| Independent review to get better value for money in rail |
| Monday, 14 June 2010 | |
 The Secretary of State for Transport Mr Philip Hammond said today (14 June 2010) “I welcome the publication of the scoping study report from Sir Roy McNulty’s review of Value for Money on the railway. While I recognise that this report represents a very early stage in the work of Sir Roy and his team, I believe that the report represents an important step in identifying the factors that drive up the cost of the UK railway. Given the scale of the fiscal deficit the UK is facing, it is vital that public spending be subject to scrutiny to ensure that it represents value for money. We must adjust to a world in which our aspirations for a successful railway have to be met from within a much tighter public spending envelope. As the scoping study highlights, there is evidence that the cost of the UK railway is relatively high, both in historic terms, and by comparison with other European railways. The next stage will be to look at options for ensuring public investment in the railways is delivered as efficiently and effectively as possible. I have therefore asked Sir Roy to accelerate key elements of his work so that his preliminary findings can inform the decisions on public spending that will have to be taken in the autumn. I would call upon all stakeholders in the rail industry to offer Sir Roy and his team their fullest co-operation. By driving efficiencies on the railway, we can ensure that passengers and freight users get the railway they need at a price which Government and taxpayers can afford” The review by transport industry expert Sir Roy McNulty will now speed up its work so that preliminary findings are ready in time to inform Government decisions on public spending in the autumn. The scoping study for Sir Roy’s report, jointly sponsored by the Department for Transport and the Office of Rail Regulation sets out the key issues that need to be dealt with. The scoping study says that the overall cost of running Britain’s railway has risen but income from users has not kept pace, meaning an increased call on the taxpayer. The way forward will involve not just cutting costs, the study says, but identifying how the industry can work more innovatively, finding new ways of doing things. The study has no “no go areas” and will aim to create a range of short and long-term solutions across the entire industry. Its scope has been informed by feedback from about 100 stakeholders. The study will focus on eight broad themes: industry objectives, strategy and outputs; industry leadership, planning and decision-making; interfaces, incentives and structure; revenue; asset management; supply chain management; innovation, standards and safety; and people. The review was launched last December and asked to report in March 2011, its remit to make recommendations to improve value for money on the railway to ensure future growth is sustainable. Transport Secretary Philip Hammond said: "Passengers and taxpayers will rightly ask why it is that our railways in the UK are so much more expensive than those in the rest of Europe. “Given the very significant financial constraints that we face, it is essential that we drive out inefficiencies and reduce costs. Better value for money is the only way we are going to protect train services and avoid very high rises in train fares. “This report by Sir Roy McNulty will play a key role in informing how we go about creating an efficient and modern railway fit for the 21st century that provides taxpayers with value for money.” In setting the context of its study, the review published today said: International benchmarking carried out by ORR suggested that Network Rail is 30 to 50% less efficient in terms of maintenance and renewals expenditure than comparable European railways. The recent HS2 study found that civil engineering costs in the UK were typically up to double those in Europe. Franchising of trains in countries such as Germany and Sweden has reportedly led to cost reductions of between 20 to 40%, while train operating costs in Great Britain are still above their level in 1996-7. The Office of Rail Regulation’s Bill Emery said: "In recent years there has been significant growth of passenger and freight traffic on the railway, while performance has improved considerably. However, the current cost of running the railway is too high, and the burden on the taxpayer too great. "The joint ORR and DfT Value for Money study will bring together the entire rail industry to explore ways in which we can reduce these costs so that our railway can continue to grow and prosper. The study will make recommendations about how the industry can meet the challenges of the future towards achieving our vision of a railway which delivers safety, efficiency and satisfaction levels to world class standards." Leader of the independent review of value for money in the rail industry Sir Roy McNulty said: “The railway as a whole faces significant challenges in terms of costs and affordability. Finding effective responses to these challenges will not be easy in such a large and complex industry. “The study team has been encouraged by the ready co-operation we are receiving from many people within the industry, and from ORR and DfT. Our aim, with their help and support, is to chart a route to a sustainable future for rail in this country”. The Rail Value for Money Scoping study report (published today 14 June 2010) notes the following: The cost of the railway is high by historic standards and also when compared to European railways and other regulated sectors where comparisons of comparable activities have been made: International benchmarking carried out by ORR as part of the recent periodic review suggested that Network Rail is 30 to 50% less efficient in terms of maintenance and renewals expenditure than comparable European railways Comparison with other regulated sectors suggests that they have typically achieved real unit operating cost expenditure reductions of 4 to 6% per year following privatisation. Network Rail’s operating costs are still above their level in 1996-97 The recent HS2 study found that civil engineering costs in the UK were typically up to double those being achieved in Europe Franchising of train operations in other countries such as Germany and Sweden has reportedly led to cost reductions of between 20 to 40% whereas train operating costs per train-km in Great Britain are still above their level in 1996-97. In the context of what are likely to be severely constrained public finances, the railway must demonstrate that the outcomes it delivers represent the optimum use of limited resources. The following sections set out what the railway has delivered and the implications for government funding and value for money. They focus on the passenger railway as the principal recipient of government support, although the freight sector is taken into account where its impact is material. Most of the analysis covers the period 1996-97 to 2008-09 |
