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DfT promises CP6 renewals boost, but pushes funding deal to October

Transport secretary Chris Grayling has agreed to a higher volume of renewals activity in CP6 in order to “maintain safety and improve on current levels of reliability and punctuality” – but has pushed back the announcement of a funding envelope for the control period, citing the need to review Network Rail’s poor approach to efficiency.

In a statement, Grayling stated that while it is important to boost the volume of renewals supported by “appropriate volumes of operations and maintenance activity”, Network Rail’s progress on improving its own efficiency in recent years has “fallen short” of his expectations.

As a result, he has published the High Level Output Specification (HLOS) document for CP6 without committing to the specific levels of funding required.

“I have decided that the government requires more assurance on the likely costs of the work programme,” the secretary of state explained. “The government will therefore carry out further work to examine the approach to setting appropriate levels of maintenance and renewals activity for CP6 and to improving Network Rail’s efficiency.

“This will enable me to confirm the extent of government’s funding envelope through the publication of a Statement of Funds Available by 13 October 2017. This work will draw on a number of sources, including the new independent review of progress on efficiency planning which the regulator has commissioned.”

Subject to satisfactory conclusion of this review – which will seek assurances on how sensible and affordable the costs of operations and maintenance activity are – the government believes it is “likely” to have funds available to meet “reasonable requirements subject to reasonable efficiency savings and deliverability”.

Grayling does not intend for Network Rail to obtain any further loan during CP6 from whatever source, and promised to provide adequate funding to meet the obligations the infrastructure owner has to its bondholders.

He also advised Network Rail to seek other “non-rail specific sources of public funding” to support its CP6 activities if desired, as well as encouraged third-party funding contributions – including from land use planning.

Alongside the HLOS document, the DfT issued a new statutory guidance setting out regulation priorities intended to support the ORR’s work in improving the infrastructure owner’s efficiency.

The publication of the long-awaited HLOS closely follows warnings from the Railway Industry Association yesterday that the future of renewals work is in jeopardy due to poor performance in CP5, which saw costs soar beyond planned levels. In August last year, the ORR estimated that work had cost almost £2bn more than expected due to underperformance and higher renewals prices.

Beyond just leaving Network Rail in a weaker financial position at the start of CP6, this also poses a threat to the wider supply chain, whose confidence to invest in projects, staff and productivity might take a hit.

The HLOS also comes on the same day as the ORR’s annual review of Network Rail for 2016-17, which found that the organisation is carrying out core work 5% less efficiently than it did three years ago. It has also postponed chunks of work to the next control period in order to remain within its budget, which will naturally have implications for passengers and customers unless the issue is addressed in CP6.

As well as confirming that the government will need to examine Network Rail’s approach and cost estimations for the next five years, Grayling revealed that the DfT is currently developing a new process for delivering enhancements – more information on which will be available shortly.

“The government is already delivering significant enhancements to the railway, including HS2 and Crossrail, and it expects to continue to invest in the enhancement to the wider rail network in the next control period,” he said.

In light of the findings of the Bowe Review, which emphasised the need to enable better planning, cost control and alignment with the needs of users of the railway, government will take forward the funding of these enhancements separately. The government is developing a new process for delivering enhancements and intends to publish more information on this in the autumn.”

HLOS: Renewals and performance

The HLOS document, which deals only with operations, maintenance and renewals of the existing railway rather than committing to infrastructure enhancements, said the transport secretary accepted the ORR’s advice on the need for higher volumes of renewals compared to CP5. In fact, the DfT said it is expecting “considerable progress” in this area.

But Grayling is still concerned about the affordability of the initial cost estimates since they do not allow for efficiencies, particularly of operations and maintenance.

On performance, the transport secretary noted that he expects Network Rail to continue working closely with TOCs during CP6 to both deliver better services for users and manage the resilience of the network. He did not propose setting national top-down performance targets, and instead vouched for route devolution as the best way to determine appropriate metrics and “stretching yet realistic target levels for each part of the network”.

He has asked the ORR to develop and implement regulatory route-level performance targets reflecting this new approach, an issue which the regulator’s director of railway markets and economics, John Larkinson, talked to RTM about earlier this year.

In response to these announcements, Gordon Wakeford, chair of the Rail Supply Group, reiterated that companies are committed to working with Network Rail, TOCs and the government to deliver investment schemes as efficiently as possible.

“What allows us to deliver efficiently is certainty about future priorities, programmes and spending levels, to enable the industry to work together and invest in skills, technologies and innovation for the future,” he noted. “Going forward, we urge government and Network Rail to pay careful attention to the issues that can be caused at the end of a control period and the start of another, but we welcome today’s first major step in the CP6 process and, as a supply chain, look forward to working with them on this basis.”

(Top image c. Dominic Lipinski, PA Wire)


Simon Eames1990   20/07/2017 at 22:28

Dear Chris Graying you have failed our railways. You scrapped Midland Mainline electrification plans, Cardiff to Swansea wiring plans and Windermere branch wiring as well. You call yourself transport secretary?

Steve Payne   20/07/2017 at 23:21

It's a great shame the electrification projects will be curtailed but on balance I think Chris Grayling is right (at least for the moment) in wanting NR to focus on renewals for the moment until an achievable and realistic plan for enhancements is produced. Better to consolidate and look after the existing railway whilst NR comes up with a decent plan with input from the new route and virtual route managers. I'm sure enhancements will happen we just have to be patient and hopefully they will then be fully achievable and better thought out. Steve...recently retired after 35 years in the rail industry.

Supplier   21/07/2017 at 13:07

Its is great everybody talking about CP6 but due to works being pushed from CP5 to CP6 because Network Rail have totally over spent on Great Western there may not be the supply chain left in the market to deliver CP6. Investors are very worried about any future investment in the supply chain due to yet again Network Rail breaking its promises on any work banks.

Andrew Gwilt   21/07/2017 at 20:34

Hate this man "Chris Grayling" in the picture on what he has done to scrap and postponed the electrification on the Midland Main Line (north of Bedford), parts of the Great Western Main Line and few other electrification projects that has been cancelled and postponed because of him. Disgraceful.

Despondant Brit   22/07/2017 at 01:57

Grayling is doing a brilliant job preparing the UK for its next phase of its accelerating drift down the list of economic powers. The Empire is gone, manufacturing has been decimated, countries that originally imported British rail technology now provide the UK with its trains & much of its other technology, in Europe Germany has risen to the top again, the US has control of the British military, and China rises ever faster to becoming the top economic power as Trump turns America inwards. Welcome to the ever growing gap between the haves and have nots, just like third World economies.

Amalgamated Man   24/07/2017 at 14:22

The railways are going through a period of unprecedented investment in both infrastructure and rolling stock. This is being paid for through a combination of tax-payer money, fare-box revenue and private funding. The inability of Network Rail to deliver crucial projects in a timely and cost-effective manner, coupled with the necessity to control public spending, means that any secretary-of-state, of whatever political persuasion, would be making tough decisions. It surely is right to prioritise the left-overs of CP5 and maintenance & renewals, and look for ways of reducing expenditure - and the manpower, engineering and technical resources required - and focusing on what can reasonably be done? These skills are in short supply. Much as I would like to see wholescale electrification of the mainline network, this is a pipedream unless we can learn to deliver electrification in at far lower cost. Let us say that completing GWR electrification and throwing in Cardiff-Swansea and the Welsh valleys for luck would cost £2bn - is any government really going to rush to do this over - for example - putting more money into the NHS? We do not live in a fantasy-world of unlimited resources.

Blue Pullman   25/07/2017 at 22:23

The abandonment of electrification is truly shocking (no pun intended). Sheffield (popn. 575,000 and 5 LABOUR MPs) doesn't get electrification but Corby (popn. 80,000 and 1 TORY MP) does. Grayling really is playing politics. We now know where the North-South divide is - Kettering!

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