Rail privatisation has improved services claims new RDG report

Rail users and taxpayers are getting better value for money, and the public are enjoying better service provision since the industry was privatised, says the Rail Delivery Group, the all industry body.  The RDG also claims the industry is now nearly covering its full operating costs, and that profit margins are low.

The findings are contained in a new RDG commissioned study from KPMG. It updates a previous ATOC report and it measures performance in the industry since the first full rail privatisation year (1997-98), with prices indexed at March 2014 levels.

For the year ending March 2014, income from the passenger fare box (£8.2bn) plus other TOC and NR revenues (£1.3bn), roughly matched train operating company costs (£6.5bn) and Network Rail operating and maintenance costs (£3.0bn). It’s the first time this has happened.

When the government infrastructure network grant of £3.8bn is added to these figures, the total cost of the rail industry amounted to £13.3bn in 2013-14. The £3.8bn is the payment for state funded capital improvement works and RDG maintains that government funding is the same in real terms as 1994-95.

Train operating company (TOC) revenues increased 81% between 1997-98 and 2013-14 (from £4.9bn to £8.9bn), while TOC costs increased by 51% during the same period (from £4.3bn to £6.4bn). This represented a 269% rise in TOC profits (from £0.68bn to £2.51bn), but RDG says most of this went back to the government, which received £0.40bn in 1997-98, and £2.27bn in 2013-14, an increase of 470%.

“(TOC) operating margins as a share of revenue are at their lowest since franchising was introduced and are 36% lower than they were in 1997-98,” states the report. They bottomed out at 2.3% in 2013-14, as against 3.6% in 1997-98, peaking at 5.2% in 2003-04.

Greater efficiency has meant that Network Rail operations and maintenance infrastructure costs fell by 32% to £2.6bn in 2013-14 (2003-04: £3.8bn), while expenditure on renewals and enhancements grew by 31% from £5.1bn to £6.7bn (to meet growth and demand) during the same period.

On the passenger front, journey numbers more than doubled to 1,654m in 2014-15 (1996-97: 801m), and the rate of passenger growth in the UK was 75%, between 1997-98 and 2012-13 compared to 37% in France and 21% in Germany. (And if journeys are measured on a per head of the population basis, the UK has almost caught up with Germany – 24.7 as against 24.9.).

The average fare price per passenger mile (the yield) has remained fairly constant – 22.1p in 2013-14 (1997-98: 20.7p), a rise of 6.7% at 2014 prices. The standard season ticket yields though were slightly higher than this, largely due to the deliberate government fares policy (of making passengers pay more for their tickets in order to cut back on state funding).

Discounted fares   – which includes advance purchase, off peak and railcard tickets – accounted for nearly half (47%) of passenger fare revenues in 2013-14 (2005-06: 38%), and 33% of passenger journey numbers, as against 31% during the same period.

Between 1994 and 2014, passenger train frequencies increased on many inter city corridors. On some routes daily departures more than doubled, notably:  London to Manchester (from 17 to 47); London to Sheffield (from 15 to 31); and Leeds to Edinburgh (from 2 to 15).

The number of passenger carriages increased 21.6% to 12,647 vehicles (1996-97: 10,400). However, average rolling stock age remained fairly constant between 2000 and 2014 at around 20 years, thought that will change when the new Crossrail, Thameslink and Inter City Express fleets become available in the next few years.

Freight traffic – as measured in billion tonne kilometres – grew by 70% since the mid 1990s. The number of freight trains fell by a third since 2002-03, but they are longer and heavier. In 2002-03, the average freight train weight was around 220 tonnes, compared to just under 400 tonnes in 2014-15. Freight operating company (FOC) margins are also low – 3.2% in 2012-13. In 1997-98 they were just under 10%, and peaked at just over 10% in 2002-03. In 1999-00, the results were negative.

 

RDG report                                                                                                                                                                            GB rail: better services, better journeys and better value

681/Sep 15

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