‘OUR EMPHASIS is on the Routes, it’s their plan, it’s down to them to deliver’, Office of Rail & Road Chief Executive Joanna Whittington told Modern Railways when the Draft Determination of Network Rail’s income in Control Period 6 (CP6) was published on 12 June. ‘This is a very different determination to previous periodic reviews’ she added.
Three fundamental changes have influenced the draft determination.
Network Rail’s status as a public body means funding is fixed for the five years (2019-24) with no provision for borrowing. In England and Wales, the Department for Transport is now responsible for specifying enhancements under its new ‘pipeline approach’. As a result, the Draft Determination is concerned solely with the operations, maintenance & renewals (OMR) expenditure proposed in Network Rail’s Strategic Business Plan. Finally, as Ms Whittington explained, the SBP has been developed by Network Rail’s Routes under the current devolution process.
Spending on OMR will be £30 billion in England and Wales and £4 billion in Scotland. With ORR proposing additional cost savings plus a reduction in the Research & Development budget, an extra £1 billion can be transferred to the maintenance and renewals budget, raising expenditure to £17 billion. Network Rail has been asked to determine how this additional funding will be allocated to the Routes.
These changes would not offset the full shortfall in spending on asset sustainability. ORR says a further £1 billion is required on top of the levels in Network Rail’s February 2018 Strategic Business Plan (SBP).
Reflecting the concerns of the supply chain over ‘boom and bust’ procurement cycles, NR is required to smooth the profile of its spending over the five years of CP6. As a government body Network Rail has restrictions on the amount of capital expenditure that can be carried over to the following year. A figure of 10% has been agreed with the Treasury.
Other developments include the capping of increases in Variable Track Access Charges for freight and charter operators. New open access operators will pay charges that recover fixed network costs, subject to affordability. In addition to each Route, Network Rail’s central organisation, the System Operator, also contributed a business plan to the overall SBP. This includes a substantial uplift in its forecast expenditure relative to CP5, from around £145 million in CP5 to £272 million in CP6. Operational expenditure represents £211 million of this, largely attributed to additional staff who, notes ORR, ‘should support improvements to the quality of timetables and its ability to manage changes’. The System Operator is also proposing a £61 million capital investment programme in CP6, £55 million of which will be spent on capacity planning systems.
Network Rail Scotland’s SBP proposed a 22% increase in OMR expenditure compared with CP5.
This included a 7% increase on provision for increased weather resilience plus 12% on core electrification, buildings and signalling assets to maintain reliability and safety. On asset sustainability, Scotland is better placed than other Routes. ORR notes there is still a small forecast decline in sustainability over CP6, which could be eliminated by an additional expenditure of around £67 million. Roger Ford