SNCF may be proudly proclaiming its financial fitness, but any assessment of the economic health of the French national railway must take into account the position of infrastructure company Réseau Ferré de France. RFF's annual results published on April 10 were in marked contrast to those of SNCF, with an operating loss in 2007 of €771m and net debt which has reached the impressive sum of €27·4bn.

It so happens that the Cour des Comptes (the French national audit office) has been taking a hard look at railway policy, and its 167-page report published on April 16 does not exactly shower the parties involved with compliments. The Rail Network: an Unfinished Reform, an Uncertain Strategy assesses what has happened since RFF was set up in 1997. Both RFF and SNCF come in for some harsh criticism, but most of all the report berates successive governments which have conspicuously failed to tackle the problems arising from the reform.

The 1997 legislation suffered from 'intrinsic weaknesses' which have been 'the origin of numerous difficulties experienced by the railway sector', with 'confusion of responsibilities' creating 'serious dysfunctionalities'. Among the few benefits arising from the reform had been the development of expertise within RFF for designing and managing major projects such as new lines - which had ended SNCF's virtual monopoly in this field. Transfer to RFF of €20·5bn of debt had allowed SNCF to clean up its financial act, but the Cour points out that the reason the debt was moved to RFF rather than taken on by the state was to ensure that France met the monetary requirements for joining the euro zone.

In the meantime the total debt of the French railway business has reached more than €41bn, including €8·3bn squirrelled away in SAAD (Service Annexe d'Amortissment de la Dette), an organisation set up in 1991 specifically to redeem SNCF's debt over the long term.

Maintenance

The Cour is especially critical of the arrangements for maintaining the national network. This is the responsibility of RFF, but the company does not have the resources to carry out the work, which is contracted back to SNCF. In the process, RFF loses control over the job, and its attempt to incentivise SNCF to improve productivity by not increasing payments has led to a reduction in the amount of work carried out, in turn necessitating the imposition of speed restrictions for safety reasons.

To remedy this, the Cour recommends that 55 000 SNCF personnel are either transferred to RFF or to a new subsid­iary responsible for infrastructure maintenance. Predictably, this suggestion was not received favourably by the railway unions who threatened industrial action if staff were 'externalised'.

Maintenance methods and processes, which still rely on a daily window in the timetable of 1 h 50 min, are criticised as expensive and inefficient. The arrangements for lookouts are especially costly, representing as much as 10% of the total cost of a maintenance project - the report recommends the introduction of automated lookout systems such as those used in Switzerland.

The Cour has similar concerns over the 'complex and confusing procedures' for timetabling and path allocation, which again are nominally RFF's responsibility. The report notes that SNCF has refused to transfer to RFF the staff involved in this function, noting that the current arrangements may lead to unfair treatment as more operators seek to run trains on the network.

Government failings

The state has 'too often failed to settle differences' between the two organisations, says the report, in some cases 'aggravating tensions between the two protagonists'. For example, RFF is expected to balance its books, but the state has made it difficult for RFF to break even as it has left the organisation 'with a debt of €12bn which cannot be redeemed because it has been forced to finance unprofitable investments' - in direct contradiction of RFF's legal duties. Decisions on the level of access fees had been made on the basis 'of compromises with no economic rationale', while the fees 'bore no relation to infrastructure costs'.

The Cour recommends that the state should assume €12bn to €13bn of RFF's debt - but a statement from the transport ministry issued on April 16 'notes with interest the Audit Commission's observations'. Three days later the ministry indicated that Transport Secretary Dominique Bussereau would appoint Senator Hubert Haenel to head a parliamentary inquiry into the development of the railway industry and the 1997 reforms.

The report also addresses the physical condition of the network, referring to an assessment published in September 2005 (RG 11.05 p663) that had drawn attention to the increasing age of infrastructure assets. A combination of maintenance and speed restrictions imposed on 1 300 route-km has so far ensured safety, but 'the risks of an accident are increasing', says the Cour. The poor state of the network had led to a decline in punctuality, with the percentage of late passenger trains rising from 31% in 1993-97 to 37% in 2002-06. A plan to improve network condition launched in 2006 has not been adequately funded, especially in 2010-15 when major renewals will be needed.

Examination of operating costs led the Cour to conclude that there is considerable scope for improving productivity, notably when signalling equipment is modernised. It suggests that the number of signalling staff could be halved, but it finds that replacement of old equipment is proceeding too slowly.

Finally, the Cour notes that 46% of the network generates just 6% of traffic. Many regional and rural lines are maintained at considerable loss for little gain, and even if environmental benefits are included the economics of some lines are doubtful. The Cour recommends that a debate on the future of these lines is reopened, noting that some could be closed. There seems to be no suggestion that lines could be revitalised by the introduction of a more frequent train service which would attract more business and make the lines more viable.