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Report calls for £1bn to be stripped out of industry and recommends fares shakeup to reduce overcrowding Commuters face the biggest shakeup of the railways since the ignominious Railtrack era after a government-commissioned report called for £1bn in costs to be stripped out of the industry – and for it to give all involved a “better deal”. An overhaul of the fares system was the most eye-catching recommendation in a study by Sir Roy McNulty, former chairman of the Civil Aviation Authority. The report into rail industry costs also outlined changes to slash the £5.2bn state subsidy, including phasing out ticket offices in small stations, removing conductors and giving train operators control of maintenance on some routes. McNulty said fares in the UK were 30% higher than in France, Holland, Sweden and Switzerland, with operating costs running 40% higher than those countries. “There is a clear imperative to give both farepayers and taxpayers a better deal,” McNulty said. “This industry has a serious cost deficiency issue to address. Everyone concerned must be aware that passengers are paying above the odds.” In a warning that fares policy is needlessly increasing overcrowding, the report made radical proposals, including scrapping some cheap walk-up tickets for long-distance journeys and lifting price restrictions on selected commuter season tickets. The government announced a fares review in the wake of the report, which pledged not to add to the financial pressure on farepayers, who already spend £6.2bn a year on the railways. McNulty stated the case for airline-style pricing that would see fares raised for overcrowded services in order to encourage travel on less busy trains. He said overcrowding could be tackled by charging higher fares on busier trains and lower fares on less busy ones. Such an approach is impossible under the current fares regime, which limits increases on season tickets and some off-peak fares at inflation +3%. The government immediately quashed some of McNulty’s blue-sky proposals and ruled out lifting fare restrictions on the busiest peak commuter services and scrapping savers entirely. However, some off-peak fares are likely to be targeted. A number of saver fares from London become available after 7pm, encouraging overcrowding on services that would have been less busy at 6.30pm. Emphasising that his proposals represented “evolution not revolution”, McNulty said £1bn a year could be taken out of the industry’s £12bn operating costs before the end of the decade by devolving power at Network Rail, the owner of Britain’s tracks and stations, and tackling costs at the companies that run passenger services. Network Rail, a government-backed business, took over from a stricken Railtrack in 2002 and soon brought safety and punctuality records back to acceptable levels after a series of fatal accidents during the early years of privatisation. A former managing director at the Strategic Rail Authority, the government body that oversaw the birth of Network Rail, said the proposals represented the most serious changes to the industry in a decade. Jim Steer, now a rail industry consultant, said: “Together with the devolution of Network Rail, it signals the biggest shakeup of the industry since Network Rail was formed. It is seeking to change the way the different organisations involved in the railways behave with each other.” The changes will not require primary legislation. Network Rail has already launched a devolution programme, while many of the changes at operating companies will be written into franchises as they come up for renewal. The transport secretary, Philip Hammond, indicated that the government had no appetite for the kind of structural tinkering that broke up British Rail and rushed the system into private ownership in the 1990s. Questions were raised over the establishment of a Rail Delivery Group, made up of senior executives from across the industry, to co-ordinate the cost reductions. The powerful RMT trade union, which views the report as a shot across its bows, objected to appointing the chief executive of FirstGroup, a privately owned train operator, as chair of the group. Last week FirstGroup’s boss, Tim O’Toole, announced that the company was handing back its First Great Western franchise three years ahead of schedule, avoiding £826.6m in payments to the government. Blaming the industry’s high costs on the fragmentation caused by privatisation, the RMT’s general secretary, Bob Crow said: “A graphic example is FirstGroup bailing out of the Great Western franchise three years early, depriving the taxpayer of £826m in premium payments while soaking up £140m in government subsidy at the same time. Deal with that kind of scandal and the government could claw back their £1bn savings target at a stroke.” A senior rail industry source also raised doubts about whether privately owned train operators would sacrifice their profits to protect the taxpayer. London’s major commuter routes are all operated by listed businesses. “Company directors have no interest in reducing their profitability. It is a real tension,” said the source. McNulty defended the achievements of privatisation, saying that punctuality and safety standards were now at impressive levels. More than nine out of 10 trains now arrive on time, while the last fatal accident due to a maintenance error was in 2007. Rail transport Transport Rail travel Dan Milmo guardian.co.uk