Rail Regulator identifies massive savings for Network Rail spending

17 October 2003
ORR/17/03

The Rail Regulator, Tom Winsor, has today published his draft final conclusions from the work that he is doing in his review of Network Rail’s funding requirements.

The Regulator’s main conclusion is that the access charges that franchised passenger train operators pay to Network Rail will need to increase, but by substantially less than the company had originally requested. They will provide Network Rail with the following revenue:

Mr Winsor said: “Shortly before Railtrack came out of administration last year, the company claimed that it would be necessary to increase the amount of money it spends on the country’s rail infrastructure by more than double the then current level. The work that Network Rail and I have done in this review has shown that these figures contained huge inefficiencies and that spending at that level would be an enormous waste of public money.

“My draft conclusions mean that Network Rail will receive through access charges more funding than at present, in return for which it must increase the amount and quality of maintenance and renewal work that it undertakes, delivering genuine improvements in the overall condition of the network. That, in turn, will mean a more punctual and reliable railway.”

In total, Network Rail will be allowed to spend £22.7 billion on the operation, maintenance and renewal of the network over a five-year period. A comparison between the Regulator’s draft conclusions and the projections in Network Rail’s recent business plan forecasts is illustrated below:

On the West Coast modernisation project, the Regulator has concluded that although Network Rail and the SRA have proposed significant efficiencies and reductions in the scope of the programme worth around £1 billion, he still has major concerns about the overall efficiency of the project after September 2004. Whilst he has based his draft conclusions on the figures from Network Rail’s latest cost submission (dated September 2003), he wishes to see more evaluation of the options for better ways for managing the project and phasing the work. If, between now and December 2003, he is not satisfied on the efficiency of the overall approach, he intends in his final conclusions to reduce the expenditure allowances accordingly.

The Regulator will remain in close dialogue with the SRA, the DfT and the Treas

Notes to Editors

1. The Regulator is conducting an interim review of the level of track access charges, payable by franchised passenger train operators, needed to fund Network Rail’s activities in the operation, maintenance and renewal of the national railway infrastructure in a manner that will efficiently and economically meet the reasonable requirements of its train operator customers, in accordance with the terms of its network licence. The review began in November 2002 and is due to end in December 2003, with any revision of access charges found necessary coming into effect from April 2004.
2. The draft conclusions document - The interim review of track access charges: draft conclusions published on 17 October 2003.
3. The third consultation document - The interim review of track access charges: Third consultation paper published on 24 July 2003.
4. Also published on 24 July was a further document in this series - The interim review of track access charges: West Coast Route Modernisation : Provisional conclusions.
5. This document sets out:
• the background of the West Coast Route Modernisation (WCRM) project, latest requirements and plans for delivery;
• the Regulator’s functions and duties with regard to the WCRM project;
• the findings of his consultants Booz Allen Hamilton;
• potential options for the way forward; and
• proposed next steps, including the Regulator’s proposed future regulatory approach to the WCRM project.
6. The second consultation document The interim review of track access charges: Second consultation paper: The incentive and financial framework published on 13 February 2003.
7. The first consultation document The interim review of track access charges: Initial consultation paper published on 15 November 2002.
8. The statement Network Rail: Interim review of access charges, published on 25 September 2002.
9. The documents are also available from Sue MacSwan, ORR Librarian, 1 Waterhouse Square, 138-142 Holborn, London EC1N 2TQ. Tel: 020 7282 2001; fax: 020 7282 2045; email: rail.library@orr.gsi.gov.uk.

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