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McNulty rail cost report ‘harsh’, says senior industry figure

Claims that building and operating railways costs up to 40% more in the UK than Europe have been roundly criticised by the train operators’ most senior figure.

Speaking at last week’s joint ICE and Amey Prestige transport lecture in London, Association of Train Operating Companies (ATOC) chairman Tom Smith said Sir Roy McNulty’s review of the rail industry was “unduly harsh” about the current state of the industry.

He said McNulty’s key point that unit costs are no lower today than they were in 1996 was flawed.

“While strictly speaking that is true, he focused only on the beginning and end point,” said Smith.

“But as an engineer knows a graph reveals a story over time, not just at selected points in time.

“This is a story of falling unit costs in two phases punctuated by a short sharp burst of rising unit costs.

“And we all know that that burst followed the nervous collapse of the rail industry and its recovery as Network Rail,” he said.

That period, he added, saw an injection of capital to rectify many years of under investment, and that injection led to sharply rising unit costs. But costs stabilised and are now falling.

He also said he had “a problem” with the European comparisons used because they lacked “credible and comparable data”.

He said he had challenged McNulty about this, and that McNulty said it was the best data available and that it did not “invalidate” his findings.

“That is fine,” said Smith. “But the adequacy - or inadequacy - of the data was not sufficiently underlined in the report, so now we have the situation where it is common currency that we are 30% to 40% less efficient than the Europeans.”

Unfair

He said this was unfair, as was the view expressed in McNulty’s report that fares are far higher in the UK than in Europe.

“The efficiency point is debatable. The fares point is simply wrong,” he said.

Smith accepted that McNulty was right to say that the industry must strive for greater efficiency, but he said savings targets must be more realistic.

He cited the recent Industry Initial Plan (IIP), published in September jointly by ATOC, Network Rail, Railway Industry Association and Rail Freight Operators Association.

This sets out the rail industry’s view of how much government funding it needs for the next five year control period.

The IIP says that savings of £2bn to £2.5bn a year are achievable. This is less than the aimed for savings of £3.5bn pledged in the recent Department for Transport rail Command Paper.

“With a fair wind it is a possibility, said Smith. “But it is a very stretching target and for the secretary of state to ask the industry to deliver that is quite a challenge.”

Smith said that the McNulty report and subsequent Command Paper were also too conservative about the potential to grow revenues.

Readers' comments (1)

  • Barry Walton

    Can the NCE expose the data Mr Smith's contentions use? As reported, he seems not to have produced any alternative figures.

    Unsuitable or offensive? Report this comment

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