Great British Railways: how can money be saved?

[The Planner]

* In structural and funding terms; where people physically sit is increasingly unimportant.

That was one of the reasons it all went to MK to start with. Hindsight is wonderful.

 

[Watershed]

Administrative functions perhaps - not just ‘admin’. IT and HR are administrative functions that support the operational side of a business, but they are certainly not ‘admin’, which implies more of a box ticking & paper work & formality exercise. I’m not going to pretend I know how people work in Train Planning, but just like IT, HR, Finance are not ‘admin’, I would expect that there is a large degree of centralisation that could happen to achieve better cost synergies.

Synergies really only happen where people were previously duplicating equivalent work (e.g. developing separate HR policies), or where people had a lot of slack time before.

You probably won't make more than a 5-10% saving through centralisation of most functions.

 

[Bald Rick]

I don't think I'd get hung up on that per-se, but I would agree that a potential saving is to "centralise"* all business functions and contracts that are applicable to all TOCs, and timetabling is certainly one of them.

Timetabling is centralised, in NR in Milton Keynes.

The work the TOCs do on the timetable is largely resource planning, and that needs to be done by people who are very familiar with Those resources, ie the traincrew and rolling stock depots, and all their foibles (staff terms and conditions, local agreements, maintenance schedules, etc). That needs to be relatively local.

 

[Iskra]

Synergies really only happen where people were previously duplicating equivalent work (e.g. developing separate HR policies), or where people had a lot of slack time before.

You probably won't make more than a 5-10% saving through centralisation of most functions.

I think we'd all be happy with a 5-10% fare reduction

 

[Bletchleyite]

Synergies really only happen where people were previously duplicating equivalent work (e.g. developing separate HR policies), or where people had a lot of slack time before.

You probably won't make more than a 5-10% saving through centralisation of most functions.

5-10% is still a saving worth making.

 

[Purple Orange]

Synergies really only happen where people were previously duplicating equivalent work (e.g. developing separate HR policies), or where people had a lot of slack time before.

You probably won't make more than a 5-10% saving through centralisation of most functions.

A 5%-10% reduction in costs is a big reduction though. Many businesses go through restructuring exercises to be as agile as they can, but the cost reduction may only be of the magnitude of 5-10%, yet that reduction represents the company operating at it’s most lean and optimal level for it’s shareholders. GBR should be no different with regard to operating for the taxpayer & passengers.

 

[WelshBluebird]

Maybe the very fact I am asking this question means I should just stay out of this thread - but why should cost cutting be such a high priority thing? Yes I know that is what the government wants to do, but take a step back from the "Tory government wants to cut costs" headline and really ask why. Surely, if we are to entice people out of cars and reduce congestion and pollution, we need to be spending more money on sustainable public transport not less? In my eyes, cost cutting for the sake of cost cutting is like the old saying of "cutting off the nose to spite the face". Sure, if there are legitimate areas that are currently overspending then look at them, but then invest that money saved into other areas of the railway. I absolutely hate this insane idea that something has to make a profit for it to be worthwhile (if nothing else, because as you then see with companies like Amazon, making a profit isn't enough - you have to still continue to cut costs and corners in order to make even more money).

 

[Bletchleyite]

Maybe the very fact I am asking this question means I should just stay out of this thread - but why should cost cutting be such a high priority thing? Yes I know that is what the government wants to do, but take a step back from the "Tory government wants to cut costs" headline and really ask why. Surely, if we are to entice people out of cars and reduce congestion and pollution, we need to be spending more money on sustainable public transport not less? In my eyes, cost cutting for the sake of cost cutting is like the old saying of "cutting off the nose to spite the face". Sure, if there are legitimate areas that are currently overspending then look at them, but then invest that money saved into other areas of the railway. I absolutely hate this insane idea that something has to make a profit for it to be worthwhile (if nothing else, because as you then see with companies like Amazon, making a profit isn't enough - you have to still continue to cut costs and corners in order to make even more money).

It depends.

There is tremendous waste in the railway - it's there almost everywhere you look - we joke about "railway inflation" and it is a massive problem. That needs cutting even if you want to increase the subsidy for societal reasons.

It's not just the railway - the NHS, whether that bit is publically or privately operated, is riddled with it too. As to be fair are many large private businesses.

The question could I suppose be framed as "how do we make the railway better value for money for passenger and taxpayer?"

 

[Iskra]

Maybe the very fact I am asking this question means I should just stay out of this thread - but why should cost cutting be such a high priority thing? Yes I know that is what the government wants to do, but take a step back from the "Tory government wants to cut costs" headline and really ask why. Surely, if we are to entice people out of cars and reduce congestion and pollution, we need to be spending more money on sustainable public transport not less? In my eyes, cost cutting for the sake of cost cutting is like the old saying of "cutting off the nose to spite the face". Sure, if there are legitimate areas that are currently overspending then look at them, but then invest that money saved into other areas of the railway. I absolutely hate this insane idea that something has to make a profit for it to be worthwhile (if nothing else, because as you then see with companies like Amazon, making a profit isn't enough - you have to still continue to cut costs and corners in order to make even more money).

It's eliminating waste so that the money can be reinvested elsewhere in things that can deliver more value/benefit to the passenger in the future. It doesn't have to be negative...

 

[WelshBluebird]

It depends.

There is tremendous waste in the railway - it's there almost everywhere you look - we joke about "railway inflation" and it is a massive problem. That needs cutting even if you want to increase the subsidy for societal reasons.

It's not just the railway - the NHS, whether that bit is publically or privately operated, is riddled with it too. As to be fair are many large private businesses.

The question could I suppose be framed as "how do we make the railway better value for money for passenger and taxpayer?"

Maybe we need a different thread, but whilst I am sure there are examples of "railway inflation", I do think the amount of waste that can be cut without actually affecting customers and the front line is exaggerated by those who have a particular political view about public funding of such things (the same is true in the NHS too - despite all the talk of waste it is one of the most efficient health services in the world in terms of funding vs outcomes).

It's eliminating waste so that the money can be reinvested elsewhere in things that can deliver more value/benefit to the passenger in the future. It doesn't have to be negative...

Maybe I am just too pessimistic, but I don't see any money saved from "waste" going to be reinvested in the railways - it will just be used to reduce the government subsidy (which this government and many people who support them feel is a bad thing - whereas I see government funding of the railways as a good thing). That doesn't mean waste is a good thing of course - but just understand what you are wishing for. The government very much feels that the railways should pay for themselves (it has been government policy for years now to raise fares so more of the railways costs are paid by the customer rather than government) and I can't see that changing anytime soon, even in the new system (if anything the new system potentially makes that kind of thinking even more likely as, at least it reads to me, that even more of the risk will fall to a government owned body rather than the ToCs).

 

[Bletchleyite]

Maybe we need a different thread, but whilst I am sure there are examples of "railway inflation", I do think the amount of waste that can be cut without actually affecting customers and the front line is exaggerated by those who have a particular political view about public funding of such things (the same is true in the NHS too - despite all the talk of waste it is one of the most efficient health services in the world in terms of funding vs outcomes).

That's because it doesn't have a load of staff working out who owes what. But that doesn't mean it couldn't be better.

Maybe I am just too pessimistic, but I don't see any money saved from "waste" going to be reinvested in the railways - it will just be used to reduce the government subsidy

As a taxpayer that is a benefit to me too. My first choice would be to have the same funding produce better outcomes, but I'll accept the same outcomes from less money as a second preference.

One example noted elsewhere is that there are presently about 5 or 6 different TOC website and app contracts (not one per TOC, often just one per group) plus NRE itself. Reducing that to one will save a considerable sum of money. Duplication of Delay Repay clearing houses is another; there should be one national clearing house for this (and I'd support that even if we weren't changing the industry's structure).

 

[Annetts key]

Ultimately, most of the industry’s spend goes on staff costs or interest payments one way or another.

Yes, I agree. But the cost of railway specific equipment can be rather expensive. One typical relay for controlling a signal, a point machine or used with a track circuit can cost between £100 to £250. Some only have a service life of ten years. One conventionally signalled relay room can have between 250 to 10,000 relays (although most relays have longer service life). On schemes that use SSI modules, I believe these cost upwards of £1000 per module.
So although the day to day running costs of the staff wages is the most significant amount, the cost of (what I consider to be) routine maintenance type renewals and the cost of replacement parts to deal with failures can be significant.

Sorry - but 'defined benefit' schemes in the private sector are now unviable - this was caused in part by Robert Maxwell pillaging the MGN scheme for his own ends, which led to legislative changes that meant companies could no longer run a deficit on their pension scheme (even for a short time). The costs of eliminating such deficits would have financially crippled some large companies, hence the decision to de-risk and move to DC schemes.

The final nail in the coffin on such schemes was Gordon Brown's tax raid on pensions, particularly iniquitous that because people are *encouraged* to save into pensions by doing so on their pre-tax income, on the grounds the state gets back their tax take when people use it as their income and therefore pay income tax on it. It was doubly iniquitous, because it only affected the private sector - state sector pensions of course being underwritten by the government have no such concerns.

It would be far better if all DB schemes in the public sector were stopped - many are very generous for the amount that needs to be contributed and many (such as the police) can be claimed remarkably early. I fail to see why private sector taxpayers should be feather-bedding the pensions of public sector workers.

But that’s my point. The government needs to change the law (including the tax laws) to encourage DB pensions over all other types. All companies (that currently have to provide a pension scheme) should be encouraged (including economic encouragement) to set up and maintain a DB scheme, and new laws to provide better protection for pension scheme members should be brought in.

BTW, you do know that Network Rail does not automatically let new staff join the Railways Pension Scheme? Instead they join the Network Rail pension scheme. This has been the case for many years now.

That’s interesting about the interest payments. Ultimately though it appears that it still boils down to people costs. Regarding capital infrastructure spend, that is less of a concern as it is not apart of the cost required to operate the railways. The DfT could choose to not build any new lines or stations and the cost goes away. However capital infrastructure spend to replace existing infrastructure is more of a concern, depending upon how frequently it is required.

Unfortunately the lines between running costs and capital infrastructure spend are rather blurred. Often what was considered to be routine renewal work in the past, is now considered to be capital infrastructure spend now.

So some examples:

• The ballast is worn out under a half a mile of track resulting in wet beds, no amount of tamping (compacting the ballast under the sleepers) or stone blowing (blowing stone gravel into the voids under the sleepers) can keep the track in a good enough state to allow the line speed to be maintained. The only solution is to programme a renewal (be that a ‘ballast clean’ with tons and tons of new ballast stone) using on-track specialist ballast cleaning machines, or lifting the track and using hydraulic JCB type machines to remove the old ballast and then lay down new ballast stone. Until the work is done, a temporary speed restriction has to be imposed.
• A signal head has developed a fault that the maintenance guys cannot fix, the case is letting in rain water due to the steel having rusted away leaving it not water tight. The solution is to install a new signal head. In the meantime, the signal has to be taken out of use due to the water causing electrical issues.

Both of these affect the running of the operational railway, but both jobs will be done by the capital works section of Network Rail, not the maintenance organisation.

I agree that completely new lines (or reopening closed lines), same for stations etc. or other new infrastructure where there was different or none before (flying junctions replacing a level junction for example) is clearly completely different.

There is tremendous waste in the railway - it's there almost everywhere you look - we joke about "railway inflation" and it is a massive problem. That needs cutting even if you want to increase the subsidy for societal reasons.

It's not just the railway - the NHS, whether that bit is publically or privately operated, is riddled with it too. As to be fair are many large private businesses.

The question could I suppose be framed as "how do we make the railway better value for money for passenger and taxpayer?"

Yes, there is waste and inefficiencies. Unfortunately just cutting from the top down often does not address many of the problems that exist. Some of these problems are as a result of too much fire fighting (nothing to do with any actual fires) rather than actually putting effort and resources into sorting out the root causes. Many of the issues that the staff on the ground know about go unaddressed.

It's eliminating waste so that the money can be reinvested elsewhere in things that can deliver more value/benefit to the passenger in the future. It doesn't have to be negative...

Absolutely.

 

[whoosh]

My sense is that the cost savings will ultimately be heavily staff-focussed; people are expensive and pension schemes add a good whack on top (potentially up to +30%). Like most of the private sector, it would be reasonable to move from defined benefits (DB) to either defined contributions (DC) or civil-service style average earnings pensions FOR NEW JOINERS*. DC offers more savings that the average earnings, but either would reduce the costs significantly over the long-term, and bring the railways into line with the private/public sectors.


*Unions please note....

Tell me more about career average civil service pensions, because whilst the Railway Pension Scheme is Defined Benefits, it is career average now and has been for the last five years.
Also changed to have to work two years longer for most, before receiving benefits.

Network Rail is already Defined Contribution I believe.

 

[Bald Rick]

Network Rail is already Defined Contribution I believe.

Network Rail is defined contribution for new starters with a choice of two schemes, essentially a basic scheme and a career average earnings scheme. After 5 years service you get a one off chance to join the Defined Benefit pension, which is ‘RPS 65’. This is the Railway Pension Scheme, retirement age 65. But it isn’t straight final salary, it’s a lot more complicated.