Sir Roy McNulty’s report on rail value for money warns rail industry that it cannot realise its huge growth potential without delivering massive cost reductions.

Transport secretary Philip Hammond has urged the rail industry to come together and deliver the vision for a more cost efficient future set out in the McNulty report.

Sir Roy McNulty’s final report on value for money in rail, Realising the Potential of GB Rail, found that taxpayers and farepayers in Britain are paying 30% more to the rail industry than those in comparable European countries. The report says that the industry should be aiming to achieve a 30% reduction in unit costs (costs per passenger km) by 2018/19 – around £1bn a year.

Speaking at a conference in London shortly before the report was published, Hammond urged the industry to unite and take the required action. If it failed to reduce unit costs, projected growth in rail travel would be matched by an increase in already unsustainable levels of subsidy. He warned that the “high cost status quo” was no longer an option and he urged the rail industry to earn its “licence to grow”.

“So I detect a window of opportunity for rail,” he said. “I don’t think it will remain open forever.

“Sir Roy’s report will be a catalyst I think for focussing on the challenges that we have ahead and the opportunities that we can seize. But the industry will have to respond pretty rapidly to show that it is prepared to move forward and address these challenges, because it can only prosper if it is willing to address the legacy of excess cost and inefficiency that it is carrying.”

Hammond also had a special message for train operators: “We are determined that success by train operators in tackling cost will be a material consideration in pre-qualification for future franchise competitions. We want to make clear that we are looking for operators who can demonstrate a commitment and capability to driving down unit costs in their operations.”

Collaborative working must become the norm, he added, with sharing of costs and benefits across the industry’s internal dividing lines. The ability to demonstrate collaborative working will become a criteria for pre-qualification.