Can the railway 'break even' and is it desirable?

[Bald Rick]

US freight railways receive no subsidy. Oh, you meant passenger railways? Then you'd probably be looking at Japan.

Parts of the UK rail network that require no subsidy when allowing for all costs including infrastructure and upgrades:

SWT
VTEC
The Thameslink / GN part of GTR

Parts that nearly do, and on current forecasts will do in the next few years:
Greater Anglia
c2c
The rest of GTR
VWC

With Southeastern not far behind

The above represents well over half the railway in terms of both income and passenger miles. Within a few years it will be turning a profit.


The big subsidy goes to Scotrail, Northern, Wales, and (in passenger miles terms) London Overground and Merseyrail.

Clearly then there are ways of making a UK railway profitable, however that would be rather undesirable, for the users of the most subsidised railways at least.

 

[Deepgreen]

Parts of the UK rail network that require no subsidy when allowing for all costs including infrastructure and upgrades:

SWT
VTEC
The Thameslink / GN part of GTR

Parts that nearly do, and on current forecasts will do in the next few years:
Greater Anglia
c2c
The rest of GTR
VWC

With Southeastern not far behind

The above represents well over half the railway in terms of both income and passenger miles. Within a few years it will be turning a profit.


The big subsidy goes to Scotrail, Northern, Wales, and (in passenger miles terms) London Overground and Merseyrail.

Clearly then there are ways of making a UK railway profitable, however that would be rather undesirable, for the users of the most subsidised railways at least.

I've probably misunderstood you here, but are you saying that, for example, SWT, pays for all its operating, rolling stock, infrastructure and capacity enhancements works (any not covered by NR) out of fares and still pays its dividends to shareholders?

 

[Bald Rick]

I've probably misunderstood you here, but are you saying that, for example, SWT, pays for all its operating, rolling stock, infrastructure and capacity enhancements works (any not covered by NR) out of fares and still pays its dividends to shareholders?

It pays all of its own costs, including track access charges to NR and a substantial premium to the DfT. However the total of track access charges for all operators does not pay for all of NRs costs (operations, Maintenance, Renewals and upgrades). The government currently makes up the difference by paying Network Grant to NR, which is another form of subsidy. Without it, track access charges would be substantially higher for all operators.

If you divide up the total Network Grant between operators on a consistent basis - vehicle miles for example - that is the amount of 'hidden' subsidy that the DfT pay NR for the infrastructure costs of each particular TOC.

In SWTs case, the value of the premium paid to the DfT is much higher than the SWT share of the network grant. Therefore that operation is a net profit to UK Rail.

 

[coppercapped]

It pays all of its own costs, including track access charges to NR and a substantial premium to the DfT. However the total of track access charges for all operators does not pay for all of NRs costs (operations, Maintenance, Renewals and upgrades). The government currently makes up the difference by paying Network Grant to NR, which is another form of subsidy. Without it, track access charges would be substantially higher for all operators.

If you divide up the total Network Grant between operators on a consistent basis - vehicle miles for example - that is the amount of 'hidden' subsidy that the DfT pay NR for the infrastructure costs of each particular TOC.

In SWTs case, the value of the premium paid to the DfT is much higher than the SWT share of the network grant. Therefore that operation is a net profit to UK Rail.

Thank you - a rare outbreak of sanity in this forum!

I hope it is clear to all that as long as a TOC returns a premium to the DfT the less the likelihood that the DfT will interfere in its operations. In fact I would suggest that when TOCs start being profitable against all attributable costs one of the original reasons for franchising groups of services - that of minimising the cost to the Exchequer of supporting a declining industry - falls by the wayside.

However those activities that require Government funding - major enhancements or replacements - will always be subject to the bigger national financial picture. If the Treasury is short of money or needs money for those politically more important things such as the NHS/welfare/pensions/education/defence/whatever - and as there is always a political upper limit to taxation - then history shows that the railways will tend to be further down the queue for funding.

Referring to some other posts. If one wants a railway which is master of its own destiny then the closer it can get to being self sufficient the better. Arguments that roads need subsidy or that those with no access to cars are discriminated against hold no water. The latter argument is nonsense as the railways' network is much too coarse for most local travel - it works best where flows are concentrated - and bus and coach services cover a much finer grid. It is not as if people cannot get about at all. The direct costs of roads can be calculated quite accurately - the indirect costs depend entirely on the viewpoint of the person doing the calculating. And the benefit of roads is basically the same sum as the Gross Domestic Product. Without roads nothing would happen. The benefit of roads far outweighs the costs.

 

[The Ham]

Could today's railways break even?

Probably yes, given that in 2014/15 the costs to the railways were £13.6bn whilst the income was £13.5bn. Further details can be found here:

http://orr.gov.uk/statistics/publis...b-rail-industry-financial-information-2014/15

As such there could well be a "profit" for 2015/16 and if not for the current year (2016/17) would more likely still show a profit.

Given that the railways, even on the currently available data, are only making a small loss then there is a fairly good case for looking at additional works to make better use of the track we already have.

As an example SWT are put forward as an operator that is making a profit, as such it should be fairly clear that if there are schemes (Woking Junction, Basingstoke Junction, Southern approach to Heathrow, etc.) that can release capacity then they should be allowed. As for example, you allow the southern approach to Heathrow to be built and change Woking Junction works you could run more trains between Basingstoke and Woking and Guildford and Woking. Add in electrification of to Salisbury and you could double train frequencies to 4tph in each direction on an otherwise under used 2 line section of the network. By doing so, although your costs go up and there are short sections of new track, chances are the extra revenue would more than offset the additional costs making SWT even more profitable.

 

[al78]

Arguments that roads need subsidy or that those with no access to cars are discriminated against hold no water.

Incorrect. If railways didn't exist I would be forced to own a car if I wished to visit my family in person, unless you think cycling a 450 mile round trip is practical. Other people would be forced to own cars to get to work. There are plenty of journeys where, without trains, car free people would be seriously disadvantaged

The direct costs of roads can be calculated quite accurately - the indirect costs depend entirely on the viewpoint of the person doing the calculating.

Yawn. People always say that when the calculations contradict their precious world viewpoint.

 

[najaB]

Yawn. People always say that when the calculations contradict their precious world viewpoint.

There is a little merit to that statement - different people may choose to include different things as indirect costs. What they need to do (and many fail to do) is make their assumptions clear.

 

[quantinghome]

This question was the central point of the recent book The Railway Dilemma. The main takeaways are:

- Freight can be run on a purely commercial basis (as happens in the US, for example).

- Passenger services are either not profitable or in the best case scenario provide only a small rate of return. The lack of clear cut examples anywhere in the world of passenger railways making a commercial return are evidence of this.

- In line with this, the pre-nationalisation railway companies made their profits on freight, not passengers. It was the loss of this traffic that saw profits disappear from the railways.

- Lack of detailed internal accounting by railway companies and later BR meant that the true profitability of different services was difficult to establish. It was only post-Beeching during the 1970s and 1980s that management effort was applied to understanding this (Serpell being a part of it).

- The conclusion was that a profitable passenger railway in the UK would be small and not very profitable.

Nevertheless, I think it is fairly obvious that railways are a societal good and should be supported by the state as are other modes of transport. Governments should not expect passenger rail services to provide a commercial return (although some might just). Looking at my local perspective, it is shocking to think that some of the main commuter routes into Leeds were once being seriously considered for closure.

 

[najaB]

- Passenger services are either not profitable or in the best case scenario provide only a small rate of return. The lack of clear cut examples anywhere in the world of passenger railways making a commercial return are evidence of this.

I was under the impression that several of the Japanese railways were profitable?

 

[coppercapped]

Incorrect. If railways didn't exist I would be forced to own a car if I wished to visit my family in person, unless you think cycling a 450 mile round trip is practical. Other people would be forced to own cars to get to work. There are plenty of journeys where, without trains, car free people would be seriously disadvantaged

Where did I suggest that railways would not exist?

Try responding to the whole argument rather than a small quote. Politicians tend to do that - are you one?

Yawn. People always say that when the calculations contradict their precious world viewpoint.

As najaB pointed out in post #37 the results of such calculations depends on what one includes or does not include. It behoves those making the calculation to make their assumptions clear.

 

[zaax]

Seemly yes demand is not there to run a profitable railway. Even with highly priced tickets during the rush hour TOC's can not make a profit (including the light rail systems). Which means we either have to live close to our places of work or make the business that congeal together pay the price of get their employees to their offices.

Or live with the fact TOC's will never make a profit and either nationalise them or make them not for profit companies.

 

[The Ham]

Could today's railways break even?

Probably yes, given that in 2014/15 the costs to the railways were £13.6bn whilst the income was £13.5bn. Further details can be found here:

http://orr.gov.uk/statistics/publis...b-rail-industry-financial-information-2014/15

As such there could well be a "profit" for 2015/16 and if not for the current year (2016/17) would more likely still show a profit.

Given that the railways, even on the currently available data, are only making a small loss then there is a fairly good case for looking at additional works to make better use of the track we already have.

As an example SWT are put forward as an operator that is making a profit, as such it should be fairly clear that if there are schemes (Woking Junction, Basingstoke Junction, Southern approach to Heathrow, etc.) that can release capacity then they should be allowed. As for example, you allow the southern approach to Heathrow to be built and change Woking Junction works you could run more trains between Basingstoke and Woking and Guildford and Woking. Add in electrification of to Salisbury and you could double train frequencies to 4tph in each direction on an otherwise under used 2 line section of the network. By doing so, although your costs go up and there are short sections of new track, chances are the extra revenue would more than offset the additional costs making SWT even more profitable.

I've since found a newer document which is for 2015/16 which has the "loss" as £71 million, which means that there isn't a whole lot of a loss:

http://orr.gov.uk/__data/assets/pdf...il-industry-financial-information-2015-16.pdf

The amount of loss is less than 0.4% of the railway's income (just shy of £19bn) and slightly less than the railways expenses (just over £19bn).

 

[najaB]

Seemly yes demand is not there to run a profitable railway. Even with highly priced tickets during the rush hour TOC's can not make a profit (including the light rail systems).

At the risk of repeating myself - the railway can be run profitability. But it won't be today's railway.

Expect little or no service outside the peaks. No service in rural areas. Limited investment in new ruling stock.

 

[Gareth Marston]

At the risk of repeating myself - the railway can be run profitability. But it won't be today's railway.

Expect little or no service outside the peaks. No service in rural areas. Limited investment in new ruling stock.

Aaah the "Taxpayers Alliance" solution.....:cry:

 

[w0033944]

If the railways were to become 100% passenger revenue reliant, then another Beeching style shut down of large parts of the network would follow almost immediately. This would then have the effect of shifting large numbers of commuters and travelers onto the roads, which would effectively shut down large parts of the road network into many cities and towns at peak times at least. The resultant loss of productivity would have businesses demanding that much more be spent increasing the road network capacity, and would need large rises in both local and central taxes to fund any such projects. It would take decades to complete, cause untold misery to commuters in particular and would probably result in loss of business as the transport network is over stretched and unable to deliver to usual timescales.

So in short, is 100% reliance desirable, no. The railway network is an asset to the country in so much that it (generally) delivers people to and from their places of work in good time. Even though it comes at a net cost to the country directly, it's benefits far outweigh that. This is why I get annoyed when some people demand that trains should only be run where they can be shown to make a profit. It is an overly simplistic way to look at the network.

This is, IIMO, a most sensible and realistic approach to the question posed by the OP. I have yet to hear anyone argue that other forms of infrastructure (sewers and water treatment or electricity provison) ought to pay for themselves without the need to be subsidised by the taxpayer, but, for some reason, this understanding does not seem to apply to the railways. As has been mentioned, the only solution which would enable the network to run without subsidies is the sort of short-sighted, selfish formula which the Taxpayer's Alliance seems to advocate for everything, and which would cost significantly more money in reduced productivity than would be saved given the problems that would result if such cuts as would be necessary to achieve such a duboius landmark were enacted.

 

[w0033944]

- Passenger services are either not profitable or in the best case scenario provide only a small rate of return. The lack of clear cut examples anywhere in the world of passenger railways making a commercial return are evidence of this.

- In line with this, the pre-nationalisation railway companies made their profits on freight, not passengers. It was the loss of this traffic that saw profits disappear from the railways.

This is I think, a point which is not properly understood by many people who comment from a contemporary (particularly post-Thatcher*) perspective: most early railways were mineral lines, and, throughout much of the pre-Nationalisation history of the railways of Great Britain, most companies saw a majority of any profits they made thanks to freight flows. Expecting the passenger sector alone to break even is therefore unrealistic given that the management of most if not all of the pre-Grouping and Big Four companies realised that it was commercially expedient for freight to subsidise passenger services to an extent, thereby enabling improvements in comfort, on-boarde facilities and speed which were marketable and which would attract more passengers to one's routes.




* I'm not the sort of left-of-centre commenter to drag Thatcher and her legacy into every discussion, however, it is relevant here as one of the changes in thinking she seems to be a tendency to undervalue hidden gains and benefits in cases where the up-front figures suggest that cuts ought to be made in order to make services pay their way. Likely societal impacts of cutting the network so as to make it pay for itself would probably be more costly overall thanks to reduced productivity, making taxpayer money towards the railways a shrewd investment in the overall economic health of the country, in addition to allowing capacity for growth.

 

[absolutelymilk]

Could today's railways break even?

Probably yes, given that in 2014/15 the costs to the railways were £13.6bn whilst the income was £13.5bn. Further details can be found here:

http://orr.gov.uk/statistics/publis...b-rail-industry-financial-information-2014/15

As such there could well be a "profit" for 2015/16 and if not for the current year (2016/17) would more likely still show a profit.

http://orr.gov.uk/__data/assets/pdf_file/0020/24149/uk-rail-industry-financial-information-2015-16.pdf

Figure 2.11 on this page shows total
renewals and enhancements expenditure in
2015-16 by Network Rail route (£3.1bn and
£3.2bn respectively).

In 2015/16, Network Rail spent £3.2 billion on enhancements (p.18) while net government funding was also £3.2 billion so yes the industry technically broke even on operating costs (including renewals).

Looking at England alone, enhancements came to about £2.95 billion (from the graph on p.18) and net govt funding was £2.22 billion (p. 24) so there was actually a £0.7 billion profit.

I have created a Wikipedia article "Financing of the rail industry in Great Britain" for those who are interested - feel free to suggest changes on the talk page there or edit it directly.

 

[matacaster]

The issue of breaking even is an accounting phenomenon!
Accountancy is excellent in presenting factual things - like how much a train costs etc, but is rather poor when costs are unclear.

eg HGV's use motorways as do cars, buses etc. Now to build a motorway just for cars, the lanes could be narrower, bridges lower, maintenance costs reduced etc, but the motorist pays nearly all the costs. So what actually happens is the treasury makes a sort of guess on figures like this attributable to HGV's and those guesses are very favourable towards road transport as there are lots of road transport firms employing lots of drivers and by keeping their costs artificially low, consumers get low prices at the shops. Rail costs have to be entirely born by the railway. Uneven playing field and no one is likely to do much about it any time soon.

 

[yorksrob]

Clearly some level of self-sufficiency is desirable for the railway, yet were we to insist on total covering of costs, we would undoubtedly be left without the sort of railway we want and need. I'm reminded of the fact that the railway's great period of recovery began during the 1980's, when the self-defeating closure programme finally wound down and attempts were made to understand which parts of the railway could be run more or less commercially, whilst those passenger services which were socially necessary were understood and supported.

Parts of the UK rail network that require no subsidy when allowing for all costs including infrastructure and upgrades:

SWT
VTEC
The Thameslink / GN part of GTR

Parts that nearly do, and on current forecasts will do in the next few years:
Greater Anglia
c2c
The rest of GTR
VWC

With Southeastern not far behind

The above represents well over half the railway in terms of both income and passenger miles. Within a few years it will be turning a profit.

This is an achievement and the railway should be congratulated. However it will be interesting to see whether this state of affairs can be maintained throughout the whole forty year investment cycle. For example, as far as I'm aware, some of the TOC's above did require subsidy during the replacement of slam door stock earlier this century.

 

[yorksrob]

Thank you - a rare outbreak of sanity in this forum!

I hope it is clear to all that as long as a TOC returns a premium to the DfT the less the likelihood that the DfT will interfere in its operations. In fact I would suggest that when TOCs start being profitable against all attributable costs one of the original reasons for franchising groups of services - that of minimising the cost to the Exchequer of supporting a declining industry - falls by the wayside.

However those activities that require Government funding - major enhancements or replacements - will always be subject to the bigger national financial picture. If the Treasury is short of money or needs money for those politically more important things such as the NHS/welfare/pensions/education/defence/whatever - and as there is always a political upper limit to taxation - then history shows that the railways will tend to be further down the queue for funding.

Referring to some other posts. If one wants a railway which is master of its own destiny then the closer it can get to being self sufficient the better.

Granted, but it's a balance between what sort of a railway service the country actually wants. Getting down to brass tacks, would we, as a society consider it desirable to suffer degraded services in rural areas, more expensive fares or trimming of services at less profitable times, to achieve an "independent" railway ? I doubt it very much. It sounds dangerously like the sort of "crumbling edge of quality" that Sir Peter Parker warned us about.

Arguments that roads need subsidy or that those with no access to cars are discriminated against hold no water. The latter argument is nonsense as the railways' network is much too coarse for most local travel - it works best where flows are concentrated - and bus and coach services cover a much finer grid. It is not as if people cannot get about at all. The direct costs of roads can be calculated quite accurately - the indirect costs depend entirely on the viewpoint of the person doing the calculating. And the benefit of roads is basically the same sum as the Gross Domestic Product. Without roads nothing would happen. The benefit of roads far outweighs the costs.

The best we can say is that all economic activity requires transport to function. Some, like the local hairdresser, for example may have a comparatively limited need for longer distance transport, road or otherwise. Others, such as such as supermarket logistics, agriculture and much manufacturing rely heavily on the road network. But then again, finance, the University sector and heavy aggregates rely pretty heavily on the rail sector.

The only thing one can accurately say is that the benefit of the transport network as a whole is the same sum as the Gross Domestic Product.

The argument that "it's not as if people cannot get about at all" doesn't hold any water whatsoever. Before we had modern maintained roads, people still "got about" be it by foot or cart, however the low quality of that transport restricted the ability of those economic sectors that depended on longer distance transport to thrive, just as lack of a quality railway network would affect the ability of those railway reliant sectors mentioned above to thrive.

 

[The Ham]

The issue of breaking even is an accounting phenomenon!
Accountancy is excellent in presenting factual things - like how much a train costs etc, but is rather poor when costs are unclear.

eg HGV's use motorways as do cars, buses etc. Now to build a motorway just for cars, the lanes could be narrower, bridges lower, maintenance costs reduced etc, but the motorist pays nearly all the costs. So what actually happens is the treasury makes a sort of guess on figures like this attributable to HGV's and those guesses are very favourable towards road transport as there are lots of road transport firms employing lots of drivers and by keeping their costs artificially low, consumers get low prices at the shops. Rail costs have to be entirely born by the railway. Uneven playing field and no one is likely to do much about it any time soon.

It goes even further than that, in that if no buses or HGV's used a road then other than resurfacing as long as the road was built well (no risk of water damage) then in theory the road could last indefinitely.

The road construction of motorways is very thick due to the number of lorries that will use them, housing estate roads are at a lot thinner because almost no lorries will use them.

 

[quantinghome]

I was under the impression that several of the Japanese railways were profitable?

They certainly have a healthy operating profit. The population density of Japan means it is one of the few places in the world that this is possible.

However the main high speed lines were built by the then nationalised railway company and financed at least partly by government loans, so it's open to question whether they could have been financed entirely on a commercial basis. This Wikipedia article https://en.wikipedia.org/wiki/Shinkansen#Economics seems to indicate that the Japanese government did not get all the construction debt repaid when it sold the lines to private companies.

So yes, they're profitable on an operational basis. But then, so was Concorde. There is a big difference between having an operational profit and being able to generate a commercial return on investment.

 

[Bletchleyite]

So yes, they're profitable on an operational basis. But then, so was Concorde. There is a big difference between having an operational profit and being able to generate a commercial return on investment.

The funding concept for Metrolink, as an example, seems to be that it receives money for capital investment (new lines and trams) but not an operating subsidy.

That isn't a bad model, as given the long life of railway equipment that means it's relatively secure from outside funding cuts for very long periods of time. Maintaining something you've already got is a lot less costly when it's relatively new.

 

[najaB]

So yes, they're profitable on an operational basis. But then, so was Concorde. There is a big difference between having an operational profit and being able to generate a commercial return on investment.

Given the fact that they turn a reliable operational profit, one would presume that they would have been able to get long-term private capital on terms very similar to those that the Government would have received.

 

[squizzler]

Consider Brightline being built in Florida.

The development (rolling stock, stations, corridor upgrades) is privately funded by bond issue, and under construction now. Evidence that passenger rail construction can be privately funded, and in the United States too.

I agree that rail's competitive position would be improved further if the polluter was made to pay for whatever alternative mode they choose. For motoring the ones that immediately spring to mind includes:

- CO2 emissions (for traditional cars and moto's)
- Local environmental quality, in turn breaks down into air quality, noise and vibration, visual amenity
- Policing costs
- Severance of the local economy by busy roads

The way people pay for individual journey choice is determined by how the mode is paid for. For example journey choice would favour motoring less if insurance, the cost of the car itself and its car tax were Pay-As-You-Go rather than a fixed sunk cost regardless of how much the motorist uses their car.

Finally the external costs of motoring only seem to go up as we find out more about it. Take diesel cars as an example. The relative car tax on diesel and petrol were determined years ago by estimated carbon emissions. Take health problems into account and diesel cars should be taxed considerably more than petrol. Also people are only just starting to quantify the health and social problems caused by traffic noise and community severence (especially to children). Cost benefit analysis is way behind the curve, transport investment models should include extra costs to account for "known unknown" externalities of transport that will no doubt manifest themselves in due course.

 

[coppercapped]

At the risk of repeating myself - the railway can be run profitability. But it won't be today's railway.

Expect little or no service outside the peaks. No service in rural areas. Limited investment in new ruling stock.

Not necessarily. SWT shows that it is possible to run a railway offering peak, off-peak, rural and seaside services profitably including all costs. It is leasing a lot of new and re-engineered rolling stock and its London terminal is being significantly enhanced.

However one must be aware of the SWT model - it operates a 'fan' of services with London at the small end. It has only one London terminal and it operates in an area with a generally sound economy.

Southern, Thameslink and the GN services are also very close to breakeven if they have not done so already. However Southern's costs will be higher than SWT as it supports two major termini in London - Victoria and London Bridge. Potentially GWR could also be profitable as it has a similar route topography to SWT and only one London terminus but it is handicapped at the moment by the disruption and delays of the electrification programme and the excessive costs of the DfT run Intercity Express Programme.

The TOCs with the highest support per passenger-km are clearly those serving large rural areas - Northern, Wales and Scotland. There is no reason why the more profitable TOCs cannot cross-subsidise these services - as is the case at the moment - with no call on the Exchequer to subsidise the day-to-day operation of the railway taken as a whole. In any event the size of the operating deficit in two of these three groups will fall as Scotland's electrifications and enhanced services and Northern's new more attractive stock all enter service. We'll have to wait and see what the new franchise agreement means for Wales.

It is time to stop crying 'wolf'.

 

[najaB]

The TOCs with the highest support per passenger-km are clearly those serving large rural areas - Northern, Wales and Scotland. There is no reason why the more profitable TOCs cannot cross-subsidise these services - as is the case at the moment - with no call on the Exchequer to subsidise the day-to-day operation.

It is time to stop crying 'wolf'.

It's far from clear that the profitable TOCs generate enough revenue to support the non-profitable ones in their current form.

 

[The Ham]

It's far from clear that the profitable TOCs generate enough revenue to support the non-profitable ones in their current form.

Passenger rail makes an total annual loss of £71 million on costs and income of about £19bn each.

Yes that is still a shortfall, but it wouldn't take much to make it so it was profitable.

Anyway on total government spend for a year (£784bn) it's less than 0.01%, which is basically a rounding error. To put that in perspective if someone was on £15,000 that would be the same as that person losing less than £1.50.

Even on the £28bn transport budget it is 0.25% of the budget, which on the above example would be the same as someone on £15,000 spending £38.

On the £19bn of expenditure it is about 0.37%, which on the above example would be the same as someone on £15,000 spending £56.

However you look at it then it isn't a large amount of money and could fairly easily in the next few years move towards actually making a profit without needing a fundamental change in the way things are done.

 

[Bald Rick]

I've since found a newer document which is for 2015/16 which has the "loss" as £71 million, which means that there isn't a whole lot of a loss:

http://orr.gov.uk/__data/assets/pdf...il-industry-financial-information-2015-16.pdf

The amount of loss is less than 0.4% of the railway's income (just shy of £19bn) and slightly less than the railways expenses (just over £19bn).

A very helpful document. But sorry, your assessment is not correct. The 'loss' of £71m is after £3.2bn (net) Government support (ie subsidy) is counted as income.

The total income figures include some financial transfers within the industry. The industry income is actually about £15bn, made up of:

£9.4bn passenger fare box
£0.9bn freight receipts
£1.1bn other income (station retail, property income, car parks, etc)
£3.2bn net government support (DfT, Wales, Scotland, PTEs, London)

The railway costs about £15bn a year to run, so the subsidy of £3.2bn represents approx 21% of the railway costs. (Which is what is shown on the last bar of the graph on page 14)

Put another way, the government is getting £15bn of railway for a little over £3bn of taxpayers cash. Which is a pretty good deal, and close to the best ever I suspect in percentage terms, certainly in my near quarter of a century in the industry.

However a little deeper anaylysis shows that the Northern, Scotrail and Wales operations (including infrastructure) are responsible for approximately half of this subsidy. These three plus Merseyrail have a higher subsidy than farebox, ie the government is paying more than half of the cost of the operation. Cally Sleeper is almost there at 49%. (Average fare income of £70k per day of operation, average cost of £175k per day, which explains all you need to know about the economics of sleepers)

Given expected growth in the next few years (acknowledging that growth is falling off at present), you can see how that £3.2bn net subsidy will reduce. And it's fairly easy to see how a profitable network could be arrived at.

 

[455driver]

How about other (new) TOC's using spare space on the lines? eg the Ipswich to Norwich line is only used every 1/2 hour which gives space for a cheaper trains between Ipswich and Norwich.

Cheaper trains still need to cover their costs and make a profit, there is no point filling a train with passengers using £5 tickets if it costs you the equivalent of £7 each to moive them!

Of course that assumes that there are a trains worth of passengers that actually want to make that journey in the first place!