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Ask ten people what defines an efficient railway and you’ll receive a dozen answers… at least!
At its heart, efficiency is a relationship between inputs and outputs. Those inputs are generally time or money, whereas outputs are many and varied. You might measure punctuality or customer satisfaction. You might measure capacity used and compare it with capacity available. But even capacity is open to debate - do you measure it in terms of trains or seats? Or for freight, container spaces or wagon capacity?
A view of railway efficiency depends enormously on viewpoint - what matters to one person may not matter to another. Passengers might measure rail in terms of value for money. So might governments, but what represents good value to one might not be good value to another.
Nowhere is this better illustrated than today’s debate over fares. In the past few years the Government has raised those fares under its control by more than inflation, as it continues a policy of shifting the burden of rail away from taxpayers and more towards passengers.
Rail efficiency can be further divided. Users generally concentrate on efficient operation, but there is also efficiency in delivering maintenance, renewals and enhancements. Here Network Rail is under constant pressure from the Office of Rail and Road to become more efficient - to deliver as much (or more) work for a lower or similar cost.
NR has made progress in this area, yet its funding appears to be ever-rising. Increasing efficiency in one area may be masked by rising costs elsewhere. Yet those parts with rising costs could still be efficient, because their budgets may have been set with too much optimism or too early to properly know what costs were involved.
That was evident from ORR’s decision in 2013 to subject NR enhancements to a process called ECAM (Enhancements Cost Adjustments Mechanism). This took a project, checked its figures before and after delivery, and then allowed NR to add the efficient cost to the regulatory asset base against which NR could borrow money. This process derailed when NR was reclassified as a public body and no longer allowed to borrow money from private markets.
Part of ORR’s ECAM process was to compare NR’s costs with others. It’s tempting to compare efficiency levels between companies, but this is fraught with difficulties - you have to be sure that you’re comparing like with like. This was one of the challenges Sir Roy McNulty faced in his 2011 report, which concluded that Britain’s railways were 30% more costly in unit terms and could reduce by this much by 2018-19.
McNulty compared Britain with France, the Netherlands, Sweden and Switzerland. He found that NR’s costs were a significant part of the gap, but also that train operator and rolling stock costs were higher than they might be because of Britain’s lower level of train use in terms of passenger-kilometres per train kilometre (see graph, page 56, which shows a gradual improvement for Britain).
France, for example, does well in that latter category by running high-capacity TGV trains on high-speed, long-distance services and making sure they are full. Demand can be concentrated by running as few trains as possible, whereas Britain runs frequent services on some long-distance routes. Trains from London Euston to Manchester run every 20 minutes, whereas Paris-Lyon’s TGV service is roughly hourly. Both journeys take around two hours. Running fewer trains helps each train load more efficiently, but reduces track efficiency in terms of loaded trains per track mile.
If Paris-Lyon demand grows, SNCF could respond by increasing frequencies if it has spare stock. But if it does, this means that it’s currently using its fleet inefficiently compared with Britain’s intensively-worked London-Manchester trains.
SNCF and London-Manchester operator Virgin Trains take different views on their business models and on what efficiency means, which makes comparing the two very difficult. Virgin uses heavily discounted fares to attract passengers to quieter trains at less convenient times, but while demand lags behind supply (as it must if there are empty seats), then this means a less efficient operation than might otherwise be possible.
Comparing UK operators with each other is similarly prone to pitfalls. The first to avoid is any assumption that one operator is like another. Take Virgin Trains again (its West Coast operation). Dividing passenger-kilometres by its staff costs gives a measure of how much it delivers per pound of staff costs (see table, page 60). Using 2015-16 accounts, this gives a result of 39.14. Do the same for East Midlands Trains and the result is 24.83. For Great Western Railway it’s 18.78.
From this you could conclude that Virgin is the most efficient of the three. But it runs far fewer trains so needs fewer drivers and guards when compared with GWR and EMT, both of which run quieter rural and regional routes using short trains in addition to their inter-city routes. Also, GWR maintains its trains using its own staff. Alstom maintains the trains that Virgin leases from Angel Trains, so those staff costs appear under a different heading and cannot easily be found.
Of more relevance would be to compare the same company in different years, which could show whether a company is becoming more or less efficient. Using 2014-15’s accounts, Virgin rates 40.79, EMT 25.52 and GWR 20.34. So according to this measure, all have become less efficient over the year.
