Britain's railways named as Europe's most expensive

[John Ashworth]

Britain's railways named as Europe's most expensive

Network Rail up to 40% less efficient in maintaining railway tracks and stations than European rivals, says regulator

* Dan Milmo, transport correspondent
* guardian.co.uk, Wednesday 8 September 2010 19.09 BST

Britain's railway system is often derided as the poor man of European transport, but its repeated problems with rising costs landed it with the title of the continent's most expensive network today.

Network Rail races ahead of its foreign peers in the cost of laying track, revamping signal boxes and repairing overhead lines, stoking an inflationary spiral in the industry that feeds into higher fares.

The rail regulator underlined the disparity by revealing that the owner of Britain's railway tracks and stations is up to 40% less efficient than European rivals including Germany, Ireland and Belgium.

"As Network Rail is a national monopoly, we benchmark the company against its international counterparts. Our work confirms that there is a significant efficiency gap," said Bill Emery, chairman of the Office of Rail Regulation (ORR).

Last year the commuter watchdog, Passenger Focus, said travellers were paying 50% more than rail users on the continent. The study prompted calls to scrap the government policy of annual price increases but the transport secretary, Philip Hammond, is considering higher-than-expected fare rises in January in an attempt to reduce taxpayers' annual £3.7bn subsidy for Network Rail.

Passenger Focus warned today that the rail industry's steep maintenance and engineering costs – Network Rail will spend £30bn between 2009 and 2014 – are turning the screw on commuters facing a minimum increase in season ticket prices of at least 5.8% next year. Under the government's fares formula ticket prices can rise by one percentage point above July's inflation figure, which was 4.8%.

"The cost of the track and signals feeds through, albeit indirectly, into fares," said Anthony Smith, Passenger Focus's chief executive. "We need to understand why Network Rail is different [compared with the continent]. Is it health and safety? Is it just the cost of borrowing from the banks? Let's find out why and then make some decisions about what we are buying from Network Rail and whether we need it at all."

The funding split between farepayers and taxpayers is 50/50 currently but passengers' contribution will reach 75% – around £9bn a year – by 2014. Hammond has refused to rule out allowing fares to rise by more than 5.8%, leading to speculation that he might sanction a 10% increase in the new year.

Network Rail said it was on track to achieve a 21% reduction in costs by the middle of the decade. The company, whose finances are underwritten by government grants and state-backed debt, said the general cost of infrastructure work in the UK was the biggest cause of cost inflation on the railways.

"The cost of construction, civil engineering and labour rates is more expensive than in Europe. Whether it is building a bridge, a railway or a house, it is more expensive in the UK than elsewhere. There are wider questions to ask," it said.

The ORR comparison with 11 European countries found that Network Rail could learn some lessons from its peers in how it carries out engineering work over weekends and bank holidays.

The study found that one explanation of the efficiency gap between Network Rail and the rest of Europe was "the way NR carries out [track] possessions". The regulator urged Network Rail to collaborate more closely with train operators on line closures.