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ORR offers rail savings compromise at £1.7bn for CP5 2014-19

The final determination for CP5 has now been published by the ORR, proposing a compromise in which Network Rail delivers its CP5 programme of works for £1.7bn less than the company originally wanted.

The regulator had earlier suggested £2.4bn savings should be achieved, but Network Rail stated that this was “unrealistic” and that £1.4bn of those cuts should be restored.

The funding package, which runs from 2014-2019, will require Network Rail to deliver nine out of 10 trains on time for regional, London & South East, and Scottish routes, with improved reliability for long distance passenger services. Nationally, 92.5% of trains should arrive on time, compared to the existing target of 90.7%.

A programme of enhancements to the network worth over £12bn will be funded to ease congestion and improve performance. The ORR has also set out nearly £5bn for maintaining the rail network, £109m to close around 500 level crossings, £250m to improve the safety of track workers and £571m to upgrade structures like bridges.

Network Rail will receive £21bn for the day-to-day running of the railway, and must bring costs down by 20% comapred to CP4 through new technology and better management.

A new regulated target will be introduced for long distance services – by 2019, fewer than three in 100 trains on the WCML and around four in 100 trains on the ECML should be delayed by more than 30 minutes or cancelled.

New targets will also be set for asset management and checks to monitor progress on making the network more resilient to bad weather and climate change.

The ORR has proposed giving passengers and TOCs a bigger role to shape the specification and delivery of approved enhancements. The final determination is aimed at promoting better performance, more capacity and greater efficiencies for the railway.

ORR chief executive Richard Price said: “Network Rail has made great strides in improving safety, performance and efficiency on Britain’s railways. Supported by significant levels of funding from governments, working more closely with the rest of the industry, and learning important lessons from the past, the company is capable of delivering more for customers and taxpayers.

“This plan for Britain’s railways between 2014 and 2019 – informed by the public, consumer groups, governments and the industry – requires a safer, higher performing and more efficient railway. More level crossings will be upgraded or closed; passengers will enjoy better punctuality and suffer fewer cancellations; customers should have a say in shaping billions of pounds of new investment on the network; and the company will continue to bring down the day-to-day costs of running the railways.

“With increased levels of funding in vital areas such as safety and closer monitoring from the regulator, we expect Network Rail to build on past successes and beat the challenges we have set.”

David Higgins, chief executive of Network Rail, said: “The next five years for the railway will prove to be a critical challenge. A challenge to continue to respond to rising passenger demand and our need to grow and expand the network while at the same time juggling the ever harder challenges of improving performance, reducing cost and delivering huge investment projects from which substantial social and economic benefits flow.

“The determination has to be right to help the company, and the railway as a whole, succeed and deliver what’s needed by passengers, freight users and the taxpayer. We must now look at the individual targets within the determination, as well as the package as a whole and welcome the opportunity provided by the ORR to use the coming months to seek clarification and work through the detail.” 

Michael Roberts, director general of the Rail Delivery Group, said: “Demand on Britain’s railway is booming. The ORR’s final determination is key to enabling the industry to build on its success so that by the end of the decade it can safely and efficiently carry 400m more passengers and take a million more lorries off the road.

“Train operators, freight companies and Network Rail share the goal of delivering an even better and more efficient railway for passengers, businesses and taxpayers. The ORR’s focus on incentivising key players in the rail industry to work together to achieve this is welcomed.

“We will study today’s final determination carefully to understand how effectively it poses stretching yet achievable targets for Network Rail to manage and improve the network.”

Network Rail has until 7 February 2014 to respond in detail and accept or reject the determination, which would require it to seek an appeal through the Competition Commission.

Otherwise its detailed delivery plan will be published on 31 March.

(Table above shows PR08 (CP4 spending); SBP (Network Rail's Strategic Business Plan); DD (ORR Draft Determination); FD (Final Determination). The difference between the 'FD comparable to SBP' and 'FD' columns is the classification of ETCS cab fitment expenditure. In the latter it is classified as enhancement instead of renewals, hence the fall from £21,553m to £21,360m in row 2.)

For our previous stories on CP5 funding, see here:

ORR cuts ‘unrealistic’ – Network Rail

ORR suggests cut of £2bn to Network Rail’s CP5 delivery plans

Network Rail’s £37.5bn spending plans for CP5

£9bn secured for rail investment in HLOS

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