ORR say NR doing well on efficiencies. Does this mean the railway can ever "break even?'

https://orr.gov.uk/news-and-blogs/p...g-start-in-delivering-its-3.5bn-savings-plans

The Office of Rail and Road (ORR) has seen encouraging progress in its first assessment of how efficiently Network Rail is delivering its five-year plans, which run from 1 April 2019 – 31 March 2024.

ORR found that Network Rail has responded well to our initial concerns and as a result has provided more robust evidence and appears on track to deliver £391m of efficiency savings in 2019-20, ahead of its target. This is encouraging progress and a welcome turnaround, based on the strengthening of efficiency planning and delivery, and stronger central oversight and is part of Network Rail’s commitment to deliver £3.5bn of efficiency improvements during the course of the five years.

Click to expand...

In last years financial report the amount of subsidy going into NR dropped by several hundred million.

The overall subsidy was basically unchanged because the TOC's stopped being a net premium payer and took in subsidy also. However with growth running as it is, new trains coming on board en masse and NR seemingly on target to hit efficiency targets can the subsidy come down enough so that a steady state railway is basically breaking even.

I also note that the new CP doesn't seem to have as many enhancements as before and many large projects are recently finished or coming to a conclusion.

I discount HS2 from this calculation as that situation is not clear at the moment. Maybe it isn't even desirable for the railway to be subsidy free as it might indicate demand has been choked off by pricing.

I would hope though that without large subsidies being needed maybe the dead hand of the Dft might be lifted somewhat.

HS2 has different funding arrangements altogether and wouldn't form a part of this assessment.

They were set something ridiculous like 20% cost savings by ORR for CP5, but by the end of the control period costs actually increased by 7.5%.

This isn't in any way a dig as we should all be aiming for the salaries paid on the railways but...

for the railway to break even, fares would need to increase substantially and to a level that the 'normal' passenger couldn't afford as the average wage for a 'normal' person outside the railway is much lower than the average wage paid within the railway for a similar sort of job. Compare bus driver to train driver or bus conductor to train guard.
Running and operating costs for the railway are, therefore, comparatively very high as a result,

This increase in fares would see a fall in ridership causing fares to rise even more and a vicious circle begins.

As I said at the start, this isn't a dig as, whilst I'm envious of the salary paid to a train driver, I don't begrudge them their pay.

It is, though, quite considerable when compared to external jobs.

What I would argue is that something like a railway should be seen for its economic benefit - in Victorian times, the factory owner built a town or a village for his workers, in Amsterdam, the ferries are free to enable workers to get to work and create wealth. The railway and bus industries should be seen as essential....

Moderator note: if anyone wishes to discuss any suggested changes to service provision, re-opening proposals etc please do so in a separate thread. The posts regarding a possible extension to Hawick have been moved to https://www.railforums.co.uk/thread...uld-happen-for-social-benefit-reasons.197093/

Im wondering if the railway almost by default will end up getting closer to balancing its books. The biggest swallower of subisdy is NR and the new Control Period does seem to focus much more on renewals rather than enhancements. If further electrification is off the cards for the foreseeable future I am not sure if there are any big projects planned for the next five years and if you consider what projects are coming to an end there is certainly not a pipeline of major projects coming online to replace them. NR are currently underspending their renewals budget and meeting efficiency targets. If growth does continue because of new rolling stock rather than infrastructure improvements then subsidies must reduce. I am sure if the railways saw 3-5% growth year on year with subsidy reducing every year then the mandarins will be happy enough.

Enhancements are generally excluded from calculations of running costs, instead they are judged on their individual lifetime benefit/cost ratio's.

Today the passenger operation side is consistently breaking even but there is still a multibillion subsidy of the infrastructure maintenance and renewal costs (about £3bn if I remember right?).
The proportion of running costs borne by the fare paying passenger has risen from 50% to 75% over the last two decades but for the complete railway (services as well as infrastructure) to break even on an operating basis would require either a 25% increase in ticket prices or 25% reduced running costs.

The break even costs on passenger operations does not take into account the heavily subsidised track access fees that operators get. The wear andtear on the track is far more than the £2.00 per mile some operators pay in track access fees.

I wouldn't worry too much... NR have an aspiration for 12 hours door-to-door for frontline staff. They'll need plenty of money to recruit sufficient signal(wo)men to deliver that!