How can the industry lower its costs?

[fsmr]

As i have said before. If you are lucky enough to get a company car like me (which i need for work as an automation engineer,) then the government takes anywhere from £1500 to £14K a year tax off you now regardless of how many miles you do privately, in my case £5k is taken even if i never drive it other than work (I am home based )

If you then get free private fuel (which i don't) you pay another £2-7 K on top of that , again regardless of private use. It is therefore no incentive to use anything other the company car (or van as these are now being taxed) For me it costs me only 13 pence per mile in fuel paid back to the company but i have already paid that money up front to the government so i want to enjoy my nice luxurious and comfortable German car.

Outside of the congested South East which is a different situation, no public transport will ever compete with that. Current turn up return fare to Leicester is £11.50 off peak and £14 return, multiply that by 2 plus a child for a 50 mile return journey by car and no saving the planet in the world argument will work for a trip to the cinema , journey time is also only 10 mins quicker by train as traffic congestion up here is nothing like the South East

The hourly trains however are often full mainly elderly and teenagers without cars

My wife used to go by train to work everyday from Oakham to Leicester but the reliability was so poor for the cost saving on car parking and running costs that she switched back to the car some years ago and wont go back. If you have a board meeting at 9-00 and the train gets cancelled with next one an hour later, it is not going to work and she got fed up paying for a season ticket and then still having to drive in the car to work

If the government want us to switch from cars, then remove the fixed costs and company car taxation and make it variable. If I was only taxed for using my car for private use, i might consider leaving the car and using the train if I was going in to Leicester on my own but then who will then make up the lost taxation revenue so i cant see any government changing that soon.

all thoughts are my own

 

[HH]

Needs to address some/all of these -

+ Many perverse incentives, so local optimisations give a net higher cost
+ 'gold plating' of requirements so no-one can be blamed for anything
+ Inept pen-pusher at DfT running procurements
+ Duplication of middle and back-office services
+ Statist mentality at Network Rail
+ Cost of capital for infrastructure renewal (probably govt. backed loans)
+ Profiteering by leasing companies and sub-contractors
+ Restrictive practices by unionised staff
+ Unfunded pension liability
+ Box-ticking mentality from too many inspectorates/jobsworths
+ Poor computerisation / yield management

I think that's a good starter list.

Certainly compared to other European networks we are expensive in cost of driving and maintaining trains, and more importantly (due to the cost) maintaining the network. Restrictive practices don't help this, and neither does NR's attitude to projects* (to be fair I think that they are trying to change).

Then we have a large amount of people who do nothing than check that other people are doing their job, both within organisations and externally (DfT, ORR, etc.), partly driven by an arse-covering mentality that's prevalent in UK rail (*which also affects costs). Plus ROSCOs appear to add more cost than they should, due to the poor way the initial nationalisation was carried out.

The DfT/ORR is also at fault for some of the perverse incentives and pointless money-go-rounds that exist in the industry, all of which take skilled, expensive resource to maintain.

The industry could do better with computerisation, but this is true (often more true) in other sectors or in other countries. Yield management will take a big leap in the next few years; that I guarantee.

In my opinion most of the problems could be fixed by government either being involved less, or being involved right.

 

[Goatboy]

I just don't know how the message that the motoring costs add up could be explained/ promoted (and I say this as someone who gave up the family car a couple of years ago).

It also doesn't cost as much as people think. The marginal cost of using a car for a journey will vary between 10 and 40p a mile for the majority of cars (ie a depreciated small economical car will be closer to 10p but a bigger car will be closer to 30p, and it will also depend on the type of journey). An average of about 20p is probably reasonable for medium to long distance journeys.

Marginal cost is what matters to people who already have a car. The maths change totally if you are looking to give up your car, or you are looking to see if its worth buying one, but most people will, regardless of rail use, retain a car for things that the train can't do. So, its not the cost of owning the car thats important when comparing with rail. It's the cost of making one journey in that car. The only reason I use the train as much as I do is because I like trains, hence posting on this forum. If I was Mr Average I'd probably use it a lot less as it often takes a bit of man-maths to make the train seem like a good idea for longer journeys versus just.. getting in the car.

People often argue that in some cases the train cannot and should not compete with the car. But why? It should, otherwise whats the point in the train?*

*On the assumption that the journey is not massively more convenient or hugely quicker than by road.

I think it's reasonable that the train should always be cheaper than a single person driving (and then parking - parking costs should be included as its only fair) a medium to large car with average fuel efficiency. Arguably it should be cheaper for two people, too, but I appreciate this is far more difficult to acheive. It gets more difficult when you've got an entire family to transport as the economies of scale of transporting 4 people in a car are quite great, but for individuals public transport should always be cheaper than private not-particularly-economical cars. Otherwise whats the point? We'll never get significant numbers of cars off the road until that situation changes.

We have a fantastic rail network built up over 150 years which could well be a genuinelly appealing alternative to car use for many, many more people than it currently is. But to get here it needs more funding - either from government, from cost reductions and reducing waste, or better still a combination of both.

 

[tbtc]

I think it's reasonable that the train should always be cheaper than a single person driving

If all you are counting is the cost of fuel (and ignoring other motoring costs) then rail is always going to struggle for most journeys.

With the car you are doing all of the work (and only counting the fuel costs - no vehicle costs etc).

With the train you are paying for at least two members of staff on board, platform staff, signal staff, track access charges, cleaners, the cost of the train... on top of the cost of fuel for the train (that's assuming no management to pay for, no ROSCO profits, no TOC profits etc).

On an Intercity train, these costs may be spread over hundreds of passengers. On a longer journey the cost of someone selling you the ticket becomes fairly insignificant. Therefore the cost per passenger can compete with motoring costs on certain journeys. But on shorter trains on shorter durations, there's no way that paying the full price for all of these costs can be lower than just petrol.

Similarly, a bus is always going to struggle to be cheaper than just the petrol used by a car as you are paying for the staffing costs and vehicle costs as well as just the fuel used by the bus.

People often argue that in some cases the train cannot and should not compete with the car. But why? It should, otherwise whats the point in the train?

What is the point of the train? A means of mass transportation, providing the kind of ability to shift large numbers of people that roads can't necessarily cope with, a way of ensuring that parts of the country are accessible to each other (especially for those unable to drive), an economic tool ensuring that people have access to jobs etc...

...there are many reasons for the railway, but I don't think that you can run a railway that is always cheaper than the fuel costs of a car.

 

[Goatboy]

If all you are counting is the cost of fuel (and ignoring other motoring costs) then rail is always going to struggle for most journeys.

Nowhere have I ever said all I am counting is the cost of fuel. I have continually explained I am talking about the marginal cost of a journey. This includes all costs associated with that journey alone, but not costs incurred regardless of whether it's made.

What is the point of the train? A means of mass transportation

Exactly - and mass transportation should cost less than personal transportation. You wouldnt stay in a 16 man dorm if a private hotel room was cheaper

The costs of providing the rail service should dictate the subsidy received from central government not the fare charged to the people you want to encourage to stop wastefully driving themselves and a car full of fresh air around. I appreciate this is perhaps a utopian view but it's how a public service aimed at reducing dependancy on imported oil and reducing CO2 emissions should operate.

And in some areas of the country - it works! I went to Truro a few months back. The tickets for both of us cost less than the fuel, let alone the other marginal costs involved with using the car. So the train was a no brainer. Last week, we went to Dublin with Sailrail tickets. Again, cheaper than using the car - cheap enough to make up for the fact it took an extra 2-3 hours. Great, so we left the car at home, saved a bit of money, enjoyed a nice train journey and didn't contribute to the traffic jams.

 

[LE Greys]

Nowhere have I ever said all I am counting is the cost of fuel. I have continually explained I am talking about the marginal cost of a journey. This includes all costs associated with that journey alone, but not costs incurred regardless of whether it's made.

Exactly - and mass transportation should cost less than personal transportation. You wouldnt stay in a 16 man dorm if a private hotel room was cheaper

The costs of providing the rail service should dictate the subsidy received from central government not the fare charged to the people you want to encourage to stop wastefully driving themselves and a car full of fresh air around. I appreciate this is perhaps a utopian view but it's how a public service aimed at reducing dependancy on imported oil and reducing CO2 emissions should operate.

And in some areas of the country - it works! I went to Truro a few months back. The tickets for both of us cost less than the fuel, let alone the other marginal costs involved with using the car. So the train was a no brainer. Last week, we went to Dublin with Sailrail tickets. Again, cheaper than using the car - cheap enough to make up for the fact it took an extra 2-3 hours. Great, so we left the car at home, saved a bit of money, enjoyed a nice train journey and didn't contribute to the traffic jams.

We could easily debate what something 'should' cost for ever. I've often said that a suitable house 'should' cost about the same as the owner's annual income. However, that's more of a value judgement than anything else.

The biggest contributor to costs is the number of people travelling. A family of four, complete with luggage (assuming 2 adults, 2 children and no railcards) would pay 3X the fares of a single traveller on the railways and probably about the same by car. Economics work out very differently for different circumstances.

 

[Pumbaa]

How to get costs down? Not simple, given the Unions, the layers of bureaucracy, the ROSCOs, the increased costs at Network Rail.

Only rail organisation to have made efficiency savings in the last year, and control period too.

 

[The Ham]

I'm going to make a suggestion that at first looks like it will lead to more costs (and for the short term it will).

If the railways were able to run more services over some of the lines where there is much demand, but no capacity because of other locations the cost per passenger km could drop significantly.

For instance the trains through Woking are fairly heavily used. Yet, if there weren't the number of trains going into Waterloo, there should be space more paths to allow more services. This would allow, for instance, more than two trains an hour each way to/through Salisbury where the double track is lightly used but there is fairly high passenger demand.

Likewise if you improved the electrification to Weymouth there would be the possibility of making better use of the mostly two track line from Poole.

Running extra trains that were viable would lead to TOC's being able to pay more in premiums and more in track access charges, whilst NR costs would NOT increase proportionally. For instance it costs the same to replace the signals if there is one train an hour or four trains an hour.

Likewise some of the TOC's "fixed" costs don't increase proportionally, as you don't need much more management or head office staff (possibly a few more to manage the extra staff that run the new services), nor do you need more station staff (again possible a few extra if the work load at the busier stations gets too high for their staff or if a station needs to be manned for longer a period than at present).

 

[Goatboy]

Perhaps what we really need from our privatised railway is COMPETITION. Not pretend competition, but ACTUAL competition. Thats the point in the private sector market economy, right? Currently there is little competition. Most poeple have a choice of only one TOC. If I want to travel by rail from Bristol to Birmingham on our privatised railway, I can use XC, XC, XC or I can use XC. Therefore my choice if I am sick and tired of stupid reservation systems, paying huge amounts of money and standing in vestibules of 4 coach Bristol to Glasgow trains is..... drive a car. I can't use another TOC instead. Because there isn't one. And the best bit? The government actively prevents future competition.

There are numerous tales of Open Access operators requesting permission for new routes only to have them turned down becuase they would 'compete' with an existing TOC. Wasn't that the whole point of private sector involvement in the railways?!

Something that those advocating market based fares should consider - the railway network is not a free market.

 

[Zoe]

Perhaps what we really need from our privatised railway is COMPETITION. Not pretend competition, but ACTUAL competition. Thats the point in the private sector market economy, right? Currently there is little competition.

There is competition for the franchises. I haven't seen many shortlists with only one bidder.

 

[Goatboy]

There is competition for the franchises. I haven't seen many shortlists with only one bidder.

And I'm sure there is competition for the catering contract too but it's fairly obvious that wasn't my point

 

[Zoe]

And I'm sure there is competition for the catering contract too but it's fairly obvious that wasn't my point

Your point was that there is very little competition in the privatized railway but this is not the case. If only one company put in a bid for each franchise then they could get away with putting in a more expensive bid and so cost the government more than if there was competition.

 

[ainsworth74]

There are numerous tales of Open Access operators requesting permission for new routes only to have them turned down becuase they would 'compete' with an existing TOC. Wasn't that the whole point of private sector involvement in the railways?!

Competition isn't the problem by itself. The problem with (and reason why) Open Access is frowned upon is because often abstracts revenue from the franchised TOC which means that the franchises premiums (money they pay to the government) can be affected negatively.

Basically the government doesn't like OAOs because it takes money out of their pockets and puts into the pocket of private companies. They don't mind TOCs doing it because the government also get's its slice of the pie but that doesn't happen with OAOs.

 

[Goatboy]

Your point was that there is very little competition in the privatized railway but this is not the case.

From a passengers perspective, it is. If they travel on a route where they are offered either only one set of prices or one TOC to travel on, there is no competition. Very few routes have true competition in the way people travelling from say London to Birmingham have access to.
--- old post above --- --- new post below ---

Basically the government doesn't like OAOs because it takes money out of their pockets and puts into the pocket of private companies.

I beleive you just summed up the entire concept of privatisation

 

[SS4]

Perhaps what we really need from our privatised railway is COMPETITION. Not pretend competition, but ACTUAL competition. Thats the point in the private sector market economy, right? Currently there is little competition. Most poeple have a choice of only one TOC. If I want to travel by rail from Bristol to Birmingham on our privatised railway, I can use XC, XC, XC or I can use XC. Therefore my choice if I am sick and tired of stupid reservation systems, paying huge amounts of money and standing in vestibules of 4 coach Bristol to Glasgow trains is..... drive a car. I can't use another TOC instead. Because there isn't one. And the best bit? The government actively prevents future competition.

Free competition = Line Closures.

Fancy Bristol to Birmingham? Via London it is

 

[Goatboy]

Free competition = Line Closures.

Absolutely. So we cant have a proper private sector free competition railway. So why then are we bothering involving the private sector at all? It'll always be state controlled and state funded!

 

[exile]

Not sure of the answer but I wonder about the way rolling stock is utilised - yesterday I travelled on an 11 coach pendolino and a "double" voyager ( 8 coaches) and I doubt there were more than 30 people aboard either of them.

 

[Goatboy]

Not sure of the answer but I wonder about the way rolling stock is utilised - yesterday I travelled on an 11 coach pendolino and a "double" voyager ( 8 coaches) and I doubt there were more than 30 people aboard either of them.

It does seem a shame how its utilised. I was also on a Voyager yesterday - but it was 4 coaches and full and standing. I also sit on 150's for 2-3 hours whilst a 158 shuttles along an electrified branch line between Brockenhurst and Lymington Pier all day long

 

[SS4]

Absolutely. So we cant have a proper private sector free competition railway. So why then are we bothering involving the private sector at all? It'll always be state controlled and state funded!

Presumably to make a quick buck by selling stock? It'd be much nicer if at least one government realised this.

 

[LNW-GW Joint]

Very few routes have true competition in the way people travelling from say London to Birmingham have access to.

London-Birmingham competition is entirely incidental.
VT, LM and CT have different franchises and are meant to serve different market sectors (roughly fast/premium, local/Northampton and High Wycombe respectively).
Most fares are interavailable anyway.

Do you want CT to spend its energy competing with VT, or serving Bicester better? The DfT says the latter.
There are three TOCs operating between Liverpool and Manchester (TP, EM, NT) but still no real competition, just a little variety.

 

[NSEFAN]

Absolutely. So we cant have a proper private sector free competition railway. So why then are we bothering involving the private sector at all? It'll always be state controlled and state funded!

Not all sectors are suffering from privatisation. Freight is doing a lot better than it was under BR because it has the scope for actual competition.

Passenger services only really have the same potential on profitable lines such as intercity and commuter routes. Rural lines have no chance at ever returning a profit, so have to be subsidised by the government (or more profitable routes). As has been mentioned, the DfT doesn't like open access because it potentially reduces the amount of cash heading in the treasury's direction.

 

[Lewisham2221]

How about the railways do away with most management and scrap consultations, feasibility studies etc and the remaining management just read this forum and implement our ideas?

Sorry, I'll get my coat...

 

[millemille]

Some actual figures to consider:

20 year old 4 car suburban EMU fleet.

Average daily mileage just short of 300 miles.

Cost to lease said EMU, on a moist lease so includes level 5 overhaul provision within lease, £1,250 a day.

Level 1-4 maintenance (planned and unplanned, so exams & modifications & defects. That's material, wage bill, all overheads including depot rental, utilities everything) 31 pence per vehicle per mile.

In maintenance and lease costs alone - ignoring track access charges and everything else your 4 car EMU is costing £5.40 a mile to run.

 

[Goatboy]

What is the capacity of this 4 car EMU?

 

[millemille]

What is the capacity of this 4 car EMU?

About 300 seated and 750 crush laden.

 

[Goatboy]

So if we assume it makes 6 passenger journeys per day with supercrush in the peak and quiet in the offpeak, so an average of say 300 passengers a trip, thats 1800 passengers a day with fixed costs of £1620 a day so under a quid per passenger trip.

Not bad.

 

[LE Greys]

London-Birmingham competition is entirely incidental.
VT, LM and CT have different franchises and are meant to serve different market sectors (roughly fast/premium, local/Northampton and High Wycombe respectively).
Most fares are interavailable anyway.

Do you want CT to spend its energy competing with VT, or serving Bicester better? The DfT says the latter.
There are three TOCs operating between Liverpool and Manchester (TP, EM, NT) but still no real competition, just a little variety.

This depends on whether you believe the DfT knows what it is doing. I would disagree with that. Taking this route as an example, let's say that Chiltern could somehow reinstate the line to Wolverhampton Low Level, then annexe the lines to Shrewsbury, Aberystwyth and Pwllheli, plus the Snow Hill suburban lines. Meanwhile, LM and Virgin merge. To me, that gives the opportunity for real competition, either a price war or a 'Race to the West Midlands' with the suburban market as an additional consideration.

To do this properly, both companies (call them LNWR and Chilern & Cambrian for instance) would need full control over timetables and fares, including freight and infrastructure. They would also need decision-making powers over routes, so they rather than the DfT could decide whether an upgrade was worthwhile or not. Finally, they would need time, the consideration that they will be competing on this route for the long term.

That's on one route where both lines are intact (mostly), although one had more money spent on it than the other. On a route where one line has been removed, the Great Central/Midland for instance, it's a lot harder to generate inter-route competition. Intra-route competition does not really work, since that is more a case of who can get the bigger slice from ORCATS rather than who can get the most passengers. ORCATS raids are very common, and often lead to path-blocking (which is why WAGN used to run near-empty 313s through Welwyn during the peaks for instance). It's easier there to edge out others through competitive exclusion rather than taking them head-on in a race or a price war.

So, it might just be possible to generate inter-route competition with a network of interweving routes, especially by breaking up big monolithic franchises like Northern along former company lines (with alterations to take account of missing links). Whether it will work is anyone's guess. Whether it can work under the current franchise system is also anyone's guess.

 

[Nick W]

So if we assume it makes 6 passenger journeys per day with supercrush in the peak and quiet in the offpeak, so an average of say 300 passengers a trip, thats 1800 passengers a day with fixed costs of £1620 a day so under a quid per passenger trip.

Not bad.

But that's £1 the passenger shouldn't pay because the train was purchased for the fare/taxpayer's railway by the fare/taxpayer 20 years ago. :roll:

 

[Oswyntail]

This depends on whether you believe the DfT knows what it is doing. I would disagree with that. ....
To do this properly, both companies (call them LNWR and Chilern & Cambrian for instance) would need full control over timetables and fares, including freight and infrastructure. They would also need decision-making powers over routes, so they rather than the DfT could decide whether an upgrade was worthwhile or not. ....

I would guess the DfT does know what it is doing, though perhaps it is not what we want it to. And I believe the various private companies also have a very good idea. And I suspect that what they really, really want is the status quo...they have a guaranteed, risk-free income stream without having to worry about asset management, and a handy scapeoat or two when things go wrong. Why should they want the extra hassle of competition - or decision making?

 

[warriorwarlord]

Surely a state* owned system like Bob Reid's business lead BR would be the most efficient way of running the railway today?
Running sectors like Intercity and Railfreight at a profit (wasn't NSE supposed to break even around 2002?) only this time, unlike in BR times the railway should be able to plough every penny of revenue it makes back into the railway. Rather than having to ask govt. permission to spend its own money, it should have freedom to do so.

*note - emphasis on owned, not run.