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Reaction to Initial Industry Plan

The rail industry has published its Initial Industry Plan (IIP), which sets out proposals on spending across the network for the next control period, from 2014-2019.

The plans include a pledge that the industry can improve in quality and cost efficiency, and sets out its aim to cut running costs by £1.3bn per year.

Network Rail suggests that continued investment can stimulate economic growth by linking the UK’s big cities, accommodating a 30% increase in rail freight and maintaining reliability whilst reducing emissions. The completion of key projects like Crossrail and the electrification of several lines are also included in the funding plans.

Paul Plummer, the group strategy director of Network Rail, said: “The railways are booming with more and more people choosing rail. Closer collaboration within the industry will deliver even more efficiencies. This revenue growth and improved efficiency taken together provide governments with real choices to consider, choices around the appropriate balance between investment, fares and subsidy.”

Train operators had a role in preparing the plan, which has been mostly welcomed by rail organisations.

Michael Roberts, chief executive of the Association of Train Operating Companies, said: “Rail has a bright future in supporting a successful green economy in the years ahead. This plan shows how we can do that by providing a better quality of service to growing numbers of passengers at a more affordable cost.”

The 2009-2014 (Control Period 4) settlement was £30bn, but Transport Secretary Philip Hammond has warned that the amount of money invested in rail by the taxpayer in recent years – £5.2bn during 2009-10 – was ‘unsustainable’. The farepayer contributed £6.2bn over the same period, and that total will increase rapidly, with the Government committed to annual season ticket increases pegged at the rate of retail price index inflation (RPI) plus 3% until 2014.

Cost savings could either be reinvested in the network, used to avoid long-term increases in ticket prices, or using them to reduce government subsidy while maintaining the upward fare trajectory.

The DfT will respond to the industry plans next summer with its HLOS (high level output specification) and SOFA (statement of funds available).

Network Rail will then respond to that decision in 2013, with the publication of its Control Period 5 Strategic Business Plan, followed by the ORR’s feedback in autumn 2013, and Network Rail’s more detailed CP5 Delivery Plan in early 2014.

Lindsay Durham, chair of the Rail Freight Operators Association, said: “With the initial industry plan forecasting further strong demand, the importance of rail freight in helping UK manufacturing grow is essential. The freight operators and Network Rail will deliver efficiencies to offer UK industry with a competitive service, while focused investment in the network will deliver further significant modal shift to rail over the coming years.”

Jeremy Candfield, director general of the Railway Industry Association said: “This plan shows that the railway industry can work together in a genuine partnership to improve efficiency. Strategic planning and greater certainty of future workloads are vital to the delivery of the further cost reductions that we all want to see.”

Anthony Smith, Passenger Focus chief executive, said: “Passengers want value for money fares and a reliable, frequent service with a good chance of getting a seat. An industry plan is welcome but what passengers will want to be clear about is what is the passenger plan? What does this all mean for train performance, the ability to get a seat and fares?”

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