Investing in the railway - Transport Contents

9  Performance of Network Rail

70. Network Rail told us that it had "a high level of confidence that CP5 can be delivered successfully".[240] Group Strategy Director, Paul Plummer, told us that he believed the greater collaboration between Network Rail, train operators and Government—through the establishment of regional alliances—would improve performance for passengers.[241] First Group stated that it supported Network Rail's plans for CP5, but cautioned that the risks in the delivery of the "enormous" programme had increased.[242]

71. The failure of Network Rail to complete Christmas 2014 engineering works on time led to the cancelling of all trains into and out of King's Cross on Saturday 27 December—the first day passengers were able to travel on the East Coast Main Line after the two-day shutdown on Christmas Day and Boxing Day. Engineering works also overran at Paddington, resulting in a second major London terminal being closed, in this case for part of the day. The disruption continued into Sunday 28 December; and the impact on passengers was extensive. The decision was taken after the closure of King's Cross for a limited service of East Coast and Great Northern services to start and finish at Finsbury Park in place of the scheduled service. The large number of passengers directed Finsbury Park—a much smaller station—and a miscommunication between Network Rail and the operator of Finsbury Park resulted in severe overcrowding, and the station had to be closed on police advice. The situation was reported as "chaos" and ORR Chief Executive, Richard Price stated that "elderly people were being left outside in the drizzle and the cold" as "hundreds of people" were queuing outside the station.[243] Overcrowding was also reported on the East Coast services that did run to and from Finsbury Park, with passengers standing for long journeys. At Paddington passengers reported a lack of information about how long services would be suspended; and severe overcrowding and delays when services did resume. The ORR is reviewing whether the events of 27 and 28 December constituted a breach of Network Rail's licence: in 2008 overrunning engineering works from the previous Christmas and New Year were found to have breached the licence and resulted in a £14 million fine for Network Rail.[244]

72. Network Rail's Christmas 2014 engineering programme was ambitious: a £200 million programme involving 11,000 staff at 2,000 sites.[245] Mark Carne, Network Rail Chief Executive, described it as Network Rail's largest ever programme of engineering works".[246] Four major London stations had major engineering works, with closures at London Bridge and Euston in addition to King's Cross and Paddington.[247] In a statement on 29 December Mr Carne announced an industry-wide review of "the timing of our major works programmes and the passenger contingency arrangements for such works".[248] Mr Carne noted that while the "conventional wisdom" was to carry out engineering works over Christmas, when passengers numbers were around half of those for a normal weekday, it was right to review whether this was still the best approach. He added:

    There are different kinds of people travelling at Christmas, with different demands and needs. They have suitcases and children, and there are elderly people visiting friends and families—different kinds of passengers that we need to look after at those times.[249]

Mr Carne suggested that spreading the work out throughout the year would cost less: engineers had been paid "at least two or three times" the normal rate to work over Christmas. It may also carry less risk, as the compression of engineering works into a short time at Christmas had stretched Network Rail's resources. Mr Carne added, however, that spreading the work out in this way would mean additional planned disruption for passengers.[250]

73. Network Rail has also been responsible for a number of previous over-running engineering works, most notably on the Great Eastern Main Line where on ten occasions in six years Network Rail has caused significant delays and disruption to passengers by failing to complete its weekend engineering works to schedule.[251] This month passengers at London Bridge have experienced severe delays and disruption during the engineering works on the Thameslink project.[252] Mark Carne stressed in evidence to us that delays caused by overrunning engineering works had halved since 2007, despite Network Rail carrying out double the amount of work compared to five years ago.[253] At Christmas, 99% of the engineering projects had finished on schedule. He added that this showed that there had been "significant improvements", despite there being "more to do".[254]

74. In written evidence Passenger Focus noted that disruption to passengers was an inevitable downside of investment in the railway, and stated that communicating well with passengers during disruption was "key to maintaining levels of satisfaction during the building works".[255] The National Rail Passenger Survey had shown that the management of delays was the biggest single source of passenger dissatisfaction.[256]

75. The Office of Rail Regulation reported on Network Rail's performance for the first two quarters of year 1 of CP5 in November 2014. The regulator found that:

a)  Network Rail was delivering less work in maintenance and renewals than it planned to do—but was already £40 million above budget on maintenance.

b)  Performance on delivery of its enhancement portfolio has worsened.

c)  Punctuality was 0.7% below the target rate.

d)  The data used to "plan and manage" its enhancements work did not meet "the required standards in some areas".[257]

76. In written evidence the RMT/TUC warned of that its members had reported an "on-going skills crisis" on the railway, due to the number of older staff (which made up a large proportion of Network Rail's workforce) taking retirement.[258] Network Rail plans to reduce the maintenance headcount by 1050 in CP5, 8% of the total workforce.[259]

77. On 7 July the ORR reported on Network Rail's performance for Control Period 4, which ran from 2009 to 2014.[260] The ORR identified the delivery of "a major rail enhancement programme, largely on time and budget" as one of the period's "significant successes".[261] In contrast, Network Rail's performance failed to meet its targets for punctuality for long-distance, and for London and South East passenger services. As a result, in Control Period 4 we heard that "7,000 trains were late that should not have been".[262] The ORR stated that "passengers would expect there to be some consequences" for the failure to meet punctuality targets, and Network Rail has been fined £53.1 million, its highest-ever fine.[263] It has been reported that a proportion of Network Rail's fine will be used to improve WiFi services on the rail network. Passenger Focus argued that "for passengers, there probably could not be a worse example of the money­go­round—fining Network Rail for it to go back into Government".[264]

78. 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.

79. 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.

80. 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.

Reclassification of Network Rail

81. On 1 September 2014 Network Rail was reclassified as a Government body (it had previously been a statutory corporation created as a not-for-dividend private company limited by guarantee). This move was necessary to comply with pan-European accounting standard ESA10. Mark Carne told us in June 2014 that reclassification "should not make any necessary difference because it does not in itself drive particular changes in the way that the company works with the Government".[265] The exception, Mr Carne told us, was the way Network Rail raises money:

    In the past when we needed to raise money we went to the markets and raised money, with a Government guarantee to support the low interest rates that we were able to attract to raise that money. In the future it is very unlikely that we will do that. The Treasury will raise the money that we need. Why would they not? They have said, "No, we will raise the money that you need for investment in the railway."[266]

The reclassification moves Network Rail's debt onto the books of the Government. Witnesses expressed some caution about the rising costs of servicing Network Rail's debt—which stood at £31 billion in 2014, and is forecast to rise to £49.6 billion by the end of CP5.[267] The interest payments will £1.4 billion in 2014/15 and are forecast to rise to £2.3 billion by 2018/19.[268]

82. Paul Plummer, Group Strategy Director at Network Rail, said that it was "inevitable" that there would be more "challenge" in the relationship between the operator and the Government, post-classification.[269] There would also, he told us, be clearer accountability, with the Chief Executive of Network Rail taking on the role of Accounting Officer to Parliament. Mr Plummer noted, however, that while Network Rail had been criticised for a lack of accountability in the past, the company did "feel incredibly accountable to an awful lot of people".[270] The Framework Agreement which sets out the governance of Network Rail from September 2014 gives the Secretary of State the power to appoint a Membership Selection Panel which will act independently and recommend Members for selection for the Network Rail Board.[271] The Secretary of State also has the right to approve or reject the Panel's recommendations.[272] He set out his view of how his relationship with Network Rail should operate:

    I do not think that it should be my job overtly to direct Network Rail. I want it basically to carry on with its relationship with the ORR. […] I do not think that it should be the job of the Secretary of State—or that it would be wise for the Secretary of State—always to be trying to over-guess what the chief executive and Network Rail are doing.[273]

83. 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.

84. 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

240   Network Rail (IRW0040) Back

241   Q43 Back

242   FirstGroup (IRW0010) para 14 Back

243   Oral evidence taken on 14 January 2015, HC (2014-15) 920, Q 96 Back

244   Office of Rail Regulation, Report of ORR's investigation into engineering overruns, February 2008  Back

245   Network Rail, Army of 11,000 railway engineers to work on record-breaking Christmas investment programme to deliver a bigger, better railway, 10 December 2014, accessed 15 January 2015 Back

246   Oral evidence taken on 14 January 2015, HC (2014-15) 920, Q 15 Back

247   Network Rail, Army of 11,000 railway engineers to work on record-breaking Christmas investment programme to deliver a bigger, better railway, 10 December 2014, accessed 15 January 2015 Back

248   Network Rail, Media statement from Network Rail: Monday 29 December, accessed 15 January 2015  Back

249   Oral evidence taken on 14 January 2015, HC (2014-15) 920, Q 16 Back

250   Oral evidence taken on 14 January 2015, HC (2014-15) 920, Q 21 Back

251   "Commuters' anger at yet more major rail delays on Norwich to London line", Eastern Daily Press, 26 August 2014,  Back

252   "London Bridge overcrowding: commuters face third day of delays", London Evening Standard, 8 January 2015 Back

253   Oral evidence taken on 14 January 2015, HC (2014-15) 920, Q 15 Back

254   Oral evidence taken on 14 January 2015, HC (2014-15) 920, Q 15 Back

255   Passenger Focus (IRW0028) para 2.2.3 Back

256   Passenger Focus (IRW0028) para 3.4 Back

257   Office of Rail Regulation, Network Rail Monitor 2014/15: Quarters 1 & 2 of Year 1 of CP5 (1 April to 11 October 2014) (20 November 2014) p 3, 4, 10, 25 Back

258   Written evidence from the RMT/TUC, IRW 45 Back

259   Written evidence from the RMT/TUC, IRW 45 Back

260   Office of Rail Regulation, Regulator reports on Network Rail's performance between 2009 and 2014, 7 July 2014, accessed 15 January 2015 Back

261   Office of Rail Regulation, Regulator reports on Network Rail's performance between 2009 and 2014, 7 July 2014, accessed 15 January 2015 Back

262   Q163 Back

263   Q163 Back

264   Q169 Back

265   Evidence taken on 9 June 2014, HC (2013-14) 255, Q 3 Back

266   Evidence taken on 9 June 2014, HC (2013-14) 255, Q 5 Back

267   Office of Rail Regulation, Periodic Review 2013: Final determination of Network Rail's outputs and funding for 2014-19, October 2014, p 30 Back

268   IRW 71 Back

269   Q50 Back

270   Q52 Back

271   Department for Transport, Network Rail Framework Agreement, September 2014, p 10 Back

272   Department for Transport, Network Rail Framework Agreement, September 2014, p 10 Back

273   Q473 Back

previous page contents next page

© Parliamentary copyright 2015
Prepared 23 January 2015