Rail Regulator outlines policy on investment in the enhancement of the rail network

12 March 1996
ORR/96/8

The Rail Regulator, John Swift, QC, today outlined his approach to facilitating investment in the enhancement of the railway, that is investment which goes beyond that needed to renew and maintain the existing network.

Introducing his policy statement Mr Swift said, "A stable regulatory and financial framework is essential to the success ofthe railway industry. My decisions on access charges have already created such a framework for investment in the renewal of the infrastructure. I expect that the arrangements I have outlined today will contribute to the provision of such a framework for enhancement investment, while ensuring sufficient flexibility to enable innovation and development of new services.

"One of the key tests of the new industry structure will be the effectiveness of the investment programme. Investment is critically dependent on effective partnership between Railtrack,suppliers of railway services, and funding bodies (such as the Franchising Director, Passenger Transport Executives and Local Authorities). I aim to fulfill my public interest duties by encouraging cooperation between the various parties and ensuring that the rules governing processes and procedures do so.

"Railtrack has commercial freedoms and commercial incentives. But with these come responsibility. I expect Railtrack to be proactive in the development of investment proposals and that where it is able to recover its costs from aproject and, where appropriate, receive a fair share of the benefits, Railtrack will carry out such a scheme unless there are clear public interest reasons to the contrary. This reflects Railtrack's monopoly position and the obligations which its stewardship of the railway network carries."

The Regulator's policy statement sets out the approach he is minded to take in the following areas:

• the contractual framework, access arrangements and the allocation of capacity - the general presumption is that capacity should be shared fairly, and in accordance with the public interest, between all operators wishing and able to use the facility;
   
• charging arrangements for access - the Regulator expects that owners of facilities, such as Railtrack, will carry out enhancement investment where they receive an appropriate return through access charges - this should cover at least avoidable costs plus a share of the benefits from investment depending on the relative risks being taken by the parties involved;
   
• licensing arrangements - generally operation of new facilities will be covered by licensing arrangements designed to protect the public interest and consistent with those covering existing facilities;
   
• implementation of projects - contracts giving train operators access to track, stations and depots contain procedural rules designed to facilitate enhancement investment. The Regulator anticipates keeping these under review to ensure that this objective is achieved and he is willing to give informal guidance as to the approach he would take in respect of specific investments; and
   
• sharing of information about investment plans - the Regulator emphasises the importance of sharing and coordination of investment plans and the document outlines the various arrangements which are in place to achieve this.

The Regulator will keep these arrangements under review to ensure that they facilitate beneficial investment in the enhancement of the infrastructure.

Note to Editors

In his review of Railtrack's access charges for franchised passenger operators the Regulator recognised the importance ofinvestment for the future of the rail network by allowing £3.5billion (at 1995-6 prices) over six years for investment in the renewal of the infrastructure in the appropriate modern equivalent form. Today's policy statement focuses on enhancement investment over and above this renewal.

"Investment in the Enhancement of the Rail Network" is available, free of charge."Railtrack's Access Charges for Franchised Passenger Services: The Future Level of Charges" was published in January 1995 and is also available from ORR the Library.

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