Finance policy

The railways are a significant part of our national infrastructure. They have a transformational effect, powering our economy for the long term. Therefore the railways need a stable financial base on which to operate – this is more important than ownership. To that end, Railfuture strongly supports continued investment in the rail industry, and a level playing field between the different modes of transport, by calling for the following:

  1. Investment in the railway to support economic growth. It has been shown that investment in rail on a pound for pound basis generates more jobs than investment in roads (Source: research for Invensys carried out by Credo 2009).
  2. Investment decision to be devolved as far as practicable – decisions with only local impact to be made locally, and major investment decisions affecting the network to be made centrally
  3. Investment to be focussed on increasing capacity and resilience, and on reducing unit costs by ongoing electrification, centralised signalling and further re-integration of the rail network, for example through extension of the South West Trains/Network Rail Alliance model.
  4. The benefits of cost savings to be apportioned fairly between farepayer and taxpayer to limit both fare rises and taxpayer support.
  5. Investment in extra capacity to be viable, ie justified on socioeconomic grounds, so that the railway is financially sustainable.
  6. Integration and coordination of public transport to release benefits of investment.
  7. A more equitable finance method for Network Rail than continued borrowing from banks at commercial interest rates, which will remove the need for Network Rail to borrow more than 75% of its asset base.
  8. Network Rail to be treated more like a commercial company, for example by treating the capital element of the Network Grant paid to Network Rail as a capital injection by the shareholders (the government) into a loss-making company, therefore at zero cost of capital. The value obtained from subsidy should be better managed to maximise social benefit at local level, for example by paying the revenue element of the Network Grant via the Train Operating Companies, if this can be done efficiently.
  9. Index linked fare increases to use CPI, now the indicator of inflation preferred by government, not RPI.
  10. Equitable investment appraisal rules between modes.
  11. Changes to make the pricing structure for each mode closer to the Pay As You Go principle, eg by introducing rail smartcards and road pricing, so that the cost is more equally visible to the user at the point of use.
  12. Greater awareness of the net cost of the rail network to the taxpayer. Railfuture seeks to dispel widely held misconceptions about the true cost of the rail industry which have arisen largely because government subsidies are widely publicised but the significant sums returned to the tax payer through taxation, loan guarantee fees and premium payments paid by Train Operating Companies rarely, if ever, get mentioned in the national media. Government fares policy is based upon gross costs and takes no account of sums paid back (refer to Railway Taxation briefing paper). We therefore contend that the fare payer already pays 75% or more of net costs and that above inflation fare increases can no longer be justified.

The Case for Rail | Fares | Light Rail | High Speed Rail | Electrification | New railways and stations | Freight | Service | Connectivity