Following the Hatfield accident in October 2000, the cost of running Britain’s railways has
increased very sharply, leading to considerable debate about whether current cost levels are
reasonable. This paper seeks to inform this debate by assessing post-Hatfield cost and TFP
levels against the historical precedents set by British Rail and the early experience of the
newly privatised industry. The results show that industry cash costs rose by 47 per cent
between 1999/2000, the last financial year before Hatfield, and 2001/2002 — but,
surprisingly, with train operating costs accounting for 42 per cent of this growth. The
results also show that the post-Hatfield cost spike is unprecedented when compared
against historical benchmarks. Analysis of long-term data on quality and safety measures
indicates that an excessive focus on rail safety may offer part of the explanation for the
cost growth
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