Select Committee on Transport, Local Government and the Regions Appendices to the Minutes of Evidence

Memorandum by Railtrack PLC (TYP 52)


  Railtrack has welcomed the 10 Year Plan's aims of providing an integrated approach to planning national transport, and recognises its own role in delivering the government's plans. Rail use is intrinsically linked to government policies, especially in respect of roads and motor vehicles. Integrated planning will ensure appropriate trade-offs between modes. The need for a long term plan to manage historically high, and growing, levels of rail travel is essential if rail is to deliver national expectations in five, 10 and 20 years time. The key points in our evidence are as follows:

    —  It is not clear the Plan addresses historic under-investment in rail—by 2010 the level of rail funding will be a smaller proportion of GDP than it is now. Most of our European partners spend considerably more on their rail infrastructure than the UK. If rail is to play a greater part in the national economy then the 10 Year Plan does not provide adequately for it.

    —  In addition to the general point made above, the Plan does not appear to fund certain areas of necessary rail expenditure. First, it is now clear that Railtrack must focus more on maintenance and renewal of the network, and that these areas will require additional funding. Secondly, there are a number of key areas of recent legislation and government policy that do not appear to be fully funded by the Plan—these include, the recommendations of the Cullen/Uff inquiries, the Disability Discrimination Act, and European legislation with respect to interoperability and noise. Unless additional funding is put in place these requirements will reduce the funds available for expanding the rail system. The government should examine the balance of funding between capacity, safety and network performance.

    —  Our analytical modelling, our appreciation for the availability of resources, and the time necessary to complete major projects, all suggest that the Plan is optimistic in terms of the timescale for achieving targets. The length of time necessary to make changes to national rail infrastructure suggests a strong case for a 20-year plan.

    —  To achieve the total levels of rail funding set out in the Plan practical mechanisms must be developed through which significant private sector investment can be secured.

    —  As transport demand grows all modes will have to cope with the risk of worsening performance. Railtrack recognises the increasing emphasis that is given to railway performance. Unless a balance is struck between performance and capacity then the achievement of 10 Year Plan targets will be at risk. The lack of a clear policy framework for performance targets in the rail industry will not help achieve overall government objectives.

    —  For the Plan to be achieved an SRA Strategic Plan must be published which the industry can deliver. This paper was drafted before Railtrack had been able to evaluate the recently published SRA Strategic Plan.


  Our analysis of whether the principal targets can be achieved is set out below:

  Passenger volume: Our analysis suggests that growth in patronage of existing services, together with implementation of new rail schemes, will not achieve the passenger volume target by 2010-11. Passenger volume outcomes may be achievable within 15 years if investment is made in new rail capacity, industry resources are used efficiently, delivery mechanisms (via SPVs or otherwise) are perfected, economic prosperity is maintained, and inter-urban road congestion grows in line with current trends. If the 10 Year Plan target to reduce road congestion is achieved then the rail volume targets will be missed by a wider margin.

  Freight volume: Our analysis suggests that if road congestion grows in line with current trends then the growth in rail freight forecast in the Plan can broadly be achieved if the schemes and incentives advocated in the SRA Freight Strategy are adopted. However it must be pointed out that unless service delivery to the end customer is improved then achievement of freight targets is very much at risk. Furthermore, government must recognise the higher operational and maintenance costs that are associated with higher volumes of rail freight.

  London overcrowding: Our analysis shows that the Plan targets for reducing London overcrowding could broadly be achieved in the timescales, with some notable exceptions on certain specific service groups, provided that best use is made of existing network capacity, including maximising the length of trains.

  In addition to the targets above we believe that the Plan must also incorporate targets in the following areas:

  Performance: As with each of the modes of transport considered by the Plan, as demand increases on the existing network then performance will suffer. Government, SRA and ORR have placed considerable emphasis on the need to make a step-change in railway performance—yet the 10 Year Plan contains no specific guidance on the levels of performance the railway industry should be expected and funded to achieve. Whilst Railtrack has a key role to play in improving day-to-day performance, we are concerned that there is an implicit assumption that improving long-run rail performance is seen by government policy-makers solely as an operating issue. A step-change in railway performance cannot be achieved without a realisation that (a) a balance must be struck between the level of use of the network and performance, (b) network stewardship must be properly funded, and (c) renewals/enhancements must as a matter of course build in additional "resilience". (Additional resilience can be provided, for example, through higher quality equipment, or through the provision of alternative and diversionary routes.) The lack of a clear policy framework for the setting of performance targets in the rail industry will not help in achieving overall government objectives.

  Overcrowding: Our analysis shows that around two-thirds of the growth in passenger kilometres will be achieved through more intensive use of existing services—this will in turn lead to these services becoming more crowded. With the exception of peak travel on commuter routes to/from London there is no Plan target with respect to overcrowding. Targets might be set for acceptable levels of overcrowding on other routes.

  Regional targets: The principle passenger targets can largely be met by improving long-distance and commuter services into London: hence it is these services that will attract investment. If the government wishes to see improvement in other railway services it must target and fund accordingly.


  The principal factors affecting rail demand are the national economy, road congestion, relative levels of rail and road costs, strategies for land-use, and the quality of rail services (ie frequency, speed, punctuality, comfort etc). It is largely within the control of the government, rather than the rail industry, to control and influence most of these factors in the long term—they are all absolutely essential to achieving Plan outcomes. In other words, government policy is the single most important determinant of demand for rail services.

  Implementation of new rail industry capacity will be constrained by resource shortages, particularly in sector-specific skills, such as signalling design. Critical resources can be grown over time but only if the supply market believes there is a long-term capital expenditure programme. An SRA Strategic Plan that enables suppliers to plan their business with more certainty is a pre-requisite to developing and retaining skilled resources in the supply side of the industry. We are working closely with the SRA to ensure that they understand our perspective on the need to plan realistically in this regard.


How will the current situation in the railway industry affect the need for, and provision of, private and public sector finance?

  Industry parties whose role is critical to the achievement of the 10 Year Plan must be brought within a rail industry-planning framework; notably the network operator, franchise owners, and key investors. Such a planning framework does not exist. The SRA Strategic Plan must be a comprehensive plan that includes the requirements of government, ORR, HSE and others. It must incorporate all of these aspirations, and set out plans for their delivery that are realistic and achievable. It must set out clear priorities in order that scarce industry resources and management effort can be focussed in pursuit of the Plan's objectives. The Strategic Plan must set out clear criteria around which government prioritises rail investment.

  It is clear from recent reactions that government will have to address the guarantees that are associated with Railtrack's successor in order to encourage future private sector investment. Government will bear a greater proportion of the risk associated with maintenance and enhancement of the network. To the extent that this implies a lesser role for private funding of railway investment government must reduce the emphasis on private rail investment in the Plan, and correspondingly increase the contribution made from public funds.

  Government policy for rail infrastructure investment is dependent upon private funding being provided—eg via Special Purpose Vehicles (SPVs). There are significant issues with the proposed use of SPVs for major enhancement schemes which are as yet unresolved. These are quite apart from the untested nature of the SPV proposition in respect of complex projects built on an operating railway. These issues must all be resolved if significant private investment is to be achieved—this may further delay railway enhancement. Furthermore it is likely that some important elements of risk associated with upgrades will be required to be borne by the network operator. The degree to which SPVs are manageable will depend on the nature of the scheme—"green field" (eg brand new lines) and station investment is likely to be easier than investment over the existing network (eg commuter routes into London).

Is the balance and phasing of investment across funding areas correct?

  It is important to recognise that whilst the Plan suggests a short term increase in the funding of rail, by the end of the Plan period the level of rail funding will be a smaller proportion of GDP than it is at present. It is noteworthy that most of our European partners spend considerably more on their rail infrastructure than the UK. As a percentage of GDP then over the period 1982-95 the UK spend less than half the European average on its railway infrastructure. Correspondingly rail's market share is lower than that of many principal EU countries. It is therefore not clear that the Plan addresses the historic under-investment in rail.

  Railtrack is not in a position to comment on the appropriateness of the level of funding applied to modes other than rail. However we believe that the level of funding provided within the Plan for rail can no longer be appropriate for the following reasons:

    —  The projected costs of maintaining the rail network have increased significantly over the past two or three years. First, it has become clear that the volume of work required to maintain the network must rise—in part because of rising traffic levels, and in part because of recognition that previous levels of work were inadequate for an ageing network. Second, as franchises have been renegotiated by the SRA, the like-for-like costs of those franchises has rise significantly.

    —  Government has emphasised the need to introduce new safety systems to make rail travel more safe than it is today (eg the European Rail Traffic Management System). In the main such new safety systems do not contribute to achievement of 10 Year Plan capacity targets, New safety initiatives are likely to require additional funding provision from that set out in the 10 Year Plan.

    —  In addition to safety measures a number of significant areas of recent legislation do not appear to be fully funded by the Plan—these include, the Disability Discrimination Act, and European legislation with respect to interoperability and noise.

  The phasing of spend on new rail schemes must be questioned. Major rail schemes can rarely be delivered in less than 10 years. The following factors all impact on project timescales: (i) feasibility work to the point at which commitment is made, (ii) negotiation of contracts which might cover creation of an SPV, access to the network for construction, and the new capacity created, (iii) the need to obtain consents for new works, (iv) the construction of the new works on an operating railway, and (v) the time for the benefits of the new works to be manifested in the market growth. Given that no commitments have been made by government to significant new rail infrastructure investment since the Plan was published, it is clear that delivery of many projects will require funding towards the end of the Plan. If efficient and strategic investment is to be made in the rail industry over the next five years then commitment to funding beyond 2010 must be assured.

Should the Plan represent a better balance between large and small schemes, and between infrastructure, management and operations?

  Railtrack analysis suggests that in many cases small, targeted schemes can offer better value for money than some major upgrades. Furthermore, given costs of sustaining the rail network, it is prudent to make best use of the existing network, eg, through better timetabling, or through ensuring that trains run at maximum length where the network is most congested. Sometimes such changes may provide significant benefits to the majority of users. Quite modest investment in infrastructure can sometimes create opportunities to make better use of the existing network. A plan that contains a balanced portfolio of small and large schemes, together with efforts to make better use of the network, will most efficiently deliver the 10 Year Plan objectives.


  A fundamental target in the Plan, and one that underpins forecasts of rail growth, is the level of road congestion. There is no readily understandable measure of road congestion, and hence it is difficult for us to assess the extent to which the Plan is "on-course" in this critical dimension. We await publication of the DTLR sponsored review on the extent to which Plan targets are being achieved.

  Our analysis suggests that if the government is as successful in reducing road congestion as proposed in the Plan, then national rail passenger and freight volume targets will prove more difficult to achieve than the Plan anticipates. Our own modelling has assumed that road congestion will continue along current trends. If government wishes to promote record growth in rail, whilst simultaneously reducing road congestion, then the levels of resources applied to rail are, in our view, insufficient. Government may wish to re-assess the relationship between the objectives it is setting for both road congestion and rail usage. Market-specific targets may achieve a more optimal contribution from rail in reducing road congestion.

  The Plan, and recent government statements, imply different, and costly, safety standards for rail. Whilst this benefits rail users, it carries with it the risk that government will perceive road to be disproportionately economical when compared to rail. In the long-term this may lead to funds being directed away from rail to less safe forms of transport. A more integrated approach is required to transport safety.

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