HomeInfrastructureNetwork Rail told to add £1bn to CP6 renewals budget

Network Rail told to add £1bn to CP6 renewals budget

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The Office of Rail and Road (ORR) has submitted its initial recommendations for Network Rail’s multi-billion investment plan for CP6.

Among the points raised by the ORR was that Network Rail should add around £1 billion to its renewals budget, funded by efficiences and other savings.

Publishing its strategic business plan in February, Network Rail set out a £47 billion plan for CP6, including £18.5 billion for operations and maintenance, £18.5 billion on renewals and £10.1 billion on enhancements.

The ORR also feels that an additional £80 million should be invested in safety, including level crossings and worker safety initiatives; £10 million should be used to create an innovation fund; and £0.9 billion held centrally as contingency should be distributed to the routes.

ORR has also urged Network Rail to look at its funding profile for CP6 to ensure spending is more evenly distributed across the control period – a measure which will be welcomed by suppliers.

One of the most significant changes taking place in CP6, is the devolution of responsibilities to eight geographical routes. Each route will have its own budgets and performance targets.

On the Wessex, South East and Anglia routes, the ORR has recommended Network Rail review its performance measures to “ensure they are robust and set consistently with other routes”.

Finally, the ORR would like Network Rail to strengthen the monitoring and financial controls of the new Rail System Operator – the new Network Rail function in charge of timetabling.

Joanna Whittington, chief executive of ORR, said: “The entire rail industry, including passengers, freight customers and train operators, relies on Network Rail to deliver a high-quality service.

”ORR’s initial assessment of Network Rail’s five year plans shows that the transition from a centrally run company to one structured round eight geographic routes has improved the quality of the plans but we want to see £1 billion more spent on renewing the railway to improve reliability and boost safety.

”ORR will be monitoring and enforcing delivery by each of the routes, so that passengers and freight customers will be able to rely on the railway for the essential service it provides.”

The ORR’s draft determination also includes changes which would have a big impact on freight and open access operators.

Although the variable access charges increases for freight and charter operators are to be capped, operators carrying biomass for energy production will be subject to charges in CP6 and some new open access operators will have to pay charges related to network costs.

Peter Loosley, policy director at the Railway Industry Association (RIA), said: “We understand that the £30 billion relating to Operations, Maintenance and Renewals expenditure for England and Wales is consistent with both the SoFA and Network Rail’s Strategic Business Plans.

“It does not of course contain any provision for ‘Hendy Tail’ enhancements which we understood to constitute roughly £9 billion of the £47.8 billion SoFA and which is a matter for the Department for Transport. RIA will need to examine the Draft Determination in detail and discuss with RIA members, ORR and others as necessary to inform our more detailed response.

“We are pleased, however, to see the ORR commitment to increased renewals expenditure and that they have included a commitment for Network Rail to review its spending profile to smooth rail investment over the five years of CP6. This is something the Railway Industry Association and its members have been calling for over many years and, in particular, since the downturn in renewals expenditure over the last 18 months of CP5.

“We therefore applaud this reaction from ORR. Aside from its damaging impact on rail suppliers, ‘boom and bust’ in the rail funding system results in a more expensive railway too. So we urge Network Rail, the DfT, Treasury and the rail supply sector to work with us and the ORR to deliver a smoother pipeline of work in the years ahead, to the benefit of the sector, the passenger, and ultimately the taxpayer as well.”

Mark Carne, Network Rail chief executive, said there were still “areas of concern” that would need to be discussed with the ORR before the final determination is published later this year.

He said: “We welcome the regulator’s general support for our plans for Britain’s railways, delivering a more reliable service that passengers can rely on.

“It has accepted the majority of our plans, strongly supporting the changes we have been making including our focus on bringing track and train closer together, supporting devolution, the creation of the System Operator and incorporating customer focused scorecards into its monitoring during CP6.

“We will consider the detail carefully over the coming months as there are still some areas of concern that we will need to work with ORR on before it publishes its final determination in October.”

Photo: Network Rail

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