UK Government signals Network Rail’s future objectives and funding

Introduction

The UK Government recently achieved a key milestone in setting Network Rail’s objectives and funding for its next five-year regulatory control period (CP7), due to commence in April 2024.

Earlier this month, the Secretary of State for Transport published the High-Level Output Specification (HLOS) and initial Statement of Funds Available (SoFA) for CP7. The HLOS outlines to the Office of Rail and Road (ORR) what the Secretary of State wants to achieve during CP7 through the operation, maintenance and renewal of railway infrastructure activities in England and Wales. Alongside, the SoFA confirms the public resources available to deliver those objectives at £44 billion, with £27 billion having been secured through Government funding. ORR will now consider the objectives proposed for CP7 together with the SoFA, and decide how best those objectives can be achieved, working closely with Network Rail and other stakeholders to allocate appropriate funding.

Objectives for CP7

The HLOS sets objectives for CP7 in the following key areas:

• safety and security;
• efficiency and financial sustainability;
• performance, reliability and use of the network;
• resilience and reducing environmental impacts;
• supporting growth, levelling up and deployment of technology; and
• financial management and risk.

Building on Network Rail’s achievements during CP6, the Secretary of State expects it to have a strong, sustained and effective approach to the delivery of greater cost efficiency in CP7. Consequently, there is an expectation for Network Rail provide clear evidence of improvements in both productivity and year-on-year efficiencies. In particular, Network Rail has been tasked to continue to properly scope projects prior to commencement, and to work in collaboration with its supply chain to drive greater efficiencies.

To deliver enhanced financial sustainability and performance, the HLOS sets an expectation for Network Rail to minimise the impact of disruptions and to deliver an operational system that is punctual and reliable. It confirms the key components that may deliver this include strong timetabling capability, improved performance modelling and enhanced performance measurement arrangements. Equally, the HLOS anticipates an improved approach to asset management and management of signalling, with control room decision-making being critical for improvements in performance.

The deployment of technology is anticipated to support growth and sustainability, and contribute to meeting broader net zero targets. In particular, digital signalling is expected to improve asset sustainability, deliver increased capacity, safety, reliability, and provide greater value for money. Another stated requirement is for Network Rail to work closely and effectively with the private sector supply chain. By investing in the supply chain’s skills and innovation, Network Rail is expected to help reduce the overall cost of rail services, maintain high standards of safety and contribute to broader aims such as decarbonisation.

Upcoming milestones

The publication of the HLOS and SoFA forms part of the wider Periodic Review process to set objectives and funding for Network Rail in CP7. The next steps in this process are expected to be:

1. Network Rail to publish a Strategic Business Plan in early 2023.
2. ORR to review and scrutinise Network Rail’s CP7 plans in line with the Strategic Business Plan, then publish and consult on its draft determination for CP7.
3. Publication of final ORR determination.
4. Network Rail to issue its Delivery Plan for CP7, to commence in April 2024.

Conclusion

The HLOS and SoFA contain ambitious objectives and represent continued strong Government backing for the rail sector, against a backdrop of a renewed demand for modernisation, and efficiency improvements being required to successfully recover from the pandemic. There is a strong emphasis on improving value for money, and a heightened need for strong cross-industry collaboration, at a time where the timescale for delivering Great British Railways is uncertain. The Scottish Government is anticipated to publish its own requirements in the near future, and it will be interesting to compare and contrast its objectives, to gain a more rounded understanding of industry priorities for the remainder of this decade. We will continue to closely monitor the development of this process through to the commencement of CP7.