How can the industry lower its costs?

[CardiffKid]

Fairs have gone up again and not unsurprisingly people don't like it.

And lets be honest from the outset if they were all cut by 10% last week the public, press and unions would still say they're too high so there will on the whole always be more moans and groans than cheers.

But let me ask how can train travel be reduced in cost say over the next ten-twenty years? What sort of things need to be done now to have long term benefits/savings?

 

[Goatboy]

There are only two real ways this can happen:

a) Restructuring of the industry

or

b) Increased government subsidy

There are cases for and against both of these.

 

[Oswyntail]

There also need to be some peripheral changes. Chiefly, the perceived costs of alternatives need to be expressed or imposed in the same way (the old argument about the relative costs of road vs rail, imho always skewed in favour of road). A lot more could be made of the recent estimate of the cost of car travel as being 51p per mile. Then there needs to be a more realistic approach to wage rises - much of the "fury" is because travel costs are rising steeply as a percentage of wages because of total wage freezes. These freezes are too often not properly explained (or justified), simply being blamed on "the economy", and, imho again, are being used to stop employers and employees having to run businesses efficiently.
I am not saying that costs cannot, or should not, be reduced, as that is an essential part of running a business. But there does need to be an adult, fair discussion about the topic.

 

[Goatboy]

A lot more could be made of the recent estimate of the cost of car travel as being 51p per mile.

This is a very misleading figure. It's an average so it will be skewed by people purchasing high end ultra expensive cars, plus its a whole-cost thing. Over its life my car has probably cost about this - but its a large German saloon in which I do not cover huge mileage, therefore the fixed costs disproportionately increase the per mile figure. The more miles you cover the lower this figure is. But whole-life costs of cars are only relevent if you are deciding whether to buy a car or use the train, which of course most are not.

What matters is the marginal cost per mile of a car journey - ie, the variable costs. Costs that you will incur if you use the vehicle for a trip but will avoid if you don't. So, annual road tax doesnt count, neither does cost of capital for its purchase, but fuel cost, tyre wear, depreciation allowance does.

This works out at around 15-25p a mile depending on the car, its fuel efficiency, service intervals and mileage rather than age related depreciation.

 

[Metroland]

There's several ways to reduce costs but there's no magic bullet:

- Innovation: Cheaper, better trains and control systems, infrastructure installation etc
- People: Making people more responsible and highly skilled, thereby reducing numbers, especially managers. Skilled people do not need managing as much, trusted professionals can get on. People can be multi-skilled and do a number of roles. This maintains wages and increases productivity.
- Fares: Matching supply and demand more closely: Yield management, smart cards, government sponsored flexible working to spread the load.
- Reducing interfaces: Cutting out duplicated role between industry players.
- Automation: Reducing staff count, reduced need for equipment inspections etc
- Differing standards for rural railways and partnerships with councils and voluntary groups to increase passenger numbers on these lines
- Other transport integration, especially buses, through ticketing
- Independent body to control wage awards, common training standards done by outside parties to stop poaching
- Low maintenance equipment installation, abolition of lineside signalling, low cost electrification for lower speed lines. Conversion to 25kv AC OHL
- Big reduction in the number of control centres, maximum automation of train planning and control
- Incentives for private sector investment and where railways are loss making subsidy to accountable. Local partnerships, even voluntary labour for branch lines, certainly multi-skilled staff and lower rates of pay for quieter lines.
- New ways to exploit stations, retail and commercial
- Commercial and retail staff can be opened up to sponsorship and competition
- Applying the same overall safety standards to all forms of transport, accountability for accidents, delays etc

 

[Dave1987]

My opinion is this:

Wages for rail staff are about right for the jobs they are required to do. I think a lot of money is lost in the sub contracting process where a contract for something is sub contracted up to four times. There should be more emphasis put on advance tickets so a passenger has a booked train to travel on as like with the airline industry an empty train is costing money to run and without revenue from it, and whether people are prepared to accept it or not there are a lot of mainly off-peak trains going around virtually empty as the TOC has to provide the capacity just incase there is an influx of walk up passengers. The railway is a very expensive beast to run. I dont consider it a public service, like air travel is not a public service. It has too be subsidised by the govt otherwise TOC's would be forced to do a Beeching style cull of lots of branch line services as the revenue from a lot do not cover the operating costs let alone make a profit, and that just would not be sustainable. No one is forced to travel by train. You choose to live where you live. For example most people choose to live an hour out of London due to the high cost of housing but no one is forcing you to live that far out. At the end of the day if people think rail fares are too high then they should have a go at driving to work and see how expensive/tiring/infuriating that is.

Anyway that is how I see it and I sure I will get a bashing for it

 

[Goatboy]

I dont consider it a public service

Therefore, no subsidy should be received and all non-profitable lines should be closed. After all, if its not a public service whats the point in running any aspect of it that isn't profitable?

It has too be subsidised by the govt otherwise TOC's would be forced to do a Beeching style cull of lots of branch line services as the revenue from a lot do not cover the operating costs let alone make a profit, and that just would not be sustainable.

But you've just said its not a public service. Therefore this isnt relevent - it doesnt matter if the branch lines get closed just as it doesnt matter if Tesco shut a shop not many people use. So these lines should close unless the railways are a public service.

No one is forced to travel by train. You choose to live where you live. For example most people choose to live an hour out of London due to the high cost of housing but no one is forcing you to live that far out. At the end of the day if people think rail fares are too high then they should have a go at driving to work and see how expensive/tiring/infuriating that is.

No-one is forced to travel by train but we should be doing all we can do both:

a) Encourage MORE people to use rail and not road
b) Ensuring the government is able to provide the capacity needed

Rail is part of a sustainable transport future. Personal transport, ie cars, is not so much.

Driving is often cheaper than rail (And often, its more expensive, too). People already have cars. They are paid for, insured for the year and taxed. Therefore the cost of using them to go from A to B instead of the train is the sum of the variable cost element, not the fixed costs.

Anyway that is how I see it and I sure I will get a bashing for it

Because it's completely contradictory?

Bottom line: It *is* a public service, whether you consider it one or not.

 

[The Planner]

- People: Making people more responsible and highly skilled, thereby reducing numbers, especially managers. Skilled people do not need managing as much, trusted professionals can get on. People can be multi-skilled and do a number of roles. This maintains wages and increases productivity.

Trouble is I think the railway is going in the complete opposite direction. It seems to be so middle heavy with management with the philosophy that experience doesn't matter (possibly to cover their own inadequacies ?). I believe experience and skills are seen as counter productive to them as it costs more. It takes time to become skilled and experienced and that should lead to pay rises and promotion. My opinion on what is happening is that it is easier to get some fresh faced person in on lower wages and suppress their development until they either leave or actually make one of the middle management jobs themselves. Jaded and cynical ? probably, but it is how I have seen it develop over the last few years.

 

[Greenback]

Bottom line: It *is* a public service, whether you consider it one or not.

I think that is correct, railways are a public service. But the problem is that we haven't treated them as a true public service for decades. What we have a mish mash of public service subsidy set against a heavily watered down version of free market competition.

I agree with your initial reply. As we are not going to get more subsidy out of the governement, the industry needs to be restructured.

Sadly, we don't appear to be getting that option either.

 

[millemille]

Trouble is I think the railway is going in the complete opposite direction. It seems to be so middle heavy with management with the philosophy that experience doesn't matter (possibly to cover their own inadequacies ?). I believe experience and skills are seen as counter productive to them as it costs more. It takes time to become skilled and experienced and that should lead to pay rises and promotion. My opinion on what is happening is that it is easier to get some fresh faced person in on lower wages and suppress their development until they either leave or actually make one of the middle management jobs themselves. Jaded and cynical ? probably, but it is how I have seen it develop over the last few years.

We must work for same TOC.....

 

[cuccir]

For about 8 months in 2012, I worked for a local authority. In that time, my department was in negotiations for renovating and moving into a railway station building, to create a travel-hub for a small town.

The building was owned by one organisation, leased to a second, and then sub-leased to a third: we were planning to sub-lease again! Buy the time I'd left, this building - for which we had received central government, ie tax-payer, money to renovate by April 2012, was still empty. Work still hasn't started.

The point being that there are too many organisations - TOCs, Network Rail, PTEs/Local Authorities, DfT, ROSCOs, Station-Adopters, Landlords, Heritage/Private Railways, Contractors, Sub-Contractors, BTP - who all have responsibilities, obligations, rights and an interest in our rail network. This causes waste.

 

[route:oxford]

One way to cut costs would be for a group of philanthropists to get together to back the purchase of new stock for lease on a not-for-profit basis.

 

[millemille]

In terms of cost what exists in the privatised rail industry, and that drives the fare paid by the passenger, that isn't profit and that didn't exist in the BR days?

Rail vehicles had to be bought and the cost met through money moving around within BR so does this replicate the ROSCO function, ignoring the profit they generate for their shareholders?s

I hear tell from colleagues who worked under BR that delay attribution and performance regimes are a far larger and more costly process, but in the grand scheme of things is this is a significant, or even noticeable, percentage of the individual face ticket price?

Or does the "inefficiency" within the privatised British rail industry come solely down to having to generate a profit for shareholders?

 

[ivanhoe]

Do we run too many trains?
Is railway productivity as it should be ?
Why don't we attract more customers?
Why do we have too many TOCS?

 

[Andrewlong]

The HMRC mileage rate is 45p for 2012-3. It is worth comparing train fares against this figure as a general guide.

 

[Dave1987]

Do we run too many trains?

The answer to that is different depending on what side of the coin you are on. For Joe Bloggs commuter who all he see's is his train in the morning (it may well be 12 cars longs ie the max length it can be), he gets into the carriage he always gets into and see's it is very full and just complains that the railway isnt putting enough carriages on trains and doesn't run enough trains full stop. On our services the first 4 coaches can be full and standing yet the rear few are near empty. We may run to absolute full capacity on a line but unfortunately Joe Bloggs commuter only see's his carriage on his train.

 

[Greenback]

Do we run too many trains?

I don't think so, unless you are talking about what are effectively empty stock movements. As an example, the first trains of the day from Carmarthen out to Fishguard, Pembroke and Milford Haven (and the last one's back) are unlikely to attract many passengers, but have to operate to form other, busier sevices.

Is railway productivity as it should be ?

I think you need to define what productivity you are talking about and how it is measured.

Rolling stock utilisation is already pretty high, tight turn arounds and intensive diagramming make furthe rimprovement sin this particular area difficult.

Why don't we attract more customers?

On many routes, the services are already full, at least for the majority of time. My journey to the north east over the Christmas period saw a lightly loaded train leave Cardiff, but there were no more spare seats by Hereford and the entire train was rammed by Crewe.

As passenger numbers appear to be rising the railway is attracting more custom, but in many cases cannot provide the capacity to deal with the growth we have, never mind even more.

Why do we have too many TOCS?

That's an interesting question. There are fewer TOC's than there used to be, but I feel that there is still scope for further reductions. Maybe we should have a 'big four'?!

 

[Gareth Marston]

The answer to that is different depending on what side of the coin you are on. For Joe Bloggs commuter who all he see's is his train in the morning (it may well be 12 cars longs ie the max length it can be), he gets into the carriage he always gets into and see's it is very full and just complains that the railway isnt putting enough carriages on trains and doesn't run enough trains full stop. On our services the first 4 coaches can be full and standing yet the rear few are near empty. We may run to absolute full capacity on a line but unfortunately Joe Bloggs commuter only see's his carriage on his train.

So what pro active measures does your TOC take to inform passengers of the spare capacity at the back of the rain?

 

[LNW-GW Joint]

Facing cost pressures, any commercial business would:

- merge operational units (ie TOCs) to get economies of scale
- eliminate old/costly/low volume assets to reduce maintenance costs (ie buy new trains to replace old ones, or automate signalling)
- match capacity better to demand (ie thin out services, possibly putting assets on better performing routes)
- review all contracts and use of contractors
- get fixed costs down (ie Network Rail access charges, depot costs etc).
- sell assets
- set up joint ventures where it reduces costs for each side (eg TOC/NR)

All this while protecting the front-end customer-facing operation.
Plenty of other management actions possible.

Franchises work against all this, by insisting on fixed walls between each TOC, even if they have the same owner.
For example, why can't Arriva merge its three franchises (AW, CT, XC)?

I'd expect ORR and the RDG to be taking the lead on all these initiatives rather than DfT, leading to a new NR CP5 budget later this year.
Otherwise it's another 5 years of stagnation.

 

[Dave1987]

So what pro active measures does your TOC take to inform passengers of the spare capacity at the back of the rain?

Its not as simple as that Im afraid, I have tried to let passengers know in the past that the rear of the 12 car is usually pretty empty but it seems that being at the front of the train closest to the exit at the terminus is more important.

- eliminate old/costly/low volume assets to reduce maintenance costs (ie buy new trains to replace old ones, or automate signalling)

Are you aware how much that would cost?? ERTMS signalling which it in cab signalling would cost billions and billions to impement over the entire network. And to replace every old train (whatever you class as old I dont know would also cost billions!)

- review all contracts and use of contractors
- get fixed costs down (ie Network Rail access charges, depot costs etc).
- sell assets

Most if not all contractors used by have to have PTS and railway safety training which means you can't just have any old contractors. Track access charges are set by NR not the TOC. What assests are there that a TOC can sell seeing as they lease stations, track and rolling stock??

 

[tbtc]

I'm not sure that the car costs are as important as some on this thread think as most motorists don't sit down with a spreadsheet to work these things down. Can trains compete with the car on every market? No - just like buses/ coaches can't.

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

I'd discuss some of the staffing issues further (like how come DOO works very well in London and Glasgow, yet hasn't been rolled out elsewhere), but that risks upsetting some "staff" members...

None of the big companies seems to want to actually *buy* trains, which suggests that even a fifteen year franchise wouldn't see costs pay for themselves (in that time), so are the ROSCOs really creaming that much off?

Fewer franchises sounds like a good idea, both in terms of costs (less need to argue about who pays for disruption when there's only one TOC in an area, some economies of scale in running everything in an area under one umbrella) and benefits (more encouragement to co-ordinate and promote branch line services etc), but again I don't know how marginal these kind of improvements would be.

There's a separate question about how to improve revenues. I've suggested in the past that (since Guards on many lines have retained the "safety" and "dispatch" roles, so don't seem to have time to perform regular ticket checks) TOCs could employ revenue-specific staff to shuttle between key stations where the Guard isn't going to have enough time to get round (e.g. Paddington to Reading, Birmingham to Coventry, Manchester to Stockport, Leeds to Wakefield) to try to increase the money coming in.

 

[Aldaniti]

The HMRC mileage rate is 45p for 2012-3. It is worth comparing train fares against this figure as a general guide.

The HMRC 45ppm figure is set simply as the amount a qualifying individual can claim with a further tax liability. In the real world it often has little corellation with the true costs of running a car which, can vary considerably from owner to owner. I wish people could get away from this inaccurate but long held belief that it costs everyone 45p a mile (even as a general guide) to run their car, it does the rail industry no favours at all! In my neck of the woods even Off Peak Day Returns are now often more expensive than driving and where they are cheaper I have to travel by one of Northern's knackered 142/15x's. I therefore drive and avoid the hassle of travelling by rail. I'm afraid the whole raison d'entre of the railways has been lost and the current set-up is ludicrous but we've had it for so long that some people don't know any different and boil in the bag railway management has lost sight of the woods for the trees - if they ever had it - deliberately or by design is debatable.

 

[brianthegiant]

TOCs could employ revenue-specific staff to shuttle between key stations where the Guard isn't going to have enough time to get round (e.g. Paddington to Reading, Birmingham to Coventry, Manchester to Stockport, Leeds to Wakefield) to try to increase the money coming in.

Don't some TOCs already do this? if I'm not mistaken EMT have staff which look like train managers but are additional to the train manager & focused on revenue on some IC services.

 

[daccer]

The very simple answer is that reducing costs is a process. The privatisation model as adopted in the 90's was a complete thumb suck and it has taken the best part of two decades to work out what does work and what doesnt.

If we are to assume that BR isnt coming back and that the basic model that we have now will form the framework for the future network then the only real way to reduce costs is in incremental changes made over lomg periods of time.

This will see many of the suggestions already made on the thread being implemented i.e. fewer TOC's, longer franchises, yield management and advance fare expansion. However if I remember rightly up to 70% of the 'waste' identified by Mcnulty belonged to Network Rail. They are already addressing many of the easier issues such as fewer signalboxes, more recycling and innovative working methods to ease disruption.

One last point to consider. If our railways are a public service and usage is continuing to increase year on year how much subsidy is acceptable. Of the current figure how much is going on improvements and how much on maintaining a steady state railway? I worked for BR in the 80's when there was a drive to get down to little or no subsidy - if you want that scenario back then you get a railway that is being managed into extinction. Subsidy is a necessary evil.

 

[Oswyntail]

I'm not sure that the car costs are as important as some on this thread think as most motorists don't sit down with a spreadsheet to work these things down. ....

... I wish people could get away from this inaccurate but long held belief that it costs everyone 45p a mile (even as a general guide) to run their car, it does the rail industry no favours at all!... I therefore drive and avoid the hassle of travelling by rail....

I agree that each mode should be used where it is most suitable. But the reason I brought up car costs is that people seem to believe that cars are a cheap and hassle-free mode of travel. They are not, but the perception they are fuels the mistaken belief that rail is always expensive. If there were spokesmen as willing to put the anti-road message as strongly and frequently as the anti-rail message is publicised, perhaps there could be a sensible evaluation of all transport modes on a level playing field.

 

[LNW-GW Joint]

Most if not all contractors used by have to have PTS and railway safety training which means you can't just have any old contractors. Track access charges are set by NR not the TOC. What assests are there that a TOC can sell seeing as they lease stations, track and rolling stock??

The contractors remark was mainly aimed at NR, but any owner has to try and maximise utilisation of its own staff rather than contract out.
And I agree there aren't many assets to sell (but there are on-line booking engines and customer service centres to be rationalised).

 

[Aldaniti]

I agree that each mode should be used where it is most suitable. But the reason I brought up car costs is that people seem to believe that cars are a cheap and hassle-free mode of travel. They are not, but the perception they are fuels the mistaken belief that rail is always expensive. If there were spokesmen as willing to put the anti-road message as strongly and frequently as the anti-rail message is publicised, perhaps there could be a sensible evaluation of all transport modes on a level playing field.

I'm sure you're right! In fact, I would hazzard a guess that a majority of motorists haven't a clue what it costs them per mile over say a year! Transport infrastructure in this country, whether it be road or rail, has been neglected for many, many years for various reasons and I believe in investment in both, particularly as both are now creaking at the seams, but all too often we have the anti-rail lobby versus the anti-road lobby. Personally I'm pro-transport! If only the government would stop wasting our hard earned tax revenues!

 

[tbtc]

Ah honorary mention to the £60,000,000 (ish) spent on the WCML franchise process - there could be hundreds of millions spent on the tendering over the next few years!

I agree that each mode should be used where it is most suitable. But the reason I brought up car costs is that people seem to believe that cars are a cheap and hassle-free mode of travel. They are not, but the perception they are fuels the mistaken belief that rail is always expensive. If there were spokesmen as willing to put the anti-road message as strongly and frequently as the anti-rail message is publicised, perhaps there could be a sensible evaluation of all transport modes on a level playing field.

I agree that motorists don't add up all of the costs - I know people who claim that buses are too expensive but will pay more in parking in a week than they would for a bus pass (even if their petrol was free).

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).

 

[amcluesent]

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

 

[Greenback]

I agree that motorists don't add up all of the costs - I know people who claim that buses are too expensive but will pay more in parking in a week than they would for a bus pass (even if their petrol was free).

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).

They probably mean that bsues are too expensive in comparison to the relative flexibility, comfort and convenienc ethey provide as against a private car.

Take my former bus commute. Walk for five minutes to the nearest bus stop where the chances are that I had to wait (possibly in the cold or rain) for another five minutes and the chance to eventually board a very busy bus and stand for the duration of the journey, which will probably take twice as long as in my car (if I had had one).

I would not have left a car sitting outside my house unused regardless of whether the bus was cheaper! I therefore cannot blame those who decide to retain a car for using it!