Conclusions and recommendations
Government policy on rail
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)
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)
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)
Planning for rail investment
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 Enhancements Cost Adjustment Mechanism
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)
Value for money and priorities
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)
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)
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)
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)
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)
Regional investment
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 Northern and TransPennine Express franchises
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)
Rolling stock
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)
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)
Pacer trains
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)
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)
Freight
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)
Resilience
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)
Connectivity with HS2
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)
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)
Performance of Network Rail
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)
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)
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)
Reclassification of Network Rail
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)
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)
Conclusion
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)
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)
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)
| 
