Rail gets CP7 funding boost
Funding for the five years from 2024-2029 has been announced and, while the Government continues to support rail, there is no commitment to further electrification.
THE Statement of Funds Available (SoFA) to Network Rail during Control Period 7 (CP7) – which covers the five-year period from April 1, 2024 to March 31, 2029 – was released by the Department for Transport on December 1.
It reveals that a budget of £44.06 billion has been agreed, of which £27.53 billion will be in the form of a grant. The balance will be funded from track access charges and other income that accrues to NR.
The funds are provided to support the delivery of the
High Level Output Specification (HLOS), again provided by the DfT, during CP7. In a change from the previous five-year period, the SoFA does not include enhancement projects and provides for the operation, maintenance and renewal of the network in England and Wales, with Scotland having its own funding arrangements.
As part of the arrangements, NR is prohibited from taking loans or issuing bonds, as has happened in the past, to fund any financial shortfall that may occur in delivering the HLOS. There is some flexibility for additional money if this is justified in detailed negotiations with the Office of Rail and Road, which has responsibility to determine the overall income NR requires from Government grant and commercial income.
Levelling up and improved connectivity
In the preamble introducing the HLOS, the Government confirms it strongly supports the recovery of the railway from the consequences of the pandemic, but expects modernisation and efficiency to bear down on the cost of providing the network.
It emphasises that the railway is a key part in securing economic growth, and must have a strategy for levelling up, connectivity and delivering environmental benefit. There is also a requirement to be aware of what matters to passengers and the potential impact of decisions on inclusion and accessibility, with a continuation of the ‘access for all’ programme providing step-free access to rail services. And there must be an asset management strategy that supports high earning routes, as well as maintaining an appropriate level of service where there is a need for subsidies.
The safe operation of the railway must be a continued priority, which includes the prevention of trespass and suicide, with priorities established through risk assessment and safety learning identified by the Rail Accident Investigation Branch. Alternatives to level crossings must also be investigated with local authorities, although any projects have to be undertaken with budgeted funds.
Train planning and weather resilience
The remit for system operation includes an expectation there will be strength in train planning expertise, which includes an effective capability for executing changes without disruption to passengers.
The capability to respond to incidents with effective signalling and control room management is also seen as an essential part of how the railway performs for its customers.
There is strong support for the development of rail freight. It is expected that NR will work closely with freight operators and forwarders to support growth, by meeting what is described as reasonable demand in the context of budgeted funds. There is a requirement for NR to be ‘held to account’ for achieving growth by ensuring sufficient capacity is provided.
The impact of climate change and extreme weather is identified as a priority for infrastructure resilience in respect of rainfall, high winds, sea level rise and heat, and it is expected that assessments will be made at a regional level of what needs to be done to improve network performance. While progress is expected in delivering low-emissions and pursuing de-carbonisation, there is no mention of a programme of electrification.
An expansion of digital signalling is to take place, but this is on the basis of renewal of life expired assets being replaced with the European Train Control System, which provides in-cab signalling, and plans should be made for retrospective cab fitment. It is emphasised that the purpose of such conversion is to reduce costs and provide value for money for taxpayers.
The private sector supply chain is seen as critical to achieving the HLOS objectives of reducing costs by investment in skills and innovation that maintain safety standards and implement decarbonisation. A strong commercial contracting approach is required, which includes the award of a third of work to small and medium sized enterprises.
No funding for establishing a Great British Railways organisation is included, and the nature of the responsibilities that NR is expected to perform suggest a reduced need for any new organisation other than being centred on the award of future contracts in place of franchises.
“No funding for establishing a Great British Railways organisation is included”
REGULATORY approval has been given to an application by Grand Union Trains to operate five daily services on the Great Western route between Carmarthen and Paddington.
After local station calls at Llanelli and Gowerton, stops from Cardiff Central will be at Newport, Severn Tunnel Junction and Bristol Parkway, from where services will run nonstop to Paddington.
New open access operators need to demonstrate that there is the necessary expertise to operate services and, as a result, it is proposed to enter a strategic partnership with the Spanish national rail operator RENFE with financial backing from Serena Industrial Partners.
Initially, the application for track access rights was not supported by Network Rail, in part because of concerns about financial backing and the rolling stock strategy. But it was accepted that paths were available and that a platforming exercise at principal stations confirmed this was not a constraint.
The proposal was backed by the Welsh Government, which wants greater use made of the South Wales Main Line, with Severn Tunnel Junction becoming a hub station serving future development of the area.
Revised proposal
The decision letter published by the ORR on December 1 reverses a decision made in 2020 to turn down an application to run open access services on the same route. This was to be on the basis of an early transfer of Class 91 and Mk.4 rolling stock to provide seven daily return services between Cardiff Central and Paddington, with the intention of the trains starting back from Carmarthen when suitable rolling stock was available.
The earlier application had high levels of revenue abstraction without the benefit of the improved services to West Wales, and so was judged to have too great an impact on the franchised operator GWR. The revised submission cuts the number of trains from seven to five daily, and from the start of operations they will serve Carmarthen.
Bi-mode rolling stock is required and, as this is not immediately available, it means that the 10-year track access agreement will not start until December 2024.
In approving the application, the ORR says that in principle it is supportive of open access as it reflects the duty it has to promote competition for the benefit of rail users. Over time, evidence to support this has come from statistics available from the presence of three open access operators on the East Coast Main Line, where there are services provided by Hull Trains, Grand Central on two routes, and the most recent entrant Lumo.
Positive effects of competition
Any doubters that remain will have to counter what must be regarded as irrefutable evidence from the last result for passenger rail usage, published for the three months ending September 30, 2022. Overall, 359 million journeys were made, which compares with the prepandemic figure in 2019 of 448 million, indicating that 80.3% of passengers have returned. However, the figures for operators on the East Coast Main Line, where open access competition is firmly established, are dimensionally different. The comparative difference compared to 2019 is LNER 105.7% (i.e. 5.7% higher), Grand Central 7.9% up and Hull Trains 2% up. Added to that is the new operator Lumo, which carried 270,000 passengers in the period. In total the three open access operators carried just short of one million passengers and, with LNER recording 5.86 million, this is a share of 17% of a market that has seen overall growth of 10.2%.
Lumo has resulted in an immediate contribution to this. The services were designed to offer a low-cost product to compete with the domestic airlines operating on the route, and the result has been a significant modal switch, with rail’s market share rising from 35% to 57% on the basis of figures provided by the Civil Aviation Authority.
On comparable routes that have continued to have a franchised operator with a monopoly, only the East Midlands Railway has recaptured its original market presence, as it carried 99.9% of the previous passenger numbers. But Avanti West Coast recorded a dismal 64.5% with Great Western Railway not much better at 75.7%.
Prospects for more
Open access operation – and therefore competition – has been slow to develop in Britain as compared to a number of European countries. But new circumstances now apply as the ORR has pointed out that the advent of National Rail Contracts has removed the argument about the impact on franchise value. NCR train operators are now paid by the DfT to run a specified timetable without any responsibility for revenue generation. It is apparent that open access operators will accept the revenue risk in promoting services that, by implication, will allow the specified level in Government contracts to be reduced.
“The Welsh Government wants greater use made of the South Wales Main Line, with Severn Tunnel Junction becoming a hub station serving future development”