Government
Response
Government policy
on rail
Recommendation 1. The Government has set
out an ambitious investment programme for the classic rail network.
The record amounts of funding committed demonstrates a welcome
commitment to meeting the high demand for rail, even at a time
of limits on public spending. (Paragraph 8)
The Government notes the Committee's positive view.
Recommendation 2. The stated ambition
of successive governments has been to reduce the subsidy to the
rail network. This has been achieved to date, but given the forecast
growth, and need to increase capacity, has prompted the question
of to what extent passengers will be required to pay for long-term
infrastructure improvements, on top of inflation increases to
fares, which principally cover operating costs. Many passengers
have no option other than to use the train. (Paragraph 9)
Fares revenue is crucial to funding day-to-day railway
operations and the upgrade programme, all of which benefit passengers.
The Government recognises the concern consumers have around the
cost of rail fares. In 2014 and again in 2015 the Government
capped regulated fare rises to inflation.
Responsible stewardship of the railways means bearing
down on running costs and investing in a sustainable way. The
Government has stated its ambition to cap fare rises at the level
of inflation as soon as economic conditions allow and savings
have been made to the cost of running the railways.
Recommendation 3. We remain concerned
that rail policy is considered in isolation, and repeat our recommendation
for the Department to commit to a wider transport strategy. (Paragraph
10)
The Department agrees that long-term strategy and
planning are important. At SR13, the Government published
Investing in Britain's Future, which sets out the long-term
commitments to infrastructure investment, including over £70
billion for transport investment. The Department also published
Transport - an engine for growth, in August 2013, which
are short explanatory documents which give strategic context to
the substantial investments set out in the recent Spending Round
and show how investments over this Parliament and the next fit
together.
A number of strategic papers set out the Government's
plans and vision for transport beyond the next Parliament, such
as the: Strategic Case for HS2; Road Investment Strategy;
and the National policy statement for national networks.
In December 2014, the Government published the Road Investment
Strategy, a suite of documents introducing long term strategic
planning and funding for the strategic road network. The
strategy outlines the Government's long term vision for the strategic
road network, the funding available and investments planned over
the first Road Period (2015-16 to 2019-20), and a Performance
Specification for the new Strategic Highways Company. The
National policy statement for national networks, published
in December 2014, sets out the Government's vision and approach
to development of the national road and rail networks in England,
including the development of strategic rail freight interchanges.
Together with the long-term investment planning frameworks for
road and rail, the national policy statement supports integration
across the transport modes.
Planning for rail investment
Recommendation 4. With the exception
of the confusion and concerns over freight access charges, witnesses
were broadly positive about the Periodic Review 2013 process.
It is concerning, however, that witnesses representing key stakeholders
for the rail industry feel that there is no clear long-term plan
for the railway. We call on Network Rail to publish a vision for
the railway up to 2043, with a breakdown of the work expected
to be carried out in each Control Period. The plan should set
out confirmed objectives and plans for the next five years, with
provisional plans for each five year period. Consultation and
flexibility should be built into this plan, allowing adjustment
through the periodic review process, and to respond to changing
costs and demand. This flexibility would increase as the plan
looks further into the future, but the clarity of objectives—and
the advanced planning that should be underway for the next two
control periods—will provide much-needed certainty for the
rail industry and stakeholders. We believe that publishing this
long-term plan is vital for transparency, and will help to secure
all-party agreement and effective engagement with the periodic
review process. (Paragraph 19)
The Government agrees that planning for the longer
term is important if we are to identify strategic investment options
for developing the network so that the railway helps to drive
growth all around the country.
The recognition of this wider economic role of rail
lies at the heart of the cross industry Long Term Planning Process
(LTPP). The LTPP has been developed to allow the industry to respond
flexibly to the challenges posed by the forecast in increased
demand for passenger and freight services, whilst planning the
long term capability of the rail network up to 30 years ahead.
The LTPP involves stakeholders, with the local transport authorities
being part of the LTPP route study teams and all local authorities
and Local Enterprise Partnerships having the opportunity to comment
on the route study during the consultation phase of the process.
The industry is also developing long term strategies in areas
such as rolling stock and technology. More information on the
industry's approach to long term planning can be found in The
Way Ahead, published on behalf of the industry by the Rail
Delivery Group.
Network Rail publishes a series of documents as part
of the LTPP to provide a vision for the network to 2043. These
include the Route Studies for different areas of the country and
are available at
http://www.networkrail.co.uk/long-term-planning-process/route-studies/.
The industry will bring together the work from the
LTPP and other long term planning work in the Initial Industry
Plan in September 2016. This will provide choices to funders of
the industry in the medium term, consistent with the long term
strategy, to inform the Government's High Level Output Specification
(the Rail Investment Strategy) in 2017.
Network Rail publishes potential future enhancements
to the railway in Control Periods beyond 2019 as part of the route
studies and LTPP.
The Enhancements Cost Adjustment Mechanism
Recommendation 5. We are concerned
that key rail enhancement projects—such as electrification
in the North and North West of England—have been announced
by Ministers without Network Rail having a clear estimate of what
the projects will cost, leading to uncertainty about whether the
projects will be delivered on time, or at all. This could be avoided
through greater clarity of the status of each announced project.
Network Rail should publish a "traffic light" status
update for each project committed to in a control period, which
would make clear whether, for example a project had been provisionally
approved subject to detailed costings, finally approved but without
a start date or approved and ready to start. When a project is
announced, the Department and Network Rail must be clear and transparent
about how it is to be funded, and how advanced it is in costings.
This will provide confidence in the delivery of enhancement projects.
Electrification of lines in the North West, the North trans-Pennine
line, and the Midland Main Line, should not be put at risk due
to the projected overspend on the Great Western Main Line. If
a rail electrification project is announced for delivery in a
set time period, there should be an expectation that it will be
delivered on time. (Paragraph 23)
The Department is working with Network Rail and the
regulator to ensure that these points are addressed for investments
delivered in the next Control Period, and to ensure that this
information is incorporated in Network Rail's regulated Delivery
Plan. In the current period, the Government is taking forward
the biggest rail modernisation programme for over a century. This
will transform our railway. Network Rail will spend £38
billion between 2014-2019 on running and improving the railway.
It is an enormous and challenging programme of work. We have
made it clear to Network Rail that we expect the company to deliver
the benefits set out in the Government's Railway Investment Strategy
across the regions.
Value for money and priorities
Recommendation 6. The Department for
Transport should increase transparency around rail spending and
projected outcomes. It should publish the criteria it uses for
allocating spending and clarify how it decides which projects
will get Government funding. To assess whether the Government
has allocated spending appropriately, and to achieve maximum benefits,
there must be a transparent way of tracking the investment—and
outcomes—in each control period. We recommend: (Paragraph
27)
Investment decisions taken by the Department are
subject to the Transport Business Case. The Transport Business
Case provides a description of the approach followed by the Department
and its Ministers when making major investment decisions. The
approach taken is in line with Treasury's recommended five case
model and sets out whether schemes:
· are
supported by a robust case for change that fits with wider public
policy objectives - the 'strategic case';
· demonstrate
value for money - the 'economic case';
· are
commercially viable - the 'commercial case';
· are
financially affordable - the 'financial case'; and
· are
achievable - the 'management case'.
Ultimately decisions regarding which specific investments
are chosen is a matter for Ministers given the wide range of competing
demands for finite capital.
The Department has also put in place the Benefits
Management Framework which aims to demonstrate that we are maximising
the benefits achieved for passengers, stakeholders and government
from the investments we are making.
The Benefits Management Framework and Transport Appraisal
for Investment Decisions are mutually supportive. The Framework
sets out how benefits should be treated within the context of
the standard five case transport business case approach and is
consistent with the methods for understanding and valuing transport
investments set out in WebTAG.
More information is available here:
https://www.gov.uk/government/publications/transport-business-case
Recommendation 7. The development of an "outturn
statement" for each Control Period making clear work agreed
to, work done, work carried over along with financial outturn,
and the split of spending between operations and enhancement projects.
(Paragraph 27.a)
Network Rail publishes an Annual Return each year
which reports the work achieved and progress against the Periodic
Review outputs. In the final year of the Control Period this includes
an overview across the whole Control Period. For enhancements,
the 2014 Annual Return included (p237) a table of milestones showing
those achieved and those deferred into CP5. Financial information
is presented in the Annual Return, however a more detailed financial
overview is also published by Network Rail in the form of the
Regulatory Financial Statements which include cumulative financial
information for the control period, the final year thus providing
a review of the organisations financial outturn for the whole
control period. The ORR reviews these statements and then publishes
its Annual Efficiency and Finance Assessment which assesses Network
Rail's financial performance. The statements include the split
of spending between operations and enhancement projects as well
as spending split in other ways - e.g. by route.
More information
is available
here:
http://orr.gov.uk/__data/assets/pdf_file/0003/14835/network-rail-annual-efficiency-and-finance-asessment-2013-14.pdf
Recommendation 8. Funding announcements
for Control Periods should differentiate more clearly between
spending on operating the network—the running costs without
any capacity/infrastructure work—and enhancements. (Paragraph
27.b)
For each Control Period the ORR publishes its Periodic
Review. This document shows a full breakdown of the funding announced
for the forthcoming Control Period - showing the amounts allocated
for both operation of the network and enhancements to it.
More information is available here:
http://orr.gov.uk/__data/assets/pdf_file/0011/452/pr13-final-determination.pdf
Recommendation 9. Each spending announcement
made by Government, Network Rail or the train operating companies
should make it clear where the funding has originated—through
the Control Period funding, separate Government funding (e.g.
the Local Growth Fund), or private investment from train operating
companies or the rolling stock operating companies. (Paragraph
27.c)
Recommendation 10. This approach fits with the
Treasury's Line of Sight principles. We think that this information
could be published by the Department at no, or minimal extra cost,
as all this information should be already easily available internally
for accounting or management purposes. (Paragraph 27)
The Government always endeavours to include details
of funding and financing arrangements alongside announcements
on spending and investments in the rail network and will continue
to do so. In some exceptional cases either for reasons of commercial
sensitivity or because the mix of funding is more complex, this
is not always possible.
The ORR currently provides high level breakdown of
funding for the rail industry, broken down into Government funding
and private funding. The information is provided in the annual
GB Rail Financial Report
More information is available here:
http://orr.gov.uk/__data/assets/pdf_file/0005/16997/gb-rail-industry-financials-2013-14.pdf
Regional investment
Recommendation 11. We welcome the substantial
investment in CP5, and the commitment to electrification and increasing
commuting capacity in a time of austerity. We support the Northern
Hub programme, and welcome the indications that the Department
for Transport will listen to the case for investment in the North
and East of England. We remain concerned that the Benefit Cost
Ratio used to allocate rail spending has failed to give sufficient
weight to the wider economic and social benefits of rail investment.
Focusing simply on passenger numbers and the short-term economic
return from rail investment will inevitably continue to focus
investment in London and the South East. Instead, we recommend
the Department for Transport adopt and publish broader criteria
for allocating funding, which consider the contribution to the
Government's wider policy objectives—such as long-term economic
regeneration, environmental policy or social need. Rail funding
must still deliver value for money for the taxpayer, with the
economic case for each project subject to rigorous testing against
the revised criteria. This approach, however, will result in a
fairer allocation of rail investment across the country; other
regions, such as the far south west, have been "starved"
of investment. (Paragraph 31)
The Department follows the HM Treasury five-case
approach in making investment decisions. This covers not only
the economic case, but also the strategic, financial, commercial
and management cases. Investment spending is not therefore allocated
solely on the basis of the benefit cost ratio.
The Department's guidance on assessing value for
money, as set out in WebTAG, requires an economic appraisal to
cover all the relevant impacts on society, including social and
environmental impacts, and is not limited to short-term financial
impacts.
Regional Allocation
Investment is focused on best value schemes and based
on industry recommendations to the Government. The rail industry
identifies where demand is forecast to exceed existing rail capacity
and puts forward the options for resolving this. Peak demand
growth is specifically forecast and measures to provide the necessary
capacity across the 10 major cities including London are included
in the current investment strategy to 2019.
Rail spend in one region can have a huge benefit
in another region. For example spend in London helps provide
capacity to enable an extra London - Leeds/North East long distance
train to operate. Spending at Reading benefits the journey time
and reliability of South West long distance services.
Investment in the South West
· Electrification
between London and Bristol both via Bath and via Bristol Parkway,
Bristol Parkway to Cardiff and Swansea, Didcot to Oxford, Reading
to Newbury and Reading to Basingstoke. This will be accompanied
by the introduction of new Intercity Express Programme (IEP) trains
on London to Bristol and South Wales services.
· The
double-tracking of Swindon - Kemble completed in August 2014.
· Extra
track capacity between Bristol Temple Meads and Filton Abbey Wood
(four tracking of Filton Bank) and an extra platform at Bristol
Parkway by December 2017.
· Increase
the passenger handling capacity of Bristol Temple Meads station
including the re-use of the Grade 1 listed Digby Wyatt train
shed. Station enlargement integrated with the wider Enterprise
Zone upgrade to the area.
· Funding
has been provided towards a new station at Newcourt, Exeter from
the New Stations Fund.
· Network
Rail spent £40m in 2014 on repairing and strengthening the
line at Dawlish after the severe weather. A further £30m
is being provided by Government towards resilience and protection
on the Dawlish route for 2015.
· The
Chancellor has committed to developing a comprehensive rail strategy
for the south-west by setting up a south-west Peninsula Rail Task
Force - this strategy will increase resilience, reduce journey
times, and increase capacity, responding to the 3-point plan of
the south-west Connectivity Study. It will also address the question
of the potential.
· The
£147m Cornwall Rail Improvement Package developed by Cornwall
Council, Rail Industry partners and the Government which includes
upgrades to main line signalling to enable a regular frequency
and relocates Night Riviera Sleeper maintenance activities from
London to Long Rock, Penzance.
The Northern and TransPennine Express franchises
Recommendation 12. We are disappointed
that the consultation proposals for the Northern and TransPennine
Express franchises have not focused on increasing capacity and
improving rolling stock, but instead suggested that passengers
in the north must make trade-offs between fares and decent journeys.
While the devolution of the franchises to Rail North is welcome,
it stops well short of devolution. The consultation document suggests
that the body's powers will be limited—indeed, the Secretary
of State will retain the final decision-making powers. Rail North
was clear that fare increases on the Northern franchise could
not be considered prior to improvements in rolling stock and services.
If devolution is genuine, Rail North's stance should be reflected
in the Invitation to Tender. The Department must also set out
how the interests of rail passengers outside the North's city
regions will be protected under the devolution to Rail North.
Network Rail must also set out why its payment—which makes
up part of the stated subsidy to each Train Operating Company—allocates
the same costs for maintaining the rails to much smaller Pacer
trains, as it does to the larger and faster Pendolino trains.
(Paragraph 39)
The Government's partnership with Rail North is a
significant initial step towards devolution of rail service provision
in the North of England. The Government and Rail North Leaders
agreed that an initial partnership would be appropriate given
the scale of the two franchises and the innovative nature
of Rail North's governance arrangements which bring together 29
local transport authorities from across the North of England.
The agreed partnership principles, which the Department is working
with Rail North Ltd to turn into a binding agreement, make provision
for the balance of responsibilities and risks in management and
development of the franchises to change over time. It is
intended that Rail North Ltd should have the ability to vary future
fare levels for these franchises, bearing the financial consequences,
in addition to the normal fare change mechanism available to the
Secretary of State.
Through a Leaders Committee of a local authority
Association appointing directors to the Board of Rail North Ltd
based on geographical groupings of the 29 authorities, Rail North's
formal governance arrangements will ensure that all areas of the
North are fairly represented in future decision making on these
franchises.
On the question of Network Rail's access charges,
the Department understands that Network Rail will provide a detailed
explanation in its response to the Committee. Network Rail does
not allocate the same cost to smaller trains as it does larger
ones. There are two broad types of access charge: variable charges
and fixed charges. While fixed charges do not vary with the type
of trains, variable charges change with the level of use of the
network. In the context of track assets, Network Rail's variable
charges are differentiated by both type and length of train. As
a result, the variable charge (per mile) is significantly higher
for an 11-car Class 390 Pendolino than for a 2-car Pacer train.
Variable charges are designed to reflect the different costs Network
Rail faces when accommodating different trains. The setting of
access charges is subject to review and consultation during a
Periodic Review by the ORR.
Rolling stock
Recommendation 13. The rolling stock
operating company involved in the proposed transfer of trains
for the TransPennine Express franchise to Chiltern Railways sought
to reassure us when he told us that the trains would stay with
TransPennine Express until Chiltern Railways and the Department
decided to transfer them. This has only blurred the lines of accountability,
as the Department was keen to stress that the factors involved
in this case were outside its control, before announcing that
it had worked with the franchisees to resolve the situation. We
welcome the Department's commitment to making sure there will
not be a shortfall of trains on the TransPennine Express line
but we expect current capacity and schedules to be maintained.
The Department must continue to accept responsibility for rolling
stock, and ensuring that there are sufficient trains to operate
timetabled services. (Paragraph 46)
Recommendation 14. The TransPennine
Express/Chiltern Railways transfer of rolling stock has been symptomatic
of a fundamental weakness in the way rolling stock is leased and
managed. This has also been demonstrated during the electrification
programme, where a disconnect between the funding of new or enhanced
infrastructure and the procurement of rolling stock risks leaving
passengers stranded with no trains running on newly electrified
lines. The Department must take responsibility for aligning infrastructure,
franchises and rolling stock procurement. This is necessary so
that uncertainty can be reduced for industry and investment made
rather than deferred. (Paragraph 47)
Government policy sets outcomes and places responsibility
for delivery on industry, through a structured planning process
involving Network Rail and partners. In line with the 2012 Rail
Command Paper, the Department expects the market to lead the replacement
and refurbishment of rolling stock, though it reserves the right
to lead in some circumstances.
Both the Department and industry have increased the
amount of information available to the market. Industry and the
supply chain rely on the Rail Franchising Schedule, Rail Investment
Strategy and industry's own Rolling Stock Strategy to plan. The
Department has created a team responsible for interdependencies
between franchise services, network infrastructure and rolling
stock. Nevertheless, the policy set out in the Rail Command Paper
remains, the market leads on rolling stock through franchise competitions.
As electrification progresses and new vehicles are
delivered we expect there to be a surplus of both electric and,
although later, diesel vehicles. The additional rolling stock
required as a result of the Rail Investment Strategy will be delivered
principally through the franchising programme. Where interventions
fall outside of the franchising schedule, as with the recent South
West Trains order, the Department will ask the franchisee for
a proposal.
Pacer trains
Recommendation 15. By refusing to give
a date for when the Pacer trains will be taken out of service
and simply saying that he "hopes" they have had their
day, the Secretary of State has suggested that he does not have
the powers to ensure a decent quality of train for passengers
in the North and South West of England or in Wales. Alternatively,
his admission that he would not like to be held to account for
the Pacers' withdrawal suggests that he does have these powers,
but is unwilling to match his rhetoric with action. We find it
concerning that the rolling stock operating company Porterbrook
is prepared to spend £800,000 refurbishing the Pacer to extend
its use on our network. It is unacceptable that Pacer trains—built
in the mid-1980s and of questionable safety—are still in
use on busy rail lines. We recommend the Secretary of State uses
his franchise specification powers to require the removal of Pacer
trains from the rail network by 2020 at the latest. (Paragraph
51)
The specification for the new Northern franchise
includes a requirement to phase out all of the Pacer fleet by
the beginning of 2020, as well as a major modernisation of other
older fleets operated by the franchise. The franchise specification
also requires a minimum of 120 newly-built vehicles to be introduced.
Alongside a significant inward cascade of electric and diesel
rolling stock, which the specification also requires to be fully
modernised, this will deliver a transformational increase in both
the quality and the capacity of the Northern rolling stock fleet.
Recommendation 16. The cascading of
train carriages out of the South East may provide the most efficient
way for the rolling stock operating companies to manage their
rolling stock. It is concerning that the Department has chosen
to order brand new trains for passengers in London and the South
East, while expecting passengers in the rest of the country to
be content with reconditioned older trains—cast-offs from
more prosperous areas. (Paragraph 52)
Franchises across the country will benefit from new
and modern vehicles. East Coast, for instance, will benefit from
new IEP vehicles. The Northern and TransPennine Express franchise
competitions are underway and we expect the market to deliver
new vehicles as part of this or through an in-franchise change.
Across the country, the franchising programme will also deliver
good quality refurbishment of existing stock, done to a high standard
within the United Kingdom.
Freight
Recommendation 17. Rail freight is
a crucial part of our economy, and its needs must be balanced
against that of passenger rail. The Government should produce
a freight strategy, considering road and rail freight together,
to ensure a coherent and fair policy. It must also set out and
consult on the practical steps required to achieve its strategic
outcomes, including the modal shift from road to rail and the
decarbonisation of freight transport. We believe the Office of
Rail Regulation must consult on the track access charging regime
with a view to reducing the current complexity. (Paragraph 60)
The recently-designated National policy statement
for national networks sets out, for the purposes of the planning
system, the Government's policy relating to nationally significant
infrastructure projects on the road and rail networks, including
strategic rail freight interchanges. The Government supports the
transfer of freight from road to rail and shipping and inland
waterways where it is practical, economic and environmentally
sustainable to do so. This can provide benefits in terms of reduced
congestion, lower emissions, improved air quality and better road
safety.
However, it must be recognised that the transport
of goods is a commercial undertaking, in which the various transport
modes compete to provide the service their customers require.
There already exists a strong element of co-ordination between
road and rail, as there are very few rail freight journeys that
do not need a road element for the "last mile". However,
over shorter distances - typically within a radius of 100 miles
- the handling costs of transferring to rail are likely to make
this uneconomic. Rather than seek to intervene in commercial decisions
that properly belong to the logistics sector, the Government seeks
to ensure that as far as possible there is a level playing field
between the transport modes.
Resilience
Recommendation 18. We commend the work
of the "Orange Army" of Network Rail engineers who rebuilt
the seawall and re-opened the railway line at Dawlish, following
the devastating storms. While the tireless work of the engineers
limited the length of the closure of the line, the economic impact
on the region was still severe. It is not clear whether the Treasury's
cost-benefit assessments take the cost of such closures, or the
cost of doing nothing, into account, when prioritising investment
on resilience or alternative lines. We call on the Department
to state whether it is prepared to fund schemes which do not meet
the required cost-benefit ratio, if the alternative is a closed
line. Where lines are closed, as in the case of Dawlish, the necessary
costs incurred in re-opening the line should not jeopardise or
delay the long-term work to improve the resilience of the network
or deliver promised enhancements. (Paragraph 64)
The economic appraisal takes into account all impacts
on society. If a scheme included a line closure then an estimate
of the economic impact of the closure would be taken into account
in the appraisal. The Department would expect to consider
each proposal on its merits on a case by case basis.
Connectivity with HS2
Recommendation 19. We welcome the proposals
to improve East-West connectivity. We call for clarity on whether
these proposals will be truly East-West: extending from Hull to
Liverpool, with the benefits that would bring for freight and
passenger rail. It is also not at all clear whether these proposals—HS3
as the Chancellor has referred to them—will entail a new
line or improvements to existing lines. The Department should
clarify this point, and also make clear what long-term objectives
it has for improving East-West connectivity across the country.
(Paragraph 68)
The Government will set out its plans for developing
East-West connectivity in the Northern Transport Strategy. An
interim report will be published in March.
Recommendation 20. The Government should
set out the details and timing of planned investment in the classic
network in order to maximise the benefits of HS2; improving rail
access for all passengers and increasing capacity for freight.
The planning process should consider HS2 and trans-Pennine improvements
as part of one overall rail network. (Paragraph 69)
The approach for Control Period 6 will continue the
current strategy, focusing on increasing network capacity through
additional tracks, larger stations, and changes to signalling
technology, preparation for, and construction of, new routes such
as HS2 and East-West Rail, and further electrification of the
network.
In CP6 we will look to develop the shape and service
structure of the existing network to be ready for the opportunities
of High Speed 2.
Performance of Network Rail
Recommendation 21. The failure of Network
Rail at Christmas, which left thousands of passengers stranded,
was unacceptable. We welcome Mark Carne's unreserved apology to
the travelling public, and the publication of Dr Francis Paonessa's
report into the disruption. Network Rail's original statement
that the failure at King's Cross was "really regrettable
and unfortunate but it is a small part of a massive amount of
engineering investment taking place over Christmas" offered
little consolation to passengers stranded in the cold. Indeed,
the fact that King's Cross was only one of a number of overrunning
engineering works and signalling problems that plagued the rail
network over the festive period offers further evidence of systemic
weaknesses in Network Rail's capacity to plan and execute engineering
works. Given the ambitious investment programme that Network Rail
will receive £38 billion to deliver by 2019, this is a matter
of great concern. If Network Rail is to maintain and improve the
rail network in CP5 it will require managing multiple, complex
engineering projects simultaneously. Network Rail must demonstrate
how it will learn from the mistakes it has made in its engineering
works and maintain a decent service to passengers while enhancement
work is carried out. (Paragraph 78)
Recommendation 22. When things do go
wrong, Network Rail must have adequate contingency plans. It should
not abdicate its responsibility to passengers, particularly vulnerable
ones such as the elderly or families with young children. We welcome
Network Rail's proposed review of contingency measures and the
timing of engineering works. In addition Network Rail must work
with Passenger Focus and the train operating companies to improve
the communication with passengers when engineering works fail.
(Paragraph 79)
The Government agrees it is vital that the rail industry
does more to look after passengers and keep them better informed
if things go wrong, and welcomes the steps being taken by Network
Rail, with the train operators, to ensure the lessons from the
events over Christmas are learned.
On 12 January Network Rail published an initial internal
review into the sequence of events and what went wrong when engineering
works overran over the weekend of 27 and 28 December 2014. The
report set out a number of improvements that Network Rail must
make. The company recognises that it needs to improve both
project and operational contingency management, so that better
identification of delivery problems results in better operation
of recovery services, and that it must work with industry stakeholders
to provide better information to passengers.
On 12 February ORR published the findings of its
independent investigation of the matter and set out requirements
to ensure that Network Rail, working with train operators, develops
clear contingency plans which help passengers if works overrun,
and that if needed, the plans are implemented in a timely and
effective way.
In the light of these reviews Network Rail is looking
at all contingency plans for works scheduled over Easter and the
May 2015 bank holidays. ORR expects Network Rail to have implemented
all the recommendations, including those which require work with
train operators, in advance of Christmas 2015 engineering works.
The regulator will audit implementation to make sure the improvements
are all in place.
The industry is also looking at how it can improve
communication with passengers both in times of disruption and
during normal operation of the railway. A key theme is the digitisation
of communications, with the industry making significant investment
in new technology to provide passengers with more real time information.
Recommendation 23. While it is essential
for Network Rail to deliver value for money for the taxpayer,
efficiency savings cannot put the safety and reliability of the
rail network at risk. The ORR should consider whether the disruption
over Christmas and the New Year suggests that Network Rail is
unable to deliver the enhancements programme planned for CP5,
alongside a safety-focused, high-performing railway each and every
day. In the light of the change of status of Network Rail the
ORR must reconsider whether fining a public sector body remains
an acceptable means for the regulator to exert control. (Paragraph
80)
The Government notes this recommendation which is
for ORR to answer.
Reclassification of Network Rail
Recommendation 24. The test of the
new relationship between Network Rail and the Minister will be
how the Minister responds to poor performance by Network Rail,
given the Government's stated commitment not to micro-manage the
railways. It is not clear whether the Secretary of State will
use the powers set out in the framework agreement. The reclassification
of Network Rail strengthens the case for greater accountability
and transparency in the way we have recommended in paragraph 27.
(Paragraph 83)
The Government recognises that Network Rail's performance
recently has not been satisfactory. High performance is expected
of Network Rail, and it is a key part of the regulator's role
to monitor and evaluate this and to hold Network Rail to account
both for the day-to-day performance of the network and progress
against its delivery requirements.
The Government remains committed to ensuring that
Network Rail retains the operational and commercial flexibility
to be accountable for managing and improving rail infrastructure.
Network Rail has an experienced board who are responsible for
the company's internal governance and the Chief Executive of Network
Rail is now an Accounting Officer and is therefore directly accountable
to Parliament for the company's performance and use of public
funds.
However the Secretary of State reserves the power
to remove Network Rail's Chair and the rest of its board in exceptional
circumstances, or to appoint a Special Director to the board.
The Department for Transport will also agree Network Rail's business
plans to ensure it has a credible approach to delivery.
The Government also recognises the need for greater
transparency given reclassification, which is why Network Rail
is being made subject to the Freedom of Information Act from late
March.
Recommendation 25. The Government should
set out in its response how it plans the future financing of Network
Rail and how it expects the financing of rail investment to be
restructured. Spending more on debt interest than on asset maintenance
is a looming political problem. (Paragraph 84)
Network Rail continues to be funded by a combination
of grant funding from government, Track Access Charges from operators,
and some income from other sources such as property. Network Rail
has also previously used debt to finance infrastructure investment,
which is common across many regulated network service providers.
It enables Network Rail to smooth investment over time and offers
the flexibility to raise funds as and when required to meet capital
investment and operational needs.
In response to the ONS's decision to reclassify Network
Rail to the public sector, the Secretary of State, in July 2014,
agreed a loan facility to replace Network Rail's previous borrowing
arrangements, improving value for money to the taxpayer and placing
a cap on how much Network Rail can add to public debt. This facility
has been agreed with Network Rail to provide sufficient financing
for delivery in Control Period 5 (2014-19).
The loan facility will be reviewed by 2017, as set
out in the Network Rail Framework Agreement. How Network Rail
will be financed beyond 2019 will be determined as part of that
review. The Government is always considering what provides best
value for money to the taxpayer, but we have no current plans
to restructure Network Rail's existing debt.
Conclusion
Recommendation 26. We welcome the record
levels of spending in the rail network to 2019. Increasing capacity
on the classic network will help to meet the current and growing
demand for rail services; and the electrification programme will
make journeys quicker and more reliable, as well as reducing the
environmental impact of rail travel. We heard that the Northern
Hub programme will deliver over £4 billion of wider economic
benefits to the North. Such criteria for the allocation of spending
will aid the Department in assessing bids for future investment,
and ensure a fair proportion of investment in different regions
of the country. Treasury statistics have shown that there is a
large variation in the level of public spending on rail across
different regions of the country. (Paragraph 85)
Investment is focused on best value schemes and is
informed by industry recommendations to the Government. As noted
in the response to recommendation 6, ultimately decisions regarding
which specific investments are chosen is a matter for Ministers
given the wide range of competing demands across the country for
a finite amount of funding. While the Government is concerned
to ensure there is a regional balance, an investment in one region
can provide benefits for other regions, for example by removing
bottlenecks, increasing capacity, improving reliability and speeding
up journey times between regions.
Recommendation 27. To maximise the
benefits of the increased spending it should be clear how it fits
into a longer-term strategic vision for the railways. While the
control periods are a useful management tool, they need to be
matched by the publication of a long-term plan, which brings together
plans for franchising, rolling stock and enhancements work, and
considers the rail network as a whole. Connectivity between the
high speed and classic network should be prioritised, as should
links to ports and airports. This plan should be linked to an
"outturn statement" for each control period, helping
to track spending, provide greater transparency around benefits
realisation. This will strengthen the accountability of Network
Rail and the ORR to Government and Parliament, as it will be clear
if projected outcomes have materialised. Given the concerns we
have expressed about Network Rail's capacity to deliver the CP5
programme, it is vital for passengers and taxpayers that it is
held to account in this way. (Paragraph 86)
The Department works with the rail industry and other
stakeholders on long-term planning for the rail network to achieve
the overriding objectives of increasing capacity, improving journey
options, increasing standards of customer service, reliability
and safety, and improving efficiency. The Rail Technical Strategy
and industry-led initiatives such as the digital railway also
contribute to the long-term vision for the railway.
These inform decisions on the outcomes sought from
the railway, how they should be delivered, and the funding available.
In particular, the department produces high level outcome requirements
to inform franchise procurements and major projects. The Department
works to secure these outcomes in partnership with the ORR, Network
Rail, Passenger Focus, Transport Scotland, the Welsh Government,
Transport for London, the rail industry and local partners.
This approach reflects the Government's belief that
investing in rail services is a key enabler of sustaining and
developing the economy across the whole of the UK. This includes
continuing to improve access to city centres and connectivity
between cities and communities as well as improving rail links
to ports and airports to improve international competitiveness.
Recommendation 28. A longer-term look
at rail should be part of a wider route-based transport strategy
that considers road and rail together, and recognises the interconnections
between different modes of transport. This approach would enable
the Government to consider whether proposed investments, in road
or rail, offer the most effective and efficient way to improve
connectivity and boost economic growth. As we have previously
recommended, working in this way would allow for consultation
with local authorities and local enterprise partnerships, for
the benefit of rail passengers and road users, and taxpayers in
general. (Paragraph 87)
The National policy statement for national networks
sets out the Government's vision and approach to development of
the national road and rail networks in England, including the
development of strategic rail freight interchanges. Together
with the long-term investment planning frameworks for road and
rail, the national policy statement supports integration across
the transport modes. As part of the consenting process for
these projects, scheme promoters are expected to collaborate closely
with other network providers at an early stage. This will help
support better integration across networks managed by different
operators. In making investment decisions Strategic Economic Plans
and the route strategies that feed into the Rail and Road Investment
Strategies, provide opportunity to integrate development on the
national and local transport networks where that is sensible and
helps drive growth and improve quality of life.
| 
