However, it’s not as bad as it looks, because these figures are not adjusted for inflation over the year. Converting 2014-15’s financial figures into their equivalents for 2015-16 gives VT 40.38, EMT 25.27 and GWR 20.14.
Imagine another operator has similar figures, but has a franchise commitment that reflects a Department for Transport requirement for all its stations to be staffed from first train to last train. Many of its stations do not currently have full-time staff, and so the switch will sharply worsen its passenger-kilometre figures per staff pound. But this cannot be seen as becoming less efficient on its own terms - in strict terms it is less efficient, but the extra staff may well contribute to a reduction in complaints. This is another measure that could be used to judge efficiency (when set against the number of passenger journeys).
Equally, an operator could shed staff. This could make it look more efficient, up until the point at which the loss of the work those staff members were doing begins to affect the business.
If you want a railway to support a country’s economy, you should not expect to hold it accountable for not being cost-effective. The DfT is mandating capacity improvements in London and South East England while holding season ticket prices down. This increases the railway’s overall costs while holding its income steady, which makes it less cost-effective.
British Rail used a variety of measures to gauge efficiency: passenger miles per member of staff employed; net tonne miles per member of staff employed; passenger-miles per loaded passenger train-mile; net tonne-miles per wagon; loaded train-miles per total route mile and average wagon load.
Such measures are rarely reported today. Instead, NR reports a bewildering array of statistics, of which only one mentions efficiency (see chart, page 62). This is a financial performance measure which shows “total efficiency generated excluding enhancement”. For Q2 of 2016-17 this was -£10m, with NR predicting full-year efficiency gains of -£180m.
Comparing (or benchmarking) one railway with another is very difficult because of the challenge of eliminating the inherent differences between those railways. In an International Transport Forum paper about railway efficiency written in 2013, Civity Management Consultants Arne Beck, Heiner Bente and Martin Schilling say: “Each nation and railway is subject to unique characteristics that will undoubtedly impact efficiency. For one, a nation’s history has shaped the organisational structure of the railway as well as the physical network. Subsidies for rail and annual deficits may be acceptable in some nations and not in others.
“Wars and its repercussions have impacted rail infrastructure. Topography is another factor. Switzerland and Japan both are nations with high concentrations of mountainous terrain, which makes the construction and maintenance of infrastructure more expensive. Settling patterns and population density also impact efficiency and utilisation of trains. France, Sweden and Canada all have low population densities when compared with Belgium, Germany or Switzerland, which may impact utilisation of costly rail assets.”
They go on to say that benchmarking can have value in stimulating debate between railway companies about what improves and what harms efficiency. Such benchmarking formed a key part of ORR’s 2008 Periodic Review that set NR’s goals for 2009-14. It led ORR to conclude that NR was at least 35% less efficient in maintenance and renewals spending than the best of Europe.
ORR set NR efficiency improvement targets of 16% in operating spending, 18% in maintenance spending, and 24% in renewals spending - giving an overall figure of 21%. As a result, NR rewrote its policies, which led to a reduction in renewals work. It also reorganised staff, cut its fault teams and created a backlog of maintenance work. Its general reaction was to cut costs, but that is not the same as becoming more efficient because it causes outputs to decline.
NR lost ground over Control Period 4, and entered CP5 having achieved around 18%. For CP5 (2014-19), ORR proposed 19% efficiencies to NR spending with 25% in support, 17% in operations, 16% in maintenance and 20% in renewals. An ambitious plan to switch signalling control from small individual boxes to a dozen Rail Operating Centres promised savings but has not occurred as quickly as expected, while lack of access has challenged NR in achieving its expected efficiencies in renewals work.
An element of this failure comes from the flaws of benchmarking, although optimism from ORR about NR’s abilities plays a part. Nevertheless, ORR is taking benchmarking forward into CP6 (2019-24), by splitting NR’s efficiency targets into geographic routes in line with NR’s devolution plans.
This means ORR will be comparing routes that are very different, which could work provided ORR manages to neutralise those differences to arrive at valid comparisons. If it’s looking at track costs, it will need to separate the costs of track maintenance and renewals on sections of line with and without third-rail. If it’s comparing London and North Eastern with London and North Western, it will need to account for the increased spending on the latter during the West Coast Route Modernisation, compared with the LNE’s East Coast modernisation that took place in the late 1980s and early 1990s.
