Memorandum by the Shadow Strategic Rail
Authority (RI 12)
Pending Royal Assent to the Transport Bill,
the shadow Strategic Rail Authority (SRA) derives its authority
from the British Railways Board and from the Franchising Director's
powers under the Railways Act, 1993. The two are drawn together
and supplemented by Objectives, Instructions and Guidance set
by the Secretary of State to the Franchising Director in September
1999 and by objectives set to the Board in February 2000. In practice,
however, the SRA already works as a single organisation and members
of the British Railways Board as well as the management team will
formally transfer to the new authority when the Act comes into
2. RENEWAL, MAINTENANCE
The renewal and maintenance of the rail network
are funded through access charges, paid by train operators, managed
by Railtrack and subject to regulation through licence conditions
by the Rail Regulator. The safe and efficient development, or
enhancement, of the network is a matter which involves the SRA.
The objective is a "bigger and better" (more capacity
and higher service quality) network.
The SRA's role is shown diagrammatically below:
SRA support for passenger services is one element,
along with fares and other TOC income, which funds the payment
of track access charges.
Once the Bill is enacted, the SRA will take
over responsibility for freight facility and track access grants
which will provide a contractual basis for strategic support and
direction for rail freight. The SSRA is currently developing a
combination of strategies designed to deliver the Government's
In future Railtrack should work in partnership
with the SRA to ensure enhancement of the network proceeds at
a sufficient pace with adequate resources. The SRA's Strategic
Plans, to be published at intervals, and Railtrack's annual Network
Management Statements will express that partnership.
The principal sources of investment funds in
the railway will continue to be in the private sector, but the
SRA will support this with public funding where there are benefits
to be gained for passengers and taxpayers. Funding sources will
3.1 Train Operating Companies. Replacement
franchises are being designed to encourage stronger TOCs with
a longer-term commitment so that they can raise investment capital.
3.2 The City. Structured finance deals and
equipment leases will provide sources of investment funds. The
rolling stock leasing market is starting to work well, and this
approach can be extended to fixed assets. "Special Purpose
Companies" can be constructed to involve partners in financing
enhancements to the network which must form part of the Railtrack
network operationally, even though remunerated separately.
3.3 Public/Private Partnerships. The SRA
will use PPPs as a way for it to fund major projects in partnership
with Railtrack, TOCs, other private sector partners or local authorities,
where this is appropriate.
4. ROLE IN
4.1 The SRA has led the development of incremental
outputs, chairing the train user groups which have assessed proposals
and prioritising those to be developed and implemented.
4.2 On larger projects, the SRA assures
payment of the regulatory return on projects which it agrees should
be "bought" and added to Railtrack's Regulatory Asset
Base (RAB). Currently this is achieved through track access charges
which are set at a level to remunerate the investment.
4.3 Across the network, the SRA will seek
to prioritise investment in infrastructure development. This will
be achieved through detailed discussions on the content of the
SRA's Plan and Railtrack's Network Management Statements, and
through negotiation on major schemes. The latter should be structured
within "Joint Project Boards" with Railtrack to ensure
an "open book" approach. The SRA must agree outputs
and a target price for the enhancements.
4.4 The SRA will promote feasibility studies
and develop schemes, such as the West Midlands capacity study
and the development of the East London line. There will be others.
4.5 The development role of the SRA is aimed
at reaching a point where the conditions precedent for including
a scheme in the network are specified in an agreement with Railtrack
and the price of adding it to the RAB is agreed. The next step
is to determine with Railtrack the most sensible funding package.
Implementation of the project will be subject to competitive tender,
after which the SRA will be a non-operating investor partner,
with implementation driven by Railtrack.
5. CRITERIA FOR
In evaluating proposals for franchise replacement,
we have said we will consider criteria including:
Projects that will encourage modal
shift and the achievement of the Government's overall integrated
Provision of greater capacity on
Improved safety standards
Increased services and reduction
of overcrowding on inter-urban/inter-city routes
The total journey experience offered
Improved station facilities and customer
Better access to the network, particularly
for those with disabilities
Provision of high quality, reliable
services to all customers
Improved quality of information to
Better integration with other transport
modes, particularly through combined bus/air/rail interchanges
and car parking and cycle facilities
Consistency with local development
and transport plans
Provision of enabling infrastructure
to allow expansion of freight services on a national and, increasingly,
an international basis; and
Making the most of opportunities
provided by co-investors, which include franchise owners, to develop
funding packages to improve railway services.
The new franchise agreement will also contain
new provisions for:
Driving up safety standards
Better operational resilience
Enforcement of punctuality targets
Better Passenger's Charter standards.
6. PROGRESS ON
The principles of franchise replacement were
outlined last summer, and proposals were invited for the first
batch of replacement franchises last November.
The focus has been on the shorter-term franchises
initially, but proposals are also being considered for longer-term
franchises, where there is the potential for delivering further
benefits to passengers and taxpayers.
Of the 25 franchises:
Seven are already of 10 to 15 years
Six are in the replacement process
A study into a franchise for Wales
and the borders will allow a decision to be made following consultation,
at the end of July
We are about to seek bids for the
franchise to operate (enlarged) Thameslink services
In five cases (franchises owned by
Arriva and Prism) there are agreements in place allowing us to
proceed to replacement of certain franchises
We announce the franchise map on
20 June, enabling bidders for the remaining new franchises to
make their plans.
Two thirds of the franchises are
in a process that will provide more investment and longer-term
commitment; the other third may follow on by mutual consent to
The process will be largely complete
by late 2001.
The competitive process has already drawn out
some very imaginative proposals and some big potential benefits
for passengers, to which the franchisee must proceed to commit
itself. The SRA will continue to apply competitive pressure to
raise the benefits for passengers and taxpayers. If the offer
is not acceptable, the existing franchise will run to expiry.
7. TRAIN OPERATORS
Following the first round of franchising, seven
franchises included options for extension based mainly on commitments
to provide new rolling stock, together with route upgrading in
the case of Virgin West Coast.
The result of this, together with commercial
orders placed by other operators of shorter-term franchises, has
been the ordering of 2,350 new passenger vehicles since privatisation,
over 20 per cent of the national fleet.
Other investments by TOCs have included station
regeneration, improved security, better access for disabled passengers,
car parks, cycle storage and passenger information systems. Some
companies have also invested in additional staff for station and
car park security, better staff training, and bus/rail ticketing
Emerging plans from initial replacement discussions
have been more ambitious. Apart from new rolling stock, they have
included new lines, stationsparticularly park and ride
stationssubstantial increases in service frequency on key
routes, and investment in additional infrastructure capacity.
Staffing principles, trainingespecially in safety-critical
postswill also form part of new franchise agreements.
3 Connex South East, First Great Western, Gatwick Express,
LTS, Midland Main Line, Virgin Cross Country and Virgin West Coast. Back