NETWORK RAIL'S renewals contracts should be brought back in-house to deliver efficiency savings that will not undermine growth or compromise safety, Britain's biggest rail union said today.

Britain's railway network needs a massive investment in new capacity if it is to play its key environmental role in bringing down the level of carbon emissions, and simply squeezing budgets will only undermine safety as well as growth, RMT said.

Improved punctuality figures published today had been achieved thanks in no small part to bringing most maintenance back in-house, and the organisation should build on that success by taking full control of capital projects as well, ending the damaging 'contract culture', the union said.

"Network Rail doesn't need a financial squeeze, it needs massive investment in new capacity, not only to meet the expected growth in demand, but to generate even more rail use to get people out of cars and aeroplanes," RMT general secretary Bob Crow said today.

"Spending targets have already been pared to the bone, and looking for further efficiency savings by squeezing from the top and seeing what comes out at the bottom is wrong-headed and dangerous.

"Network Rail's own investigation into the Grayrigg disaster has already highlighted problems caused by budget cuts, lack of resources and the imposition of increasingly unrealistic workloads on the people who get out there and do the work.

"Failure to stem the steady stream of runaways operated by a myriad of private contractors has also highlighted the need for Network Rail to take proper control of all railway assets.

"Reducing the number of main contractors doing renewals work was a nod in the right direction, but the clear benefits of bringing most maintenance functions back in-house need to be rolled out across the piece.

"As matters stand we still have a dangerous muddle of huge contractors, subbies, agencies and one-man-and-a-dog outfits raking it in at the public's expense, and if we're looking for efficiency savings, that's where they are to be found," Bob Crow said.

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Network Rail Profit Gains 13% on Funding, Cost Cuts

Bloomberg: Nov. 23
By Tracy Alloway

Network Rail Ltd., the government- backed owner of Britain's railways, said first-half profit increased 13 percent after it received more state funding and ended contracts with outside consultants and engineers.

Net income for the six months ended Sept. 30 rose to 591 million pounds ($1.2 billion) from 523 million pounds a year earlier, the London-based company said in a statement today. Sales gained 3.5 percent to 2.98 billion pounds.

Passenger numbers on trains are at their highest in 60 years and lines face "significant capacity constraints,'' according to the company. Train punctuality in the past six months was the best in a decade, with 91 percent of services running on time, and 4,000 more trains a day.

"You've got more trains, you've got new trains and you've seen them all running at high levels of punctuality,'' Chairman Ian McAllister said on a conference call. "The punters are actually saying the system is working, I'll use the train.''

Network Rail wants to spend 9.6 billion pounds, more than double its current amount, to upgrade the U.K.'s overcrowded railway system in the coming five years. Adding more train carriages and lengthening platforms would be the best way to add capacity, McAllister said today.

Demand for rail travel has grown faster than supply over the past decade, according to the U.K. government. It predicts numbers will increase by another 30 percent in the next decade.

Thameslink, Crossrail

The government is planning to add 1,300 carriages and expand Thameslink services connecting north and south London to meet some of the demand. Crossrail, a 16-billion-pound project to link London Heathrow airport with east and west London, was also approved last month.

"The government are putting more money into the railways than ever before,'' McAllister said. "Obviously they want us to be an efficient provider of rail services.''

Network Rail took over railway maintenance from private contractors in 2003 and since then has been bringing more work in-house to minimize spending.

The Office of Rail Regulation, which oversees Network Rail, wants the company to reduce operating costs by 31 percent over the five years ending in April 2009. Network Rail has so far cut costs by 26 percent.

The company inherited the U.K.'s 21,000 miles (33,800 kilometers) of railway more than 4 1/2 years ago after Railtrack Plc, its predecessor, was forced into administration, a type of receivership allowing the network to continue operating, because of rising debt and poor performance.

Safer Railway

Key safety indicators, such as broken rails and drivers passing red signals, are at record low levels, Network Rail said in today's statement.

Executive bonuses at the company were cut 63 percent after a train traveling between London and Glasgow derailed Feb. 23, killing one person. An investigation concluded the crash at Grayrigg in northwest England was caused by a fault in a railway switch, one of Network Rail's responsibilities.

The track operator was also fined 4 million pounds in March over safety failings in a 1999 crash that killed 13 people. Network Rail admitted that Railtrack had failed to fix a signaling problem.

Profit at Network Rail is used to reinvest in the railway or reduce debt.

The extra yield, or spread, that investors demand to hold Network Rail's 1.25 billion pounds of 4.75 percent bonds due Nov. 2035, compared with similar maturity government bonds, was unchanged at 24 basis points, or 0.24 percentage points, according to Royal Bank of Scotland. The bonds are guaranteed by the government.