Will more flexible HLOS restore confidence in the railway?

This year should see governments in Westminster and Holyrood reveal what they want from Britain’s railway over the five years from 2019.

With the rail industry’s love of jargon, acronyms and abbreviations, these ambitions will be revealed in HLOS – High Level Output Specifications. Each will be accompanied by a SoFA or Statements of Funds Available. Taken together the first explains what governments want and the second reveals how much they are prepared to pay for it. Any gap, or anything extra proposed by train operators or demanded by passengers will have to be paid for by passengers. Network Rail no longer has an option of borrowing to fund the difference as it has for its entire existence, with the result that its debts now total £42bn.

Governments might borrow to fund railways but NR can no longer. The change is the result of reclassifying NR as a public-sector body back in 2014. Before then, NR could borrow to fund enhancements, even if those projects exceeded their initial costs estimates, provided the Office of Rail and Road (ORR) deemed the overspend efficient.

The change put paid to several projects that Westminster’s government had wanted done in the current five-year funding period, notably Midland Main Line and trans-Pennine electrification, in the light of NR’s huge overspend erecting overhead wires above the Great Western Main Line.

It’s tempting to give NR a shoeing for these problems – the company has admitted it started work before everything was ready – but the two governments’ ambitions mean that they too must shoulder responsibility.

After years in the wilderness, electrification returned to fashion with a vengeance with 2012’s HLOS that fed into NR’s five-year control period over 2014-2019. Westminster wanted GWML, MML and TP done, the Lancashire triangle, together with an ‘Electric Spine’ connecting the port of Southampton with the Midlands. This would have seen part of Southern England’s third-rail electric network converted to overhead wires. Meanwhile, in Scotland, Holyrood demanded that the main Edinburgh-Glasgow route be electrified, the Shotts line between the two cities be similarly treated and had plans for a rolling programme of wire erection to follow.

When put together, this was way beyond Network Rail’s capabilities and way beyond its suppliers. It didn’t help that NR decided it needed brand-new designs for its wires, rather than using existing UK or Continental European designs. It didn’t help either that it rushed the design and building of brand-new ‘high output’ installation equipment that has proved to be anything but.

Yet it remains true that a more measured approach from ministers could have produced an electrification plan for delivery over a longer period. Instead their headlong rush has damaged perceptions of electric railways and may yet see Britain’s relying on diesel trains for longer than it ought.

Converting electric trains such as Great Western’s future Class 800s to bi-mode, electro-diesel trains by adding diesel engines bridges the gap caused by NR’s postponement of Bristol Temple Meads’ electrification. However, it damages the wider case for electrification particularly when ministers claim the change will have no adverse impact on passengers. If this is the case, then why electrify at all? Electric trains might be cheaper to run and maintain but these savings are swamped when the capital costs of erecting wires run awry.

The folly may have sunk in at the Department for Transport. Released in November by ORR but written last summer is this from DfT Rail Strategy and Security Director Richard Carter: “The next HLOS and SoFA will look significantly different to those which were published in 2012. [Periodic Review] 18 is likely to see from DfT a much higher-level HLOS, and accompanying SoFA.”

Carter goes on to explain that DfT will focus on the railway’s steady-state costs (operations, maintenance and renewals), meeting the government’s commitments to enhancement projects, delivering major projects (such as Crossrail), and projects deemed “critical to prevent serious deterioration disruption (sic) to passenger or freight services”.

Carter explains that this should give greater flexibility to take projects forward and fund new upgrades on a rolling basis “as and when they reach sufficient design maturity”. This should prevent ministers announcing a billion-pound project to deliver x, y and z before anyone has had a chance to examine what it’s likely to cost.

Carter writes: “The current intention is to distinguish separately proposals that are considered by ministers to be worth developing, from those that have been developed to a stage worth designing in detail, and from those that are worth delivering. There will then a further test as to whether those worth delivering are also capable of being delivered and are timetabled to have regard to other factors such as the state of the supply chain and the impact of disruption on the network.” He also warns of the need to keep in mind “the backdrop of a continued need for restraint in public spending.”

If DfT officials can keep their ministers from chasing alluring headlines, Carter’s pledge could restore wider confidence that the railway can deliver. This will be difficult because ministers naturally prefer to announce grand schemes rather than describe outcomes in terms of increased capacity or reduced journey times. Easier to say ‘electrify to Penzance’ than ‘add 10% more seats and cut journey times by 15%’. Not least because the latter approach begs the question of why not a different percentage.

North of the border, there’s a similar attitude, with Transport Scotland Rail Director Aidan Grisewood saying: “It is unlikely that the Scottish Government will commit to individual projects through the HLOS unless these are sufficiently developed, their business cases proven, and costs and affordability are certain.”

HLOS and SoFA are due this spring or early summer, according to ORR. They should take due regard of the rail industry’s initial advice, which was due last December. ORR expects Network Rail to publish its initial plans this autumn. If ministers deliver their officials’ promises of an HLOS that deals in outputs rather than inputs, NR has a busy summer ahead of it. It faces translating ministers’ wishes into projects and plans that are convincing enough to attract funding. Despite its struggles with Great Western electrification, it’s usually easier to deliver what the DfT asks for, letting it take the risk that it’s not enough to satisfy passengers and freight shippers, than work out what’s needed from higher-level goals and then deliver.

The potential government shift away from specific schemes to more general outputs should help NR concentrate on satisfying the needs of passengers and shippers via train and freight operators rather than viewing government as its customer. You’d be forgiven for thinking that NR has forgotten the railway’s users in the face of close control and ownership by government. Ministers need to step clear from this controlling nature and DfT needs to stop plastering its logo across projects.

For its part, ORR wants to see NR regulated more at regional than national level. For NR, this means regulation at route level, including a national route that looks at freight operators and TOCs such CrossCountry, because it crosses so many boundaries in a way few others do. Alongside these national and geographic routes, ORR will regulate NR’s central functions. These ‘national system operator’ functions include deciding which upgrade projects should be done, making best use of current capacity by timetabling and predicting future uses.

ORR faces a challenge in checking NR’s NSO work because it can be many years before the effect of its decisions becomes apparent. It’s thinking of looking at the NSO’s skills instead, reasoning that with the right inputs it should produce the right outputs.

For all the importance of these central functions, it’s enhancements and upgrades that arouse most interest. It’s in this area that Whitehall, Holyrood, Network Rail and ORR will need to tread most carefully to produce a better railway without the disappointments of delays and funding crises.

This article first appeared in RAIL 818, published on January 18 2017.

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Philip Haigh

Freelance railway writer, former deputy editor at RAIL magazine - news, views and analysis of today's railway.

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