Abstract
Over the last decade, British railway engineering efficiency has come under close scrutiny, with general perceptions of massive maintenance cost escalations and a general lack of control over these costs. This is exemplified by headline figures such as Roger Ford’s perceptions of a 50% rise in maintenance costs since privatisation (Mod Railw 638:8, 2001), or the more recent figure of a doubling in all rail costs since privatisation presented by Shaoul (Public Money Manag 26:151–158, 2006). Little, however, has appeared in the academic literature on the subject. This paper considers these issues through an examination of British railway infrastructure costs over the period 1980–2009, which has seen three different infrastructure management regimes in place—the nationalised BR (1980–1994), the privatised Railtrack (1995–2001) and the not for dividend Network Rail (2002–2010). Infrastructure costs are examined in total for all operating costs (including maintenance but excluding renewals and depreciation), and under two sub categories, signalling and management costs. The results show that in the case of total operating costs, by the end of the period (up to 2010) these had returned to pre-privatisation levels. The results also show that costs increased significantly following privatisation due to imperfect competition in sub contractor markets, but large declines in the last 6 years have eradicated most of these costs increases, although still do not match the best achieved under full public sector management. Management costs associated with the infrastructure on the other hand have increased significantly.
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Notes
This is for many reasons too numerous to list here, however, one simple example has been the significant increases in renewals that have occurred periodically over the whole period, particularly under Network Rail stewardship, which is far more indicative of a policy of a programme of renewal rather than related to cost management of the infrastructure. For more information, see Wolmar (2005).
To give some indication of the scale of this increase, staff levels rose rapidly from 9,000 employees under Railtrack management to 27,000 within the new Network Rail, and now, at the time of writing, stands at around 35,000.
Indeed this is no different from any other cost analysis contained in cross sectional or panel data, as this is no different from accounting variations between firms.
In the form of informal discussions with railway engineering experts.
Nevertheless this method actually apportions a significantly higher percentage of management costs onto infrastructure than the only other alternative that could have been used, which is based on the share of total operating costs accounted for by infrastructure and signalling operations.
The five other components not listed here centre around the areas of the individual, selective rationality, effort, inert areas and interpersonal relations (Leibenstein 1978).
In other words, the basic management cost involved of a train running on the infrastructure, which must still be present under the current structure, although note the point made earlier regarding transaction costs, hence this is a rather bold assumption.
A very loose reference to ‘efficiency improvements’ referred to in the Government’s White Paper “New Opportunities for the Railways” (HMSO 1992).
As pointed out by one of the referees, however, such cost ‘increases’ may have been present all the time, the problem of increasing budgetary requirements may have resulted from the initial under estimation of costs.
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Acknowledgments
The authors would like to express their thanks to three anonymous referees and Martin Richards (Editor-in-Chief), who provided detailed and carefully considered observations that proved to be very valuable in the completion of this paper. Any errors or omissions that may remain in the paper, however, are entirely the responsibility of the authors.
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Cowie, J., Loynes, S. An assessment of cost management regimes in British rail infrastructure provision. Transportation 39, 1281–1299 (2012). https://doi.org/10.1007/s11116-012-9389-6
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DOI: https://doi.org/10.1007/s11116-012-9389-6