High fares - The issue that won't go away

[JonathanH]

Why does the DfT and the Treasury not say to Network Rail ' the typical costs of operating and maintaining similar rail networks in other countries is £x'. Over the next three years we will gradually reduce your budget to similar levels, but will expect the same levels of work activity as now. It is for you to reduce your costs over that time'?

Is it that simple? The DfT and Treasury arguably do say that, but the result of cutting Network Rail's (or one day GBR's) budget will be felt by users in less money being spent on maintenance and upkeep rather than budget cuts elsewhere. How do staff costs compare with those other similar Rail networks? Should they be cut? What are the elements of cost that directly feed through to higher train fares?

 

[TUC]

Is it that simple? The DfT and Treasury arguably do say that, but the result of cutting Network Rail's (or one day GBR's) budget will be felt by users in less money being spent on maintenance and upkeep rather than budget cuts elsewhere. How do staff costs compare with those other similar Rail networks? Should they be cut? What are the elements of cost that directly feed through to higher train fares?

But that's my point, DfT should require that there is no reduction in maintenance. Network Rail must drive costs down.

 

[JonathanH]

But that's my point, DfT should require that there is no reduction in maintenance. Network Rail must drive costs down.

But what then are the costs it can drive down? Presumably less use of outside contractors, but it doesn’t have a big say in raw materials costs and the cost of machinery. Does that just leave staff costs?

 

[TUC]

But what then are the costs it can drive down? Presumably less use of outside contractors, but it doesn’t have a big say in raw materials costs and the cost of machinery. Does that just leave staff costs?

If contracting is done well, greater rather than less use use of outside contractors should reduce costs.

 

[alistairlees]

Orr published some international comparisons in 2008 and 2013, which tended to show that network rail was more expensive. I am not sure if there are more recent ones.

But perhaps a comment, made to me a couple of years ago, from a very large supplier to network rail will help: “we cannot believe how much network rail pays us.”

 

[JonathanH]

But perhaps a comment, made to me a couple of years ago, from a very large supplier to network rail will help: “we cannot believe how much network rail pays us.”

If that is the case, then Network Rail need to negotiate lower costs with those suppliers, but who has who "over a barrel" in this case? Is it a buyer's market or a seller's market? Any buyer will only pay what someone else says is the cost.

 

[Krokodil]

Why does the DfT and the Treasury not say to Network Rail ' the typical costs of operating and maintaining similar rail networks in other countries is £x'. Over the next three years we will gradually reduce your budget to similar levels, but will expect the same levels of work activity as now. It is for you to reduce your costs over that time'?

In many cases the reason for the higher costs is gold plating on safety grounds. Network Rail simply have to say "are you accepting responsiblity for any incidents" and the minister will wilt, no matter how slim the risk is in reality.

The railway does get taken for a ride by many of its suppliers and contractors. Encouraging more firms to get themselves certified would increase competition here.

 

[alistairlees]

If that is the case, then Network Rail need to negotiate lower costs with those suppliers, but who has who "over a barrel" in this case? Is it a buyer's market or a seller's market? Any buyer will only pay what someone else says is the cost.

The conversation was in the context that the suppliers were really expecting to be paid less, but they could charge large amounts to network rail which were accepted. In other words, network rail is a terrible buyer.

 

[Falcon1200]

Over the next three years we will gradually reduce your budget to similar levels, but will expect the same levels of work activity as now. It is for you to reduce your costs over that time'?

My operational roles on the railway started way back in 1984, and even then there was constant pressure on BR to reduce its costs - It was a rare year without any form of Control re-organisation, ie staff reduction. And this has continued, one of the reasons I retired from Network Rail in 2016 was a decrease in numbers in my job and therefore an unmanageable increase in workload on the remaining staff. Ironically the most stable period of my career was under Railtrack!

Any reduction in Network Rail's funding would inevitably have a serious effect on the performance, reliability and indeed safety of the railway.

 

[modernrail]

Yes, the overall cost is £25bn and passengers pay £11bn of that cost in fares. The rest (£14bn) comes from Government/taxpayers. That gets to the heart of this debate - fares are viewed as too high, but still don't even cover half the cost of running the industry.

Quite. The

My operational roles on the railway started way back in 1984, and even then there was constant pressure on BR to reduce its costs - It was a rare year without any form of Control re-organisation, ie staff reduction. And this has continued, one of the reasons I retired from Network Rail in 2016 was a decrease in numbers in my job and therefore an unmanageable increase in workload on the remaining staff. Ironically the most stable period of my career was under Railtrack!

Any reduction in Network Rail's funding would inevitably have a serious effect on the performance, reliability and indeed safety of the railway.

No it wouldn’t it would, if done properly, empower Network Rail to do a much much better job of working its supply chain to achieve a vastly better result at a lower cost.

There is hardly an example out there of Network Rail achieving anything other than abject failure in achieving decent costs and cost controls with its supply chain.

Anyone who bumps into anything to do with Network Rail knows 2 things. It makes a mountain out of a mole hill where it interacts with other bodies that need to get on with their jobs and it allows contractors to invent prices that should get you Windsor Castle, not a bit of electrification etc.

 

[Falcon1200]

No it wouldn’t it would,

Yes it absolutely would, and I speak from personal experience. What is your role within Network Rail please?

 

[modernrail]

Yes it absolutely would, and I speak from personal experience. What is your role within Network Rail please?

I carefully use the words ‘if done properly’. Do I have any confidence there is a leadership team that could achieve that, not really.

However, any organisation the size of and with the budget of Network Rail that is failing against international cost comparators and uses largely outsourced contractors that doesn’t think it might not be able to achieve huge improvement would be showing a huge amount of arrogance, as many parts of the railway industry do.

I have dealt with high value Network Rail contracts. They were appalling and left the field wide open to the consultants and contractors to shove in more claims than I have ever seen before. In one office we were told there were more contractors working on additional claims than on the job itself. I feel for Network Rail in a way. The contractor market has become very skilled and aggressive at this stuff and with a sense of entitlement (and no doubt some very unhealthy relationships and merry-go-round) at the top. It all needs sorting as is sortable.

One thing that has changed is that the top board members within the contractors are on vastly higher salaries and bonuses than say 30 years ago. They are highly, highly incentivised to use any trick they can to milk the cow as hard as they can.

 

[alistairlees]

I don’t think the issue is necessarily what network rail pays its salaried employees; it’s what it pays to suppliers (contractors, consultants etc.)

Take Soham station for example: it cost £18.5m. Yet it was only a single 100m platform with a basic footbridge (no lifts) a short access road, a small amount of car parking, a bus turning circle, a small amount of lighting, two TVMs and a bus shelter style waiting room. Of course, some money also went on planning application, surveys and compensation. But there was little in the way of signalling, point work or electrification to get in the way.

This was all contracted out (with some management from within network rail I expect). That (the contracting out) is where the problem lies.

 

[Starmill]

Yes it absolutely would, and I speak from personal experience. What is your role within Network Rail please?

What's your role? Just so I've got this right, you think that the only people who can comment on a large state-owned and almost entirely publicly-funded body are... people who work within it? Please feel free to clarify if not.

== Doublepost prevention - post automatically merged: 5 Jul 2025 ==

Is it that simple? The DfT and Treasury arguably do say that, but the result of cutting Network Rail's (or one day GBR's) budget will be felt by users in less money being spent on maintenance and upkeep rather than budget cuts elsewhere. How do staff costs compare with those other similar Rail networks? Should they be cut? What are the elements of cost that directly feed through to higher train fares?

They regularly accept that costs will be higher in the medium term in exchange for a smaller budget this year, next year, and the year after that, within the recent narrow spending review horizons. This is part of why National Highways and Network Rail have such outdated infrastructure and technical maintenance "debt". Extending those would be a start, however, the new government is if anything more myopic than the previous one while so far. Perhaps the most recently concluded spending review will improve this, perhaps it won't and will continue roughly as is until the end of the Parliament.

 

[modernrail]

There will be some absolute classic wastes of money hiding in plain sight. For instance public sector bodies have a terrible habit of leaving gaps between contract work package approvals to contractors, especially over financial periods. I have seen that one alone add 20% to final bills on plenty of occasions.

There are also often huge problems with complex project governance structures.

Report after report has highlighted all of this across all public sector contracting and Network Rail is likely one of the worst offenders because of the fragmentation of the market it operates in.

 

[TUC]

My operational roles on the railway started way back in 1984, and even then there was constant pressure on BR to reduce its costs - It was a rare year without any form of Control re-organisation, ie staff reduction. And this has continued, one of the reasons I retired from Network Rail in 2016 was a decrease in numbers in my job and therefore an unmanageable increase in workload on the remaining staff. Ironically the most stable period of my career was under Railtrack!

Any reduction in Network Rail's funding would inevitably have a serious effect on the performance, reliability and indeed safety of the railway.

Then why do comparable railway systems run on lower costs with no apparent reduction in safety?

== Doublepost prevention - post automatically merged: 5 Jul 2025 ==

I don’t think the issue is necessarily what network rail pays its salaried employees; it’s what it pays to suppliers (contractors, consultants etc.)

Take Soham station for example: it cost £18.5m. Yet it was only a single 100m platform with a basic footbridge (no lifts) a short access road, a small amount of car parking, a bus turning circle, a small amount of lighting, two TVMs and a bus shelter style waiting room. Of course, some money also went on planning application, surveys and compensation. But there was little in the way of signalling, point work or electrification to get in the way.

This was all contracted out (with some management from within network rail I expect). That (the contracting out) is where the problem lies.

There is little evidence that direct operations have lower costs. The problem lies in how contracting out is managed. Requirements are too often over-specified, and those managing the tendering process are no better at doing this well and cost-effectively than they are with direct operations. In both cases, it is poor oversight by the state which is to blame.

== Doublepost prevention - post automatically merged: 5 Jul 2025 ==

In many cases the reason for the higher costs is gold plating on safety grounds. Network Rail simply have to say "are you accepting responsiblity for any incidents" and the minister will wilt, no matter how slim the risk is in reality.

The railway does get taken for a ride by many of its suppliers and contractors. Encouraging more firms to get themselves certified would increase competition here.

Then DfT sponsor teams need to have the knowledge and confidence to push back on Network Rail. That approach is a lazy man's blank cheque.

 

[alistairlees]

There is little evidence that direct operations have lower costs.

I never said there was

The problem lies in how contracting out is managed.

Exactly

Requirements are too often over-specified, and those managing the tendering process are no better at doing this well and cost-effectively than they are with direct operations. In both cases, it is poor oversight by the state which is to blame.

That, and a tendency to reach for consultancy to validate things you should know already and which are within your core competency (or should be).

Then DfT sponsor teams need to have the knowledge and confidence to push back on Network Rail. That approach is a lazy man's blank cheque.

Indeed, but if you don’t have the experience or expertise, then don’t attempt to specify or manage it.

 

[modernrail]

I never said there was

Exactly

That, and a tendency to reach for consultancy to validate things you should know already and which are within your core competency (or should be).

Indeed, but if you don’t have the experience or expertise, then don’t attempt to specify or manage it.

Or even worse, reach for a consultancy that actually knows less than you to validate a decision, then leading to a change of plan that is not the right solution.

 

[tbtc]

LNER are getting a lot of criticism, but I thought that they were one of the first/few operations to genuinely hit their pre-Covid passenger levels? (i.e. ignoring the Elizath Line)

In which case, maybe (their version of) fares reform is going to plan?

Presumably off peak fares on the ECML were also regulated, which begs the question how LNER have been given carte blanche to do away with them.

Ultimately there needs to be some regulation of fares with teeth - although with the DfT in control, that can only be a conflict of interest against passengers.

LNER have carte blanche because they are effectively a branch of the government,. They can do what they want, who's going to take them to court?

We used to have private companies who had to stick to franchise commitments, and so couldn't do things like cut the frequencies at a whim (locally to me, Mansfield had lost half it's Nottingham trains, half of the Gainsborough - Workshop - Sheffield trains cut, half the Sheffield - Doncaster trains cut... and no recourse... Further afield we've seen long running links like Scarborough - Manchester withdrawn because it improved reliability for a nationalised operator... )

There'd have been toys thrown out of the pram if those pesky private firms dared do those things (or ripped up the fare book like LNER), but... its the government's train set again, so they can do what they want

You may not like what LNER have done, you may not trust the DfT, you may not be happy with Network Rail but... this is nationalisation.

It was never going to be 'leave A Proper Railwayman in charge for five years, without political interference"

Who'd have guessed that it would end up like this?

Yes, the overall cost is £25bn and passengers pay £11bn of that cost in fares. The rest (£14bn) comes from Government/taxpayers. That gets to the heart of this debate - fares are viewed as too high, but still don't even cover half the cost of running the industry.

Worth repeating this

Over a billion pounds a month in subsidy, yet people on here seem to resent any fares going up (and I regularly see suggestions that tickets should be free, or at least subsidised even more thank they currently are, plus more loss making branch lines get proposed)

In the real world, we can't be confident that a government struggling with public finances (as all UK governments will be for at least the next decade) won't try to trim that deficit at least slightly

That’s the surface of the debate, not the heart of it. Closer to the heart of it are the key questions:
- why is network rail so expensive (it’s the bulk of costs)? See here for the £15bn of expenditure in 2023/24
- why have rolling stock costs increased so much? (bungled IEP procurement)
- and why is there no truly concerted effort to drive up revenue ?

These are the real biggies. Sorting these out takes treasury pressure away and enables the railway to free itself (as much as possible) from political interference and to actually deliver a good railway.

Driving up revenue sounds good, but often involves increasing costs to achieve that

There's very little mention of any actual cuts, of course. We are still propping up many Provincial lines, timetables essentially untouched in thirty years, no efficiencies.

BR would have made many cuts by now (after all, BR cut lines and stations pretty much every year of its fifty year history), but any suggestion of that gets a very predictable response on here

(ending franchises didn't seem to boost revenues that way that people used to suggest it would, funnily enough)

 

[modernrail]

LNER are getting a lot of criticism, but I thought that they were one of the first/few operations to genuinely hit their pre-Covid passenger levels? (i.e. ignoring the Elizath Line)

In which case, maybe (their version of) fares reform is going to plan?



LNER have carte blanche because they are effectively a branch of the government,. They can do what they want, who's going to take them to court?

We used to have private companies who had to stick to franchise commitments, and so couldn't do things like cut the frequencies at a whim (locally to me, Mansfield had lost half it's Nottingham trains, half of the Gainsborough - Workshop - Sheffield trains cut, half the Sheffield - Doncaster trains cut... and no recourse... Further afield we've seen long running links like Scarborough - Manchester withdrawn because it improved reliability for a nationalised operator... )

There'd have been toys thrown out of the pram if those pesky private firms dared do those things (or ripped up the fare book like LNER), but... its the government's train set again, so they can do what they want

You may not like what LNER have done, you may not trust the DfT, you may not be happy with Network Rail but... this is nationalisation.

It was never going to be 'leave A Proper Railwayman in charge for five years, without political interference"

Who'd have guessed that it would end up like this?



Worth repeating this

Over a billion pounds a month in subsidy, yet people on here seem to resent any fares going up (and I regularly see suggestions that tickets should be free, or at least subsidised even more thank they currently are, plus more loss making branch lines get proposed)

In the real world, we can't be confident that a government struggling with public finances (as all UK governments will be for at least the next decade) won't try to trim that deficit at least slightly




Driving up revenue sounds good, but often involves increasing costs to achieve that

There's very little mention of any actual cuts, of course. We are still propping up many Provincial lines, timetables essentially untouched in thirty years, no efficiencies.

BR would have made many cuts by now (after all, BR cut lines and stations pretty much every year of its fifty year history), but any suggestion of that gets a very predictable response on here

(ending franchises didn't seem to boost revenues that way that people used to suggest it would, funnily enough)

For any of that to be on the table, there would need to be proper data produced on loadings, fare revenue etc for a debate to occur. The railway is stuck in secrecy mode. That will need to change for a proper debate to be possible.

Most businesses look to cut costs before they change customers more because they are looking for growth. The railway does the opposite.

The complacency of the supply chain is astonishing to me. See a totally unsustainable increase in subsidy and do precisely nothing as an industry to get your house in order. It will come back to bite them in the end but I am sure the current directors of various companies will feel like they squeezed plenty of over the top directors salaries and bonuses out of the system by then.

Needs proper leadership but we don’t seem to have any available.

 

[The Ham]

I don't understand. The operational cost of the railway, according to ORR, is £25bn not 14.

As others have said there £14bn is the level of support of the railways, £25bn is the operating costs.

There's 37 million tax payers, and so the figure of £1,000 per tax payer allows for a further £12bn of costs to run the buses (an estimate based on TfL road revenue of £5bn, First having a total revenue of £2bn, Ariva having a revenue of €650 million, Stagecoach having a revenue of £1.4bn, those total 9bn and then allowing for £3bn for other operators, although there some double counting as First and Stagecoach include their rail income in those numbers, whilst TfL's includes road charging in that income)

There is little evidence that direct operations have lower costs. The problem lies in how contracting out is managed. Requirements are too often over-specified, and those managing the tendering process are no better at doing this well and cost-effectively than they are with direct operations. In both cases, it is poor oversight by the state which is to blame.

Arguably managing staff is less likely to result in significant increases in costs vs managing tendering processes.

One of the best models I've seen in the private sector was a multi sector company who had their own contractor who tendered for work, this did three things.

Firstly the company had the construction understanding within the company and so knew what they were doing from both sides of the tender process.

Secondly it meant that the contractors coming to the table knew that I'd they took the micky in the price than the "in house" contractor could be given the job.

Thirdly it meant that the in house contractor had to be managed well, as if it didn't win work then they were at risk.

Based on the above I'd be inclined to keep NR as one overall business, but create internal business units. Probably something like NR England (South) NR England (North) NR Scotland and NR Wales each with a sub business of construction. Each unit would then be able to bid to do work in each others' patch as well as their own.

Those business units would report to NR National and they would be able to see what works well and what doesn't and provide this information to each of the units.

Outside contractors would still be providing tenders, however if the price too high they don't get the work. However, likewise, if the internal contractors bid too high it is given to others.

There's very little mention of any actual cuts, of course. We are still propping up many Provincial lines, timetables essentially untouched in thirty years, no efficiencies.

There were lots of cuts during COVID and not all have been restored.

 

[Falcon1200]

What's your role? Just so I've got this right, you think that the only people who can comment on a large state-owned and almost entirely publicly-funded body are... people who work within it? Please feel free to clarify if not.

My role now is none, having retired, but I worked for the railway for 38 years, mostly in operational posts. And no, I do not think that only people who work for the railway should comment on it, however those who do just might have a slightly better idea of the way things work, and in particular, how pressure to reduce costs directly affects how the railway is run. Of which I have personal experience.

Then why do comparable railway systems run on lower costs with no apparent reduction in safety?

As others have stated here, because Network Rail seems to be utterly incompetent in everything it does. Although it might be worth comparing the safety record of UK railways with those cheaper to operate elsewhere?

 

[modernrail]

As others have said there £14bn is the level of support of the railways, £25bn is the operating costs.

There's 37 million tax payers, and so the figure of £1,000 per tax payer allows for a further £12bn of costs to run the buses (an estimate based on TfL road revenue of £5bn, First having a total revenue of £2bn, Ariva having a revenue of €650 million, Stagecoach having a revenue of £1.4bn, those total 9bn and then allowing for £3bn for other operators, although there some double counting as First and Stagecoach include their rail income in those numbers, whilst TfL's includes road charging in that income)



Arguably managing staff is less likely to result in significant increases in costs vs managing tendering processes.

One of the best models I've seen in the private sector was a multi sector company who had their own contractor who tendered for work, this did three things.

Firstly the company had the construction understanding within the company and so knew what they were doing from both sides of the tender process.

Secondly it meant that the contractors coming to the table knew that I'd they took the micky in the price than the "in house" contractor could be given the job.

Thirdly it meant that the in house contractor had to be managed well, as if it didn't win work then they were at risk.

Based on the above I'd be inclined to keep NR as one overall business, but create internal business units. Probably something like NR England (South) NR England (North) NR Scotland and NR Wales each with a sub business of construction. Each unit would then be able to bid to do work in each others' patch as well as their own.

Those business units would report to NR National and they would be able to see what works well and what doesn't and provide this information to each of the units.

Outside contractors would still be providing tenders, however if the price too high they don't get the work. However, likewise, if the internal contractors bid too high it is given to others.



There were lots of cuts during COVID and not all have been restored.

I like that model a lot and the amount of work going through the NR books has the scale to make it work.

In house provision is so important for the reasons you outline. However, it can all go wrong if it is the only option and the usual public sector sins creep in where the management team is not up to it. Where this mission driven in house provision it can be fantastic but the railways are so far away from that culture, it would never work as the only option so needs the external option as well. Critically, it exposes over coziness between tender authority and directors in bidders.

Every region could have a main contractor level. Then you would need to make a value call on which subcontractor equivalent levels/specialists you would include.

Another option under GBR could also be to allow an operator to jointly bid with an infrastructure team for the same patch for a number of years. To do this on the basis of a fixed price route budget per year and to use the competitive process to drive up performance levels. This would allow for a very specific moment where the culture and aims of the relevant region are set and established. This then gives the DfT etc something very clear to mark progress against.

== Doublepost prevention - post automatically merged: 6 Jul 2025 ==

My role now is none, having retired, but I worked for the railway for 38 years, mostly in operational posts. And no, I do not think that only people who work for the railway should comment on it, however those who do just might have a slightly better idea of the way things work, and in particular, how pressure to reduce costs directly affects how the railway is run. Of which I have personal experience.



As others have stated here, because Network Rail seems to be utterly incompetent in everything it does. Although it might be worth comparing the safety record of UK railways with those cheaper to operate elsewhere?

Within this post we have the core of the problem. It is acknowledged Network Rail is utterly incompetent. However, the taxpayer should not argue for it to reduce costs because that might result in even worse outcomes.

Wrong - this is meant to be a country run by actual adults. Taxpayers have every right to expect competent leadership and effective spending, if the industry is incompetent, it needs to sure itself out, stop being so utterly arrogant and grow up,

For the record I don’t think NR is completely incompetent. It has shown some promise and occasionally does some very impressive things, like coordination of impressive works in difficult locations and tight timetables. It is just far, far too patchy and has turned into a money vortex.

 

[Starmill]

Of which I have personal experience.

Personal experience perhaps, but perhaps it's also a little hypocritical to criticise others for not having any "role within Network Rail" when you yourself haven't for a decade.

== Doublepost prevention - post automatically merged: 6 Jul 2025 ==

There's 37 million tax payers, and so the figure of £1,000 per tax payer allows for a further £12bn of costs to run the buses (an estimate based on TfL road revenue of £5bn, First having a total revenue of £2bn, Ariva having a revenue of €650 million, Stagecoach having a revenue of £1.4bn, those total 9bn and then allowing for £3bn for other operators, although there some double counting as First and Stagecoach include their rail income in those numbers, whilst TfL's includes road charging in that income)

These figures are not that useful for anything though. There are taxes other than income taxes, some of which are not trivial. There is overall public borrowing, repayment of which is a responsibility shared out by everyone, not only the people who have income tax or National Insurance bills today. Everyone owns Network Rail and National Highways and all the other state assets, not only the people doing PAYE and Self Assessment. Public money is something everyone has a stake in.

 

[modernrail]

It is this ‘having a stake in it’ I wish people in the UK would get more on board with.

We have become a nation of individualism, something my late Mum called very early and was spot on about.

Too many people think they are personally excellent and the state is a shambles, rather than acknowledging both are always inherently flawed and need to support each other.

Corporately, we see this in poor leadership and poor mission. Politically we see this as a game of cat and mouse between a public who have become addicted to attack and cynicism and politicians who are increasingly hypocritical. In terms of public services this has resulted in people blaming systems they don’t understand that are too opaque and often run by overly arrogant under-performers.

GBR is absolutely the opportunity to reset in the railways, just as the new head of the NHS (who seems like a legend of a lad to me) is the opportunity for health. However, we all need to be willing to get stuck in with the debate, challenge the status quos loudly and call out where a transfer of an attitude that exists now would lead to bad or substandard outcomes.

If the people on this forum can’t find the energy and articulation to get stuck in with MP’s, direct communication with TOCs etc etc, who can?

 

[Mag_seven]

As we no longer appear to be discussing high fares we will bring this one to a close now.

As ever if anyone wants to discuss anything else they are welcome to start a new thread in the appropriate forum section.

Thanks all