Posted 1st April 2011 | 1 Comment

Network Rail is still too expensive, says new report

LIMITATIONS in Network Rail’s information on its own costs are hampering the ability of the Office of Rail Regulation to judge the genuineness of cost savings according to the National Audit Office, which is warning that other infrastructure operators are often more efficient.

The Regulator also said  that ‘substantial scope’ remains for Network Rail to do better.

Today’s report from the NAO acknowledges that the Regulator has ‘significantly developed’ the methods used to judge efficiency.

Its targets have demanded substantial improvements, amd Network Rail has come close to meeting these targets, by making efficiency savings of 27 per cent in the five years to 2008-09, equivalent to £1.8 billion in that final year.

This was below the Regulator’s target of 31 per cent, although this was still an achievement when compared to savings in other regulated industries.

But ‘substantial scope’ remains for Network Rail to improve its efficiency, said the NAO.

The NAO has estimated that maintenance and renewal activities were 34 per cent to 40 per cent less efficient than the most efficient rail infrastructure managers elsewhere in Europe in 2008.

The Regulator estimates that Network Rail can achieve further efficiency savings of 21 per cent in the five years to March 2014 – equivalent to spending £940 million less in 2013-14 than the forecast for that year without efficiency gains.

However, the NAO added that there are continuing limitations in the robustness and coverage of Network Rail’s unit cost information. It said ‘these need to be addressed promptly to improve confidence that future efficiency targets accurately reflect Network Rail’s potential for sustainable savings, as the efficiency gap narrows, and that reported savings correctly reflect efficiency gains actually achieved’.

The report also pointed out that Network Rail is financed by debt guaranteed by the Government and holds a national monopoly over the rail network.

Its main incentives to deliver efficiencies are reputational and a component of Directors’ remuneration. The Regulator can specify objectives for Network Rail’s management incentive plan, ‘but has in the past expressed surprise at the actual levels of bonuses’.

Reader Comments:

Views expressed in submitted comments are that of the author, and not necessarily shared by Railnews.

  • dazzer, blackburn

    Savings can and should be made from the top down. N Rail has more executives, directors & senior managers than any private company would have and they are all on £100k and more + huge bonus for doing what?

    Put a few Railwaymen in charge and cut this wastefull lot out then we might begin to see a proper well run railway.