this would be a single European Rail Infrastructure Management that would sell train paths on a competitive basis.

This vision is seen by the CER as flawed, largely because the rail infrastructure remains state owned and a level playing field with other transport modes could not be achieved. A better focus should be on improved co-operation between infrastructure managers to obtain co-ordinated investment plans, train path allocations, equitable charging arrangements and harmonised rules for cross border traffic.

Perhaps it is too much to expect that the rail business, both infrastructure and train operations, could be subsidy free. Just how the EC sees subsidies being paid is unclear and the expectation that open access operators would flood in is probably unrealistic. The mechanism to make this all come about is an unknown but, more pertinently, would it represent value for money and would it be more efficient.

In Europe, the payment of subsidies to train operators follows no set pattern. Most franchises in the UK obtain subsidy to operate a guaranteed minimum service level. In Europe, PSO (Public Service Obligation) compensations apply to the incumbent state controlled operators and this results in lower fare levels.

Germany‘s InterCity Express (ICE) services are not under the PSO contract whereas the Regional Lines are, so they are able to offer cheaper, although slower, travel between two centres. The Vienna-Salzburg line in Austria is trialling open access competition which should lead to efficiency gains.

Freight services must not be forgotten. Much depends on the contracts that the freight customers have negotiated. Subsidy is not the order of the day and freight traffic must be bottom line driven, in many ways a pity since road user charges do not fully pay for the wear and tear on road infrastructure. Since rail freight transits are usually long distance, the freight operators pay more for access.

Is the Vision Realistic?

So why is the CER bothered by all of this? Basically, because it has real fears that the EC vision is over simplistic and may well lead to a worsening of railway finances. If true, it begs the question why should a member state pay for an EU model that costs the tax payer more?

The “Value For Money” seminar was arranged to bring an element of realism to this complex problem. The line-up of speakers was impressive. As well as Libor Lochman, there was Sir Roy McNulty, Michael Roberts of ATOC, Keir Fitch from the EC Cabinet of Transport, Roger Cobbe from Arriva Trains and Vice Chairman of the CER and Brian Simpson, the MEP for the North West and Chairman of the Parliamentary Transport and Tourism Committee.

All outlined their own perspective position, but at the heart of it all is the vexed issue of ”value for money”. Whilst the British model looks attractive and progressive to mainland European eyes, it undoubtedly costs more than European counterparts. The often quoted figure is one third more. Understanding why this should be is the vital question – is it because the model itself is more costly? Or, more likely, is it because the interfaces between infrastructure and train operators are so complicated that they create needless inefficiencies that have to be paid for? Various instances come to mind:
– The price and priority of train paths
– Over complex financial penalty regimes
– Over zealous safety demands
– Possession management and line closures/bus substitution
– The infrastructure monopoly and perceived high cost of projects.

Add in to this the Passenger Rights Obligation and the financial compensation that has to be paid. If the cause of delay is clear, then this must be paid if delays exceed 60 minutes.
None of these are unique to the UK, but the McNulty report sets out how some may be tackled. The UK goal is to save £3∙5 billion per annum on rail costs by 2018. This has to be achieved without any significant cut back in services and no line closures.

Expansion, Projects and Environment

The UK lags behind mainland Europe in the provision of High Speed Lines. Attitudes seem to differ considerably; Libor Lochman had not heard of the acronym NIMBY and was amused when it was explained. There is a general acceptance that High Speed Lines are good for the wider European economy with less emphasis being placed on proving the individual business case for a particular project.

Environmental issues are more sensitive in the UK, maybe because these are easy to latch onto as a means of preventing progress. European examples are rare. One instance was cited; the Cologne-Frankfurt High Speed line freed up train paths for freight on the lines that run either side of the Rhine. This has resulted in many more freight trains running around the clock with considerable increase in noise and some people having difficulty sleeping. So vociferous are the complaints that tunnels may be drilled to relocate the line away from hotspot areas.

Most European investment has been in high speed lines, with regional routes left largely as they were. The reverse is true in the UK, where main line upgrades have been, and continue to be, carried out. Although high speed lines are extremely expensive, a green field site is always easier to work on compared to an operational railway and far less disruptive, perhaps another reason why British rail projects cannot be compared directly.

In Conclusion

The CER is right to sound a note of caution to the EC if it tries to impose and expand the institutional separation as the single model for Europe. There are many factors to take into account and these must be fully understood. Can the Europeans learn from the British? Just look at what has happened with low cost airlines, where UK initiatives are being copied right across the continent and the wider world.

However, for rail, it is not that simple. The EC needs to note that the British are experimenting with a partial vertical alignment in some parts of the country , such as the “Deep Alliance” between Network Rail and South West Trains, as a means of improving efficiency and reducing cost. Equally, Network Rail is in the process of devolving operational decision making down to smaller management units.

One might be tempted to say ‘if you wait long enough, the wheel goes full circle’. Quite how the European model will pan out will be watched with interest.