ORR gives the final go-ahead for improvements to Britain’s rail network and confirms Network Rail’s funding for the next five years

30 October 2008
ORR/32/08

A £7.6 billion package of improvements on Britain’s railway network is to be coupled with greater efficiency and a more accountable Network Rail - announced the Office of Rail Regulation (ORR) today as it published its final determinations of its 2008 periodic review. 

This sets out what Network Rail will need to deliver in the five years from April 2009 and the funding the company will receive for doing this.  The package includes the biggest programme of improvements seen on the railways in decades.  The regulator has set Network Rail clear targets so that it will be transparent to users and funders what Network Rail should deliver year by year.  Also ORR is challenging Network Rail to improve its efficiency by 21% by 2014.

The programme of improvements will enable delivery of all the benefits to passengers, train operators and freight customers set down in government’s output specifications. It also confirms that the package is affordable as it falls inside the public funding commitments.

The key railway improvements include:

• Improvements in reliability and levels of disruption
  
• a 20% reduction in late and cancelled trains
• train punctuality increasing to at least 93% for local services in the south east and 92% for all other services
• at least a 25% reduction in freight trains delays caused by Network Rail
• reductions of over a third in disruption to passenger services caused by engineering work and no worsening of the current position for freight services
• Improvements in safety
• further reductions in the risk of death or injury to passengers and rail workers from accidents on the railway.
• Improvements in capacity – the largest improvement programme on the network for decades to accommodate 20% more passengers and for the expected 30% increase in freight services
• Key schemes in England & Wales include:
• connecting Kings Cross commuter services into the Thameslink route and increasing its capacity throughout (including lengthening platforms and relieving the track bottleneck at London Bridge)
• rebuilding Reading station and removing the track bottleneck in the area
• rebuilding Birmingham New Street station
• improvements in capacity in Cardiff
• improving line speeds on the Midland Main line; and
• providing capacity relief to the east coast Main Line.
• Key schemes in Scotland include:
• a new Glasgow Airport Rail Link; and
• a new line from Airdrie to Bathgate.
• Plus many smaller scale schemes, including extensions to more than 500 platforms to accommodate longer trains.

Delivering all this successfully will be a major challenge for the industry and ORR is already monitoring how Network Rail is preparing to meet it.

ORR has reviewed all the evidence on efficiency and confirmed that there is  significant potential for Network Rail to improve further, for example the gap to the best in Europe is still substantial. ORR has maintained its earlier view that Network Rail will need to make a 21% improvement by the end of 2013-14. However it has provided some enabling monies and altered the profile of improvement giving Network Rail longer to plan and implement the necessary changes while also gearing up to deliver major improvements to the network.

ORR has determined that Network Rail will need income of £26.7bn in the five years from April 2009 in order to operate, maintain, renew the railway network and deliver all the required improvements. This is £2.4bn (8%) less than the £29.1bn Network Rail requested.

Bill Emery, ORR chief executive, said:

“Network Rail has delivered significant improvements to reliability, asset condition and efficiency over the last five years, against the backdrop of strong passenger and freight growth. Our determination provides the funding necessary for Network Rail to build on this to deliver further improvements for train operators, passengers and freight customers and expand capacity for the long term benefit of the railway.

 “We have considered very carefully the responses made to our draft determinations and we have made a number of changes. We have not changed our view on the overall improvements in efficiency which Network Rail should achieve but we have reduced the rate of improvement we expect in the first two years to allow Network Rail more time to plan and implement the changes required.

“Network Rail has committed itself to becoming a world class company. We consider our evidence-based judgements are consistent with Network Rail’s transformation agenda – strengthening its capabilities, improving its partnerships with train operators and its suppliers and introducing new technologies / working practices.

“We have also made adjustments to our earlier assumptions on Network Rail’s financing plans and costs in light of the changed conditions in the global financial markets.
 
“As the regulator of Britain’s railways, we will proactively monitor Network Rail’s progress in delivering all of its obligations including the required improvements.  During the period we will not hesitate to take action to require Network Rail to address promptly any shortcomings as we will view a culpable failure to deliver a specified output on time as a serious breach of Network Rail’s licence.”  

Notes to editors

1. In the current five-year control period (from 1 April 2004 to 31 March 2009) Network Rail’s total revenue requirement is £28.1bn.
2. Control period 4 starts on 1 April 2009 and will end on 31 March 2014.
3. The improvements in the reliability of train services, measured by the public performance measure, are set out for the different sectors in England & Wales: 93% for London & south east services, 92% for long distance and regional services in England & Wales.
4. Governments in England & Wales and Scotland published their respective high level output specifications (HLOSs) and statements of funds available (SoFAs) in July 2007. Network Rail responded to the HLOSs by producing an industry strategic business plan (SBP) at the beginning of November, and its SBP update in April 2008. ORR published its draft determination in June 2008.
5. Following the determination the detailed price lists and access charge schedules will be audited and published on 18 December 2008 along with the review notice which starts the legal implementation of ORR’s determination.
6. ORR consulted on proposals for a suite of changes to the network licence on 5 June 2008, and on financial licence conditions on 17 July 2008. We will conclude our thinking in December and undertake the statutory consultation required so that changes can come into effect for 1 April 2009.

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