Investing in the railway - Transport Contents

Conclusions and recommendations

Government policy on rail

1.  The Government has set out an ambitious investment programme for the classic rail network. The record amounts of funding committed demonstrates a welcome commitment to meeting the high demand for rail, even at a time of limits on public spending. (Paragraph 8)

2.  The stated ambition of successive governments has been to reduce the subsidy to the rail network. This has been achieved to date, but given the forecast growth, and need to increase capacity, has prompted the question of to what extent passengers will be required to pay for long-term infrastructure improvements, on top of inflation increases to fares, which principally cover operating costs. Many passengers have no option other than to use the train. (Paragraph 9)

3.  We remain concerned that rail policy is considered in isolation, and repeat our recommendation for the Department to commit to a wider transport strategy. (Paragraph 10)

Planning for rail investment

4.  With the exception of the confusion and concerns over freight access charges, witnesses were broadly positive about the Periodic Review 2013 process. It is concerning, however, that witnesses representing key stakeholders for the rail industry feel that there is no clear long-term plan for the railway. We call on Network Rail to publish a vision for the railway up to 2043, with a breakdown of the work expected to be carried out in each Control Period. The plan should set out confirmed objectives and plans for the next five years, with provisional plans for each five year period. Consultation and flexibility should be built into this plan, allowing adjustment through the periodic review process, and to respond to changing costs and demand. This flexibility would increase as the plan looks further into the future, but the clarity of objectives—and the advanced planning that should be underway for the next two control periods—will provide much-needed certainty for the rail industry and stakeholders. We believe that publishing this long-term plan is vital for transparency, and will help to secure all-party agreement and effective engagement with the periodic review process. (Paragraph 19)

The Enhancements Cost Adjustment Mechanism

5.  We are concerned that key rail enhancement projects—such as electrification in the North and North West of England—have been announced by Ministers without Network Rail having a clear estimate of what the projects will cost, leading to uncertainty about whether the projects will be delivered on time, or at all. This could be avoided through greater clarity of the status of each announced project. Network Rail should publish a "traffic light" status update for each project committed to in a control period, which would make clear whether, for example a project had been provisionally approved subject to detailed costings, finally approved but without a start date or approved and ready to start. When a project is announced, the Department and Network Rail must be clear and transparent about how it is to be funded, and how advanced it is in costings. This will provide confidence in the delivery of enhancement projects. Electrification of lines in the North West, the North trans-Pennine line, and the Midland Main Line, should not be put at risk due to the projected overspend on the Great Western Main Line. If a rail electrification project is announced for delivery in a set time period, there should be an expectation that it will be delivered on time. (Paragraph 23)

Value for money and priorities

6.  The Department for Transport should increase transparency around rail spending and projected outcomes. It should publish the criteria it uses for allocating spending and clarify how it decides which projects will get Government funding. To assess whether the Government has allocated spending appropriately, and to achieve maximum benefits, there must be a transparent way of tracking the investment—and outcomes—in each control period. We recommend: (Paragraph 27)

7.  The development of an "outturn statement" for each Control Period making clear work agreed to, work done, work carried over along with financial outturn, and the split of spending between operations and enhancement projects. (Paragraph 27.a)

8.  Funding announcements for Control Periods should differentiate more clearly between spending on operating the network—the running costs without any capacity/infrastructure work—and enhancements. (Paragraph 27.b)

9.  Each spending announcement made by Government, Network Rail or the train operating companies should make it clear where the funding has originated—through the Control Period funding, separate Government funding (e.g. the Local Growth Fund), or private investment from train operating companies or the rolling stock operating companies. (Paragraph 27.c)

10.  This approach fits with the Treasury's Line of Sight principles. We think that this information could be published by the Department at no, or minimal extra cost, as all this information should be already easily available internally for accounting or management purposes. (Paragraph 27)

Regional investment

11.  We welcome the substantial investment in CP5, and the commitment to electrification and increasing commuting capacity in a time of austerity. We support the Northern Hub programme, and welcome the indications that the Department for Transport will listen to the case for investment in the North and East of England. We remain concerned that the Benefit Cost Ratio used to allocate rail spending has failed to give sufficient weight to the wider economic and social benefits of rail investment. Focusing simply on passenger numbers and the short-term economic return from rail investment will inevitably continue to focus investment in London and the South East. Instead, we recommend the Department for Transport adopt and publish broader criteria for allocating funding, which consider the contribution to the Government's wider policy objectives—such as long-term economic regeneration, environmental policy or social need. Rail funding must still deliver value for money for the taxpayer, with the economic case for each project subject to rigorous testing against the revised criteria. This approach, however, will result in a fairer allocation of rail investment across the country; other regions, such as the far south west, have been "starved" of investment. (Paragraph 31)

The Northern and TransPennine Express franchises

12.  We are disappointed that the consultation proposals for the Northern and TransPennine Express franchises have not focused on increasing capacity and improving rolling stock, but instead suggested that passengers in the north must make trade-offs between fares and decent journeys. While the devolution of the franchises to Rail North is welcome, it stops well short of devolution. The consultation document suggests that the body's powers will be limited—indeed, the Secretary of State will retain the final decision-making powers. Rail North was clear that fare increases on the Northern franchise could not be considered prior to improvements in rolling stock and services. If devolution is genuine, Rail North's stance should be reflected in the Invitation to Tender. The Department must also set out how the interests of rail passengers outside the North's city regions will be protected under the devolution to Rail North. Network Rail must also set out why its payment—which makes up part of the stated subsidy to each Train Operating Company—allocates the same costs for maintaining the rails to much smaller Pacer trains, as it does to the larger and faster Pendolino trains. (Paragraph 39)

Rolling stock

13.  The rolling stock operating company involved in the proposed transfer of trains for the TransPennine Express franchise to Chiltern Railways sought to reassure us when he told us that the trains would stay with TransPennine Express until Chiltern Railways and the Department decided to transfer them. This has only blurred the lines of accountability, as the Department was keen to stress that the factors involved in this case were outside its control, before announcing that it had worked with the franchisees to resolve the situation. We welcome the Department's commitment to making sure there will not be a shortfall of trains on the TransPennine Express line but we expect current capacity and schedules to be maintained. The Department must continue to accept responsibility for rolling stock, and ensuring that there are sufficient trains to operate timetabled services. (Paragraph 46)

14.  The TransPennine Express/Chiltern Railways transfer of rolling stock has been symptomatic of a fundamental weakness in the way rolling stock is leased and managed. This has also been demonstrated during the electrification programme, where a disconnect between the funding of new or enhanced infrastructure and the procurement of rolling stock risks leaving passengers stranded with no trains running on newly electrified lines. The Department must take responsibility for aligning infrastructure, franchises and rolling stock procurement. This is necessary so that uncertainty can be reduced for industry and investment made rather than deferred. (Paragraph 47)

Pacer trains

15.  By refusing to give a date for when the Pacer trains will be taken out of service and simply saying that he "hopes" they have had their day, the Secretary of State has suggested that he does not have the powers to ensure a decent quality of train for passengers in the North and South West of England or in Wales. Alternatively, his admission that he would not like to be held to account for the Pacers' withdrawal suggests that he does have these powers, but is unwilling to match his rhetoric with action. We find it concerning that the rolling stock operating company Porterbrook is prepared to spend £800,000 refurbishing the Pacer to extend its use on our network. It is unacceptable that Pacer trains—built in the mid-1980s and of questionable safety—are still in use on busy rail lines. We recommend the Secretary of State uses his franchise specification powers to require the removal of Pacer trains from the rail network by 2020 at the latest. (Paragraph 51)

16.  The cascading of train carriages out of the South East may provide the most efficient way for the rolling stock operating companies to manage their rolling stock. It is concerning that the Department has chosen to order brand new trains for passengers in London and the South East, while expecting passengers in the rest of the country to be content with reconditioned older trains—cast-offs from more prosperous areas. (Paragraph 52)


17.  Rail freight is a crucial part of our economy, and its needs must be balanced against that of passenger rail. The Government should produce a freight strategy, considering road and rail freight together, to ensure a coherent and fair policy. It must also set out and consult on the practical steps required to achieve its strategic outcomes, including the modal shift from road to rail and the decarbonisation of freight transport. We believe the Office of Rail Regulation must consult on the track access charging regime with a view to reducing the current complexity. (Paragraph 60)


18.  We commend the work of the "Orange Army" of Network Rail engineers who rebuilt the seawall and re-opened the railway line at Dawlish, following the devastating storms. While the tireless work of the engineers limited the length of the closure of the line, the economic impact on the region was still severe. It is not clear whether the Treasury's cost-benefit assessments take the cost of such closures, or the cost of doing nothing, into account, when prioritising investment on resilience or alternative lines. We call on the Department to state whether it is prepared to fund schemes which do not meet the required cost-benefit ratio, if the alternative is a closed line. Where lines are closed, as in the case of Dawlish, the necessary costs incurred in re-opening the line should not jeopardise or delay the long-term work to improve the resilience of the network or deliver promised enhancements. (Paragraph 64)

Connectivity with HS2

19.  We welcome the proposals to improve East-West connectivity. We call for clarity on whether these proposals will be truly East-West: extending from Hull to Liverpool, with the benefits that would bring for freight and passenger rail. It is also not at all clear whether these proposals—HS3 as the Chancellor has referred to them—will entail a new line or improvements to existing lines. The Department should clarify this point, and also make clear what long-term objectives it has for improving East-West connectivity across the country. (Paragraph 68)

20.  The Government should set out the details and timing of planned investment in the classic network in order to maximise the benefits of HS2; improving rail access for all passengers and increasing capacity for freight. The planning process should consider HS2 and trans-Pennine improvements as part of one overall rail network. (Paragraph 69)

Performance of Network Rail

21.  The failure of Network Rail at Christmas, which left thousands of passengers stranded, was unacceptable. We welcome Mark Carne's unreserved apology to the travelling public, and the publication of Dr Francis Paonessa's report into the disruption. Network Rail's original statement that the failure at King's Cross was "really regrettable and unfortunate but it is a small part of a massive amount of engineering investment taking place over Christmas" offered little consolation to passengers stranded in the cold. Indeed, the fact that King's Cross was only one of a number of overrunning engineering works and signalling problems that plagued the rail network over the festive period offers further evidence of systemic weaknesses in Network Rail's capacity to plan and execute engineering works. Given the ambitious investment programme that Network Rail will receive £38 billion to deliver by 2019, this is a matter of great concern. If Network Rail is to maintain and improve the rail network in CP5 it will require managing multiple, complex engineering projects simultaneously. Network Rail must demonstrate how it will learn from the mistakes it has made in its engineering works and maintain a decent service to passengers while enhancement work is carried out. (Paragraph 78)

22.  When things do go wrong, Network Rail must have adequate contingency plans. It should not abdicate its responsibility to passengers, particularly vulnerable ones such as the elderly or families with young children. We welcome Network Rail's proposed review of contingency measures and the timing of engineering works. In addition Network Rail must work with Passenger Focus and the train operating companies to improve the communication with passengers when engineering works fail. (Paragraph 79)

23.  While it is essential for Network Rail to deliver value for money for the taxpayer, efficiency savings cannot put the safety and reliability of the rail network at risk. The ORR should consider whether the disruption over Christmas and the New Year suggests that Network Rail is unable to deliver the enhancements programme planned for CP5, alongside a safety-focused, high-performing railway each and every day. In the light of the change of status of Network Rail the ORR must reconsider whether fining a public sector body remains an acceptable means for the regulator to exert control. (Paragraph 80)

Reclassification of Network Rail

24.  The test of the new relationship between Network Rail and the Minister will be how the Minister responds to poor performance by Network Rail, given the Government's stated commitment not to micro-manage the railways. It is not clear whether the Secretary of State will use the powers set out in the framework agreement. The reclassification of Network Rail strengthens the case for greater accountability and transparency in the way we have recommended in paragraph 27 (Paragraph 83)

25.  The Government should set out in its response how it plans the future financing of Network Rail and how it expects the financing of rail investment to be restructured. Spending more on debt interest than on asset maintenance is a looming political problem (Paragraph 84)


26.  We welcome the record levels of spending in the rail network to 2019. Increasing capacity on the classic network will help to meet the current and growing demand for rail services; and the electrification programme will make journeys quicker and more reliable, as well as reducing the environmental impact of rail travel. We heard that the Northern Hub programme will deliver over £4 billion of wider economic benefits to the North. Such criteria for the allocation of spending will aid the Department in assessing bids for future investment, and ensure a fair proportion of investment in different regions of the country. Treasury statistics have shown that there is a large variation in the level of public spending on rail across different regions of the country. (Paragraph 85)

27.  To maximise the benefits of the increased spending it should be clear how it fits into a longer-term strategic vision for the railways. While the control periods are a useful management tool, they need to be matched by the publication of a long-term plan, which brings together plans for franchising, rolling stock and enhancements work, and considers the rail network as a whole. Connectivity between the high speed and classic network should be prioritised, as should links to ports and airports. This plan should be linked to an "outturn statement" for each control period, helping to track spending, provide greater transparency around benefits realisation. This will strengthen the accountability of Network Rail and the ORR to Government and Parliament, as it will be clear if projected outcomes have materialised. Given the concerns we have expressed about Network Rail's capacity to deliver the CP5 programme, it is vital for passengers and taxpayers that it is held to account in this way. (Paragraph 86)

28.  A longer-term look at rail should be part of a wider route-based transport strategy that considers road and rail together, and recognises the interconnections between different modes of transport. This approach would enable the Government to consider whether proposed investments, in road or rail, offer the most effective and efficient way to improve connectivity and boost economic growth. As we have previously recommended, working in this way would allow for consultation with local authorities and local enterprise partnerships, for the benefit of rail passengers and road users, and taxpayers in general. (Paragraph 87)

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© Parliamentary copyright 2015
Prepared 23 January 2015