McNulty report says costs must be slashed by 30 per cent to bring UK network in line with European railways

Britain’s railways require a major overhaul if they are to provide an efficient and effective low-carbon transport network, a major review has concluded.

Today’s report by former Civil Aviation Authority chairman Sir Roy McNulty was commissioned by the previous government and tackles the issue of why the UK’s rail system costs over £11bn to run. Taxpayers currently stump up around £5bn of this, with the rest coming in fares that are amongst the highest in Europe, but Transport secretary Philip Hammond is keen to reduce the public subsidy.

McNulty said rail costs in Britain should be 20 to 30 per cent lower than current levels to bring the UK into line with networks in other countries and help further drive increases in rail travel.

He is proposing trimming £1bn a year from industry costs by the end of 2019, on top of a review of the fares policy, giving train operators greater control of their routes and potentially cutting jobs – a move certain to rile the unions.

A record 1.3 billion passenger journeys took place last year, but fares are set to rise by three per cent above inflation as measured by the Retail Price Index (RPI) over the next three years. The record prices have long-angered passenger and environmental groups, who claim they are making it harder to get travellers off the roads and on to lower-carbon public transport networks.

The report argues fares should be “rebalanced” and calls for a government review “to move towards a system that is seen to be less complex and more equitable”. Essentially, McNulty wants to keep most fares flat, with no rises above inflation after 2014.

However, some packed off-peak services just outside the rush hour could see fares rise sharply, while quieter trains would see reductions to spread out passenger numbers.

Other measures proposed include encouraging Network Rail, which manages the rail infrastructure, to work more closely with train operating companies (TOCs) and explore new ways to raise revenue, such as building more car parking spaces.

Launching the review, which will feed into a transport white paper expected later this year, McNulty said there was no “silver bullet” to fix the network.

“Achieving a 30 per cent efficiency improvement by 2019 should be the target for the GB rail industry given the study’s findings on the industry’s costs compared to European railways and other industries,” he said. “A reduction of this magnitude is achievable and is essential if passengers and taxpayers are to get the fair deal they deserve from the rail industry.”

David Higgins, chief executive of Network Rail, said the organisation was “well on its way” to cutting the network’s operations cost by over £5bn from 2009 to 2014, but recognised there was more it could do.

“Sir Roy’s work gives the industry the direction it must take, a direction that has our full support,” Higgins added. “That will involve more change, but it is change for the better, change that will deliver an even better performing, sustainable railway for Britain.”

Tim O’Toole, former head of London Underground and current chief of transport company FirstGroup, will oversee the implementation of the reforms as chair of the new Rail Delivery Group (RDG).