New report reveals how biased cost allocation system penalises local rail services in the regions

Network Rail repairing bridge

-    Lightweight regional trains allocated same share of maintenance costs as much heavier Intercity trains  -

-    A fairer system of cost allocation would reduce regional rail’s share of government support by around 50% –

A new report from pteg takes the lid off the complex way in which the costs of running the national rail network to show how time and again the rules are biased against regional rail, loading on costs in a way that feeds false perceptions about the value for money of local rail services in England outside the South East.

The report finds that:

  • the allocation of maintenance and renewal costs largely treats every passenger train in the same way even though Inter-city trains are estimated to produce twenty times the amount of track damage as the most basic regional train (a Pacer) 
  • in order to make rail freight competitive, and to keep freight off the roads, the substantial damage that freight trains cause to rail infrastructure are largely ignored. However, the knock on effect is that many of these costs are then picked up by regional rail even though freight trains cause up to sixty times the track damage of a Pacer train
  • Although regional rail received only 20% of new investment by Network Rail in 2012/13, regional rail contributed 30% of fixed track access charges and was allocated 32% of Network Rail’s overall financing costs
  • A system that allocates costs more fairly would result in regional rail going from taking an estimated 58% share of total government support  for the railways to 28% 

The report finds that: ‘…it is clear that the current method for allocating costs is heavily skewed against regional railways. Our alternative approach would create a more level playing field for regional rail and ensure that the national debate and key decisions are informed by robust evidence.’

The report comes at a time when the Government is consulting on the future of the Northern Rail franchise in a way that highlights the ‘high costs’ of the franchise to justify low aspirations for investment in the network and to raise the prospect of fares increases and service reductions.

Lead spokesperson for pteg on rail issues, Geoff Inskip, said:

‘It’s the common currency of the rail debate that regional rail networks require high subsidies. A quick look at the ORR’s analysis couldn’t be clearer in its inference. Running regional railways is expensive for the taxpayer and Inter city is not. Indeed Inter city can make money for the taxpayer. Case closed.’

‘However, these figures do not reflect the realities on the ground. The railway as a whole costs over £15 billion a year and requires considerable government support (some £6.3 billion a year in direct grants and supported borrowing). Decisions on how the overall cost of running the railway is allocated to particular users of the railway are decisions that could be taken in different ways and there are strong arguments for doing so.’

‘This paper shows how the current allocation of costs unfairly apportions a disproportionate share of the railways’ overall costs on regional rail. Which in turn makes regional rail services look expensive to the taxpayer in a way that distorts the debate about their wider economic, social and environmental benefits. It also shows that what appears to be objective and neutral figures about subsidy levels are in fact a construct based on a series of challengeable assumptions, often overlaid by political decisions. For example rail freight, rightly, does not pay anywhere near its full infrastructure costs because Government has recognised the importance of getting lorries off the road. By way of contrast regional rail pays more than its fair share even though there are clear environmental, social and economic arguments for switching traffic from road to rail in our busy cities, national parks and historic towns.’

For more information contact Jonathan Bray on 0113 251 7445 / 0781 804 1485