Rail industry money-go-round. How does it work?

[whole diary]

[grahame]

The rail industry money-go-round. What are the consequences on service and investment? How does it work?

In the UK^▸ (United Kingdom) we are told that the farebox accounts for two thirds of the rail industry income, and that it's a far higher proportion in the UK than in our neighbours on mainland Europe. Which is said to be why our fares are said to be "so much higher".  But how does that money from the farebox get passed through the system - how is it controlled and spent?



When trains were operated under a franchise model (No. 1 on my diagram, dashed blue lines), the money collected from the farebox went to the train operating company - subsidiaries of First, Stagecoach, Arriva, and others and was onward spend, subject to franchise terms, as they wished.  Some elements of those franchise terms were restrictive, mind.

As things moved from franchise to management contract, and as the shock of covid decimated the farebox, farebox money was all passed after collection to The Treasury (no. 2 on my diagram, green lines).  As I understand it, payment from The Treasury to the Department for Transport to run the railways was fiscally controlled / budgeted and didn't take account of the Farebox income, resulting in the contracts being such that innovative investment ideas were squashed, even if there was every likelihood that spending a pound would bring an extra ten pounds of revenue

We have now moved - again as I understand it, to the income from the farebox going to the Department for Transport (no. 3 on my diagram, the red line) which now allows for the consideration within that department of the effect on income of what they spend - so it's balance sheet sensitive and not just cost sensitive. Should the DfT^» (Department for Transport - about) wish to spend a pound to get ten more in income, it can now do so without having to go to The Treasury to ask.

The black lines on my diagram show various key bits of the money-go-round - some of them may not be huge sums in the overall picture, but never the less they represent the major funding flows for the organisations shown. 

I worry that - as shown on my diagram, key funding to Network Rail, the Train Operating companies (including the operator of last resort), Passenger Focus, the Office of Road and Rail, and the Community Rail Network ... and also to a myriad of others such as fledgling GBR^▸ (Great British Railways), RAIB^▸ (Rail Accident Investigation Branch), RSSB^▸ (Rail Safety and Standards Board), National Rail and the Railway Ombudsman are all controlled by that single organisation diretly.  Indirectly (?) they also hold purse strings / financial control over the RoSCos, Staff costs (salaries), Rail Delivery Group and these days over Community Rail Partneships.

What is ... missing ... from the diagram is an indication of any truly independent co-ordinators of customer and market (potential customer) input. And at a time when there's re-organisation and replanning underway, all the various current organisations funded via the DfT and also the individual employees in them will be concerned as to their own future.  Naturally so, but perhaps to the exclusion for practical purposes of the interests of the customer / passenger.  Is there a risky concentration of power - both judge and jury if you like to call it that - in the Department for Transport?

What organisations do we have left over which are not in the DfT funding tree, that can take a view that's not subject to taint by being on that tree?  Well - there’s Railfuture. The Campaign for Better Transport.  Our members of parliament. Our local community user groups though these can apply through CCIF^▸ (Customer and Communities Improvement Fund) and where they are station friends groups for the King's Shilling.

I am ... heartened ... in the knowledge that there are so many excellent people working in the organisations I have listed in this article, and that the vast majority of them appreciate the need for a public transport sector that's financially aware, safe, and provides transport with both the environment, and quality of life to the forefront. I just hope and 'pray' that the powers that be set things up for the future to meet those needs / desires, and that in the immediacy of the next year or two they remain at the forefront, being developed, and not swept up nor abandoned for the moment in the rush to look good and have a place in the new setup.

[ChrisB]

What organisations do we have left over which are not in the DfT^» (Department for Transport - about) funding tree, that can take a view that's not subject to taint by being on that tree?  Well - there’s Railfuture. The Campaign for Better Transport. 

There is promised a new independent passenger watchdog - enveloping Transport Focus & the ORR^» (Office of Rail and Road, formerly Office of Rail Regulation - about)'s passenger parts plus other 'bits' still being developed (e.g. accessibility). We will need to await the Railways Bill in order to discover exactly what this being is - and whether there will be any requirement on it to consult passengers, or 'stakeholders' - & if the latter, whether the definition of 'stakeholders' includes passenger representatives, or indeed, actual passengers/users or simply the defined consultees.

A couple of weeks further to wait, I suspect for that.

[grahame]

There is promised a new independent passenger watchdog - enveloping Transport Focus & the ORR^» (Office of Rail and Road, formerly Office of Rail Regulation - about)'s passenger parts plus other 'bits' still being developed (e.g. accessibility). We will need to await the Railways Bill in order to discover exactly what this being is - and whether there will be any requirement on it to consult passengers, or 'stakeholders' - & if the latter, whether the definition of 'stakeholders' includes passenger representatives, or indeed, actual passengers/users or simply the defined consultees.

A couple of weeks further to wait, I suspect for that.

Indeed - such excellent questions.  What will it be? ... with questions within that "who will be on it and consulted", "will it have teeth or just be a talking shop", "what will its remit be" and "will it, truly, be independent or always have one eye looking over its shoulder at its funding"?

[Witham Bobby]

For the railways' infrastructure, there are other noses in the taxpayer's wallet, too.  All the consultants and contractors etc, with all their cash-absorption.  Getting anything done appears to cost way more than it could, and has been disproportionately inflated above the cost of getting it done years ago, when it was largely done in-house

[grahame]

For the railways' infrastructure, there are other noses in the taxpayer's wallet, too.  All the consultants and contractors etc, with all their cash-absorption.  Getting anything done appears to cost way more than it could, and has been disproportionately inflated above the cost of getting it done years ago, when it was largely done in-house

I totally agree with you ... my graphic is grossly oversimplified.  I was tempted in drawing it to add extra boxes for categories such as these - probably branches off the tree (which could better be drawn the other say up?) nourished from the same trunk.

[Electric train]

For the railways' infrastructure, there are other noses in the taxpayer's wallet, too.  All the consultants and contractors etc, with all their cash-absorption.  Getting anything done appears to cost way more than it could, and has been disproportionately inflated above the cost of getting it done years ago, when it was largely done in-house

Contractors have always worked on the UK^▸ (United Kingdom) railway, indeed contractors built the infrastructure and many of the locomotives and rolling stock.   

There are a number of things that inflate the cost of railway infrastructure contract work, these contracting companies include risk into their pricing this risk value is understood by NR^» (Network Rail - home page) as it has declared values.  The risks are work cancelled / delayed due to NR / TOC^▸ (Train Operating Company) operational requirements, this can often be at short notice.  The planned access not being granted.
The antisocial hours the work is undertaken raise staff costs.   Machinery hire costs are much higher than normal construction plant due to its specialist nature.

Cost could be drastically reduced if lines were closed during the normal working week, but that would be unpalatable to the travelling public 

[ChrisB]

So how many of those conditions DO NOT apply to European railways? They appear to be cheaper over there....

[Electric train]

So how many of those conditions DO NOT apply to European railways? They appear to be cheaper over there....

Maybe they are much more willing to accept line closures for maintenance, their planning is less restrictive to building new / diverted lines, less restriction regarding construction noise.  Perhaps they have better contracts based on their legal system and Government requirements, NR^» (Network Rail - home page) is heavily governed by "Civil Service" governance (note this is not saying Civil Servants interfere)

Many of the European do not have the intensity of traffic seen on most of the UK^▸ (United Kingdom) network,

Comparing apples with oranges is never an exact science, are European costs any different or are they reported differently.