Network Rail delivers an efficient start to Control Period 6
THE Office of Rail and Road (ORR) has an important responsibility to hold Network Rail to account in the interest of passengers, freight customers, funders and taxpayers.
Network Rail has been provided with £35 billion to operate, maintain and renew Britain’s railways in Control Period 6 (CP6, April 2019March 2024). It’s our job to provide assurance that it does this efficiently, effectively and safely.
CP6 is vastly different to CP5 (April 2014March 19), and necessarily so. Things went wrong early in CP5, with shortcomings in Network Rail’s planning which led to delays in delivery, cost overruns and a cycle of constant re-planning, all of which undermined the company’s efficiency. This could not go on, so for CP6 both ORR and Network Rail have made significant operational changes.
Core to this has been the role of devolution within Network Rail. In contrast to CP5, the company’s plans for CP6 were developed by its devolved teams (rather than the centre), with much greater local ownership than before. Network Rail has since consolidated this, with its shift to a regional structure and the appointment of Regional Managing Directors. In ORR we have mirrored this with dedicated regional leads and region-based settlements.
We have also changed our oversight and assurance of the company, with a greater focus on leading indicators which makes it easier to intervene at an earlier stage, to prevent issues escalating. And when we do intervene, we can target specific regions. Additionally, we have new sanctions available, including hearings and the ability to apply financial penalties to management bonuses (for example, at regional level), rather than issuing fines that reduce Network Rail’s overall funding.
Beyond our safety role, our main focus on Network Rail is making sure that the company gets it right on efficiency, train performance, and delivering the work it promised to do to look after its assets sustainably.
First regional annual assessment
Year one of CP6 has been the first test of the new approach. Our recently published annual assessment shows that overall there has been a good start, with Network Rail achieving significant efficiencies following ORR’s early intervention, and delivering its planned works to improve network condition.
It is the first time we have been able to compare regions in our assessment, which has been useful. We have identified variations in train performance across regions, showing best practice and where improvement is needed. It has allowed us to take targeted action during the year - for example, on Network Rail’s contribution to poor performance in the North West & Central region.
On track for improved efficiency
The most pleasing aspect in year one is that for the first time in many years, Network Rail has not only delivered its efficiency targets, but exceeded them. It delivered better than planned efficiency savings on its operations, support, maintenance and renewals activities - £385 million of efficiency, ahead of its £316m commitment.
This comes off the back of a lot of hard work by both ORR and Network Rail. On our part, we have been relentless in seeking clarity on how Network Rail was going to deliver on its efficiency promises (again, learning from CP5) - and it has responded well. But we don’t want to get ahead of ourselves. There will be impacts from COVID-19, and there are more challenging efficiency targets ahead.
Network Rail must continue to plan effectively to meet these challenges, and we have been monitoring its preparations. For example, the percentage of bookings for engineering works in 2020-21 (76%) is behind the company’s internal target and lower than last year. This represents a risk to efficient delivery in 2020-21. We are staying on the case and Network Rail is responding positively to our challenge.
A focus on performance
Passengers largely judge the railway based on whether their trains are reliable and punctual. And while it is now a completely different world in terms of passengers’ use of the railway, after COVID-19, it is still important to look at what happened in 2019-20 and at Network Rail’s contribution.
Our annual report highlights the variations in performance across the network. Where delays are higher, it pinpoints the causes.
Using the measure of Network Rail-caused delay, we can see that performance in Wales & Western was best. In particular, the region successfully implemented a large timetable
change while maintaining performance, and is now sharing that best practice with other regions. Performance was also good in Southern.
Performance was lower than target in North West & Central, Network Rail Scotland, and Eastern regions. In North West & Central, it fell below the minimum level that we set for both freight and passenger performance, and as a result we investigated. We found that the region was taking performance improvements very seriously but had not, at the time, produced time-bound improvement plans. It has now produced these and must deliver them. We will monitor progress and take action if delivery stalls.
Rightly, NR’s focus is now on its response to the Coronavirus pandemic, but it must continue to address underlying performance issues across the network. Analysis of the relationship between service levels and performance during the past four months will provide further insights, and we’re pleased with how the company is working with operators on this.
Improved infrastructure reliability
Going hand in hand with performance is the reliability of the infrastructure- if you cut the number of asset failures, then there are fewer delays. And what we’ve seen is that while Network Rail is delivering its plan to renew the railway, the reliability of some assets has worsened in the past year. For example, there was an increase in overhead line issues in the Eastern region.
To minimise the impact of asset failures it is vital that Network Rail continues to improve the resilience of the network, including against severe weather. It must also continue to carry out essential inspection and maintenance work to identify and rectify defects and failures in a timely way - and improve its reporting in this area. We will review how it is progressing on this important work.
Rising to the challenge of COVID-19
As part of our annual assessment, we looked at Network Rail’s initial response to COVID-19. And we’ve seen that its response - and the whole industry’s response - has been quick, decisive and impressive.
At ORR we asked the industry: “What do you need from us?” We responded promptly to multiple requests for new guidance and took a pragmatic approach to our data requirements to help reduce the burden, so that the rail industry could focus on transporting essential workers and goods. But we made it clear that Network Rail still had obligations and still needed to be held to account.
There is also a lot of unfinished business from 2019-20 - for example, on how Network Rail uses scorecards to provide transparency to its customers and funders.
And there will be new challenges and opportunities for Network Rail this year. The Government wants to see how infrastructure spend, particularly on enhancement projects, can be increased to support the economy and how projects can be delivered faster. We are working with NR on how we can use our experience in authorising projects to highlight where improvements could be made.
What’s next?
While year one of the Control Period has only recently ended, there are good signs that the devolved structures of ORR and Network Rail, and our focus on greater early intervention, are bringing benefits.
There’s more to do, and we will continue to focus in particular on efficiency, performance and overseeing NR’s delivery of its promised commitments. While the future shape of rail travel is unclear, we want to make sure that Network Rail is well placed to play its part.
“We have been relentless in seeking clarity on how Network Rail was going to deliver on its efficiency promises, and it has responded well. But we don’t want to get ahead of ourselves. There will be impacts from COVID-19 and there are more challenging efficiency targets ahead.”