NR hindered by DfT’s intervention on investment plans

A splash in The Independent newspaper on March 31 thrust into wider public perception a problem for Network Rail that’s been quietly worrying the railway for some time. The problem is a looming lack of money with the company now under tight control by Her Majesty’s Treasury and no longer able to borrow money from private markets.

Without seeing the letter on which the paper based its story, it’s hard to know its real thrust. Quotes in the paper point towards spending cuts but there’s likely to be more to the letter than those quotes.

NR told me that the Indy’s story was exaggerated and inaccurate and that it had complained formally to the press regulator. It said the newspaper could not justify it claim that Britain’s railways faced their biggest spending cutbacks since the financial crash of 2008.

What appears true more generally is that Britain faces some very difficult spending decisions across many areas. Recent days have seen reports of longer NHS waiting times and suggestions of cuts to the armed forces.

Railways cannot expect to be exempt from government spending cuts. It doesn’t help that Network Rail has massively overspent on project such as Great Western’s electrification. It doesn’t help that the company is consistently assessed by its regulator as less efficient than it could be.

Over the last decade and more, Britain’s railway has seen huge sums of money. Some has been public money flowing into Network Rail to modernise and upgrade track, signalling and structures. Some has been private money, chiefly to bring new trains. Both have helped attract more passengers such that numbers have doubled since privatisation.

Government and NR are now keen to attract private money into infrastructure. It already happens, as Crossrail shows. Government hopes that East West Rail will prove to be another success. Attracting private money onto the existing network will be much harder. NR does not have a good record of timely delivery within budget. It’s been criticised for many years for having insufficient knowledge of the condition of its network. Such knowledge is important if NR and private investors are to agree who bears the risk for unforeseen problems. Problems such as the landslip that kept the Settle-Carlisle route closed for a year.

Network Rail has become more efficient in terms of spending on daily operations and maintenance. It has invested in kit and training to allow more efficient renewals. I’ve been researching efficiency for RAIL’s high-protein sister magazine, Rail Review, and concluded that NR has an almost impossible task in keeping up with a parent that keeps changing its mind. That parent is the Department for Transport. Back in 2012, it let its imagination run riot with a very ambitious High Level Output Specification (HLOS) that included several electrifications schemes as well as specific targets for capacity into major cities.

Yet within a couple of years, it had changed it mind and upped the capacity targets for Leeds and Manchester when it procured a new operator for TransPennine Express. This means that NR faces pressure from TPE to deliver whatever is needed for the train operator’s targets with only the money granted by its regulator, ORR, for DfT’s lower but now obsolete targets.

Sitting in the centre but oblivious to the problems it’s caused is the DfT. If there was ever an argument against nationalisation, it’s that government can never keep its mind fixed on a problem for long enough to see it solved.

Much as I’d like to see today’s railway keep growing physically, it’s time for government to curb its ambitions and give Network Rail a chance to catch its breath. DfT should produce an HLOS that is grounded in the reality of what the railway can deliver and reflects what DfT has already asked for in franchise competitions and what it plans to demand in future competitions.

ORR published a formal notice in late March that establishes its review of NR’s access charges for 2019-24 (Control Period 6). In setting NR’s charges, ORR reviews what NR must spend over the period. This spending is driven by its operating, maintenance, renewals and enhancement plans. NR’s plans must reflect what the British and Scottish governments want from their railways and how much they are prepared to contribute financially. Their wants are expressed in the HLOS.

RAIL 823 revealed that the British government was not planning to publish the industry’s advice of what HLOS should contain for England and Wales (the Scottish government has allowed this advice to be published). This hinted that DfT would make its decisions behind closed doors without the public and stakeholders even knowing what the rail industry thought should be done.

Since then DfT tells me that it plans to conduct a full public consultation to discover what people think should be priorities for investment over 2019-2024 (it hasn’t done this in previous periodic reviews). The standard time for such consultations has been 12 weeks to which time must be added for DfT to consider what people have said. The ORR’s formal notice said that it wanted HLOS statements by July 20. Count back 12 weeks and you’re in mid-April. While government no longer says that consultations must be 12 weeks, it’s clear that it’s running out of time if it’s to consult and decide priorities for HLOS in time for ORR’s July deadline.

The alternative is that it consults on HLOS itself, in which case ORR will have to wait for a final version sometime in the autumn. This cuts the time available for Network Rail to develop its plans and for ORR to scrutinise them.

Rushed plans and inadequate scrutiny lie behind many of NR’s current enhancement project problems. Government’s late-in-the-day decision to consult looks set to once again disrupt planning and delay delivery. It gives civil servants another opportunity to change their minds. They must resist that temptation.

This article first appeared in RAIL 824 on April 12 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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