Rail freight operators must cut costs, says government

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Transport secretary Justine Greening has warned rail freight operators that they will need to continue to pursue cost savings.

Outlining government plans to cut the cost of rail services, Greening said: “If rail can deliver savings by cutting costs and growing demand there is real potential to grow jobs in a crucial and vibrant industry.”

The command paper “Reforming our Railways: Putting the Customer First” focuses on reducing costs in the passenger sector. It comes in response to a review by Sir Roy McNulty last year which said running costs should be cut by one third.

The government is now paying more than £4 billion a year in subsidies to the rail industry  –  compared to only £1.6bn befopre privatisation.

On rail freight, the command paper said:  “Government is continuing to provide support through the mode shift revenue support scheme to shift freight from road to rail where there are overall environmental and social benefits from doing so.”

In exchange, it said: “Freight operators will need to continue to pursue cost savings. They are working with Network Rail to review which parts of the network they no longer need to access, and to establish the extent to which maintenance and renewals can be differentiated as a result.

“The ORR is considering the scope for mark-ups on Network Rail track access charges for freight trains (for example, those serving the nuclear and electricity supply industries) which could help to cover a greater share of the costs associated with their use of the network.”

[asset_ref id=”1490″] Justine Greening

It also pointed out that the passenger operators can learn from the freight companies.

“The competitive environment has also forced rail freight to find significant efficiencies over recent years, and it has encouraged Network Rail to do the same.

“As a result, in an industry that has had difficulty in reducing costs, freight has made good progress. Government seeks to repeat this approach with similar success for passenger services.”

Freightliner chief  Peter Maybury welcomed the command paper saying: “We welcome the plans to continue delivery of the Strategic Freight Network, particularly initiatives to increase capacity on the rail network.

“As a member of the Rail Delivery Group, I recognise the challenge of reducing the costs of the UK railway system and I know that Network Rail and all the operators, including Freightliner, are keen to play their part and drive through efficiencies.”

The Freight Transport Association warned of the need to protect freight operations against any negative effects from alliances between passenger operators and Network Rail.

“The need for regulatory protection for freight is acknowledged,” said freight policy manager Chris MacRae. “However, the proof will be in the delivery of that.”

But RMT general secretary Bob Crow called it: “A recipe for exploitation with the train operators given the green light to rob passengers blind to travel on overcrowded and unsafe trains in the name of private profit”.

Passengers would run the risk of “being mugged by yobbos using the destaffed services as a cover for violence and assaults”.

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