Comment

30.01.18

There is still much more to do: avoiding the boom and bust in CP6

Source: Dec/Jan 2018

Reflecting on the triumphs of the past year, Darren Caplan, chief executive of the Railway Industry Association (RIA), assesses what the government needs to do to ensure the rail industry avoids a potential ‘boom and bust’ scenario when it comes to future funding.

There has been some good news for the rail industry in the past year, with a new rail strategy recently published, progress on some major projects like HS2 and East West Rail, and a 25% uplift in the funding envelope for CP6, covering the period between April 2019 to March 2024. However, there now needs to be debate over how ‘boom and bust’ can be avoided in funding the rail network in future.

CP5, CP6 and the rail funding debate

Over the course of 2017, the RIA, which represents some 200 companies in the rail supply chain, was making the case for £500m to be brought forward from CP6 to CP5 to bridge a funding shortfall that is having a particularly damaging impact on the industry.

We argued that failure to plug the funding shortfall would result in significant falls in renewals work on the railway, primarily in track, signalling and consultancy, and that this could ultimately jeopardise passenger and freight services. What’s more, rail companies could be forced to freeze recruitment or make redundancies and stop investing in the sector. For multinationals, this may mean moving investment and jobs away from the rail sector or even overseas, whilst niche SMEs in the industry will be fighting for survival. If these smaller companies go bust, the industry will lose the specialisms and innovations they provide.

In November, we saw some progress in our campaign. The DfT and the Treasury engaged with Network Rail and £200m has been reallocated from within its CP5 budget to renewals, thereby increasing the workload of rail suppliers in the renewals sector – one of the areas hit hardest by the slowdown. This is not the full amount requested but it is certainly a step in the right direction for now, and the campaign has highlighted the need to seek solutions to avoid ‘shortfalls, booms and busts’ in the rail funding mechanism in future.

Positively, the DfT did announce a 25% increase in the overall funding envelope for the next control period, increasing funds available from around £38bn to £48bn, with a further announcement on enhancement projects due in the New Year. So whilst there still remains an albeit now smaller shortfall to March 2019, it is indisputable that there has been real progress to improve rail funding overall recently, and that the sector was right to lobby for its funding ‘asks’ in the first place.

The rail industry now needs to look at the long-term issue of how to reduce ‘boom and bust’ in the current control period funding system. RIA members are clear that ‘boom and bust’ creates uncertainty within the supply chain and acts as a disincentive to invest in new technology, processes and people, increasing costs by up to 30%. This is bad news for rail suppliers, as well as the government, the travelling public and the taxpayer.

RIA does not argue that there should be a return to the old British Rail system of annualised budgets, and we are not arguing for a complete overhaul of the current mechanism for funding rail. What we do say is that there needs to be a smoothing of workload profiles to ensure rail suppliers no longer face a large ramp-up in activity at the start of a control period before a drop-off in workload at the end.

So we urge the rail industry to look at this issue in the months ahead. Currently, the UK Parliament’s Transport Select Committee is holding an inquiry into rail funding – to which RIA is providing evidence – and subsequently all interested parties should get around a table to find solutions.

rail fares tickets c. Torsten Dettlaff edit

Major projects

The Budget on 22 November provided some good news for major projects. The government committed to reopening the rail line between Oxford and Cambridge, known as East West Rail, and since then the East West Railway Company has been set up to progress the project. This scheme is particularly exciting as it provides an opportunity to harness third-party investment, potentially acting as a pathfinder project for future schemes.

On Northern Powerhouse Rail (NPR), the chancellor announced at the Conservative Party Conference £300m for connecting NPR with HS2, a pledge repeated in the Budget. This funding is vital because passengers need a joined-up, fully integrated network.

The Budget also committed the government to work with TfL on the funding and financing of Crossrail 2. Whilst this announcement is welcome, the scheme should not be allowed to fall by the wayside and we will continue to campaign for the project to get the green light so that a Hybrid Bill can be submitted to Parliament.

Rail strategy

The Budget was followed a week later by the government’s rail strategy, ‘A Strategic Vision for Rail.’ The most popular announcement was that the government is set to reopen lines closed under Beeching. This is a welcome move and shows that our rail network is in a very different position to where it was 50 years ago. Instead of managing the decline of a network with falling passenger numbers, we are now finding ways that we can increase capacity for an intensely used network that has seen numbers double over the past 20 years.

The strategy also contained a number of announcements for the supply chain, including on how train and track could be brought further together and a recognition of the work the industry is doing to boost innovation.

Overall, it’s been a positive year for rail, with a good CP6 SoFA settlement, some additional money made available to bridge the CP5 funding shortfall, a new rail strategy, and positive news for major projects. However, as 2018 begins to unfold we urge the government to continue its commitment to the rail supply sector and to work with the industry on reducing ‘boom and bust’ in the funding system, so we can deliver an even better, fully-funded, world-class UK railway in the future.

(Top image © SAKhanPhotography)

FOR MORE INFORMATION
W: www.riagb.org.uk

Comments

Lutz   30/01/2018 at 21:42

The article fails to address the cause of the gap being the inability of Network Rail to deliver projects on time and to budget. The starting point would be how to address the GBP 3.7 Billion over-spend/under-delivery that Network Rail estimates it will have achieved by close of CP5. It is these failings that are causing problems to the supply industry.

Richard   01/02/2018 at 12:08

I have experience of these dips and ramps, from inside NR, it happens at the end of one and into the next CP as no one seems to authorise planned works to start at the beginning of a CP, so you have an end of CP dip followed by a lag into new CP spend, which then leads to a "we need to show some deliveries" panic at the end of year one in a CP. This, I believe, lead to those back of a fag packet inaccurately costed projects Mark Carne referred to. IMO NR needs a ten year well scoped and costed plan of the key infrastructure renewals, the ones that bring ageing infrastructure up to date, these are not luxuries and so can provide the improved phasing of spend the industry needs.

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