Funding set for next five years
Regulator issues final determination for Network Rail spending to 2029.
THE Office of Rail and Road has announced that railway funding for Control Period 7, which runs from April 2024 to March 2029, will total £43.1 billion.
This comprises £38.5 billion for England and Wales and £4.6 billion for Scotland.
The total is not significantly different from the previous five-year period (CP6, April
2019 to March 2024), but there is a change of emphasis for renewals and contingencies as a result of climate change.
Income from fixed and variable track access charges is calculated at £10.6 billion and, taking into account the net effect of the performance regime and recovery of the cost of providing electric traction current from the train operators, the Government grant will be £29.8 billion, which again is a very similar figure to that paid in Control Period 6.
Greater emphasis is given to freight traffic, with gauge clearance and infrastructure improvements to allow fulllength intermodal services to use more routes, which should allow growth of 7.5% in England and Wales and 8.7% in Scotland. Track access charges for freight operators will continue to be capped, and there will be favourable tariffs for charter operators.
Renewals main share
The largest element of Network Rail spending is for the renewal of structures, track and signalling, for which a budget of £19.7 billion is provided – a 7% cut from CP6. The brunt of this reduction seems to be in the Southern Region, despite the need to replace ageing third-rail traction supplies.
There is also a cutback in the national programme to install in-cab digital signalling, where the budget has fallen from £742 to £557 million. The intention to convert the northern part of the West Coast Main Line has been pushed back to save £123 million, while the introduction of new signalling on the Midland Main Line from St Pancras has also been postponed.
However, the planned expenditure on the installation of in-cab equipment in locos and units has been kept at the current level, with an anticipated outlay of £699 million to cover passenger and freight traction, plus provision for heritage, charter, and on-track plant vehicles.
There has been a debate about the continuing relevance of compensation payments to operators for lost revenue as a result of planned engineering work (‘Schedule
4’) or unexpected infrastructure failures (‘Schedule 8’). The argument is that for operators directly controlled by the Government or operating under contracts where no responsibility is held for revenue, the compensation is unnecessary.
However, without such payments there will be no funds available to pay for rail replacement services, particularly when short notice events disrupt the train service. Despite criticism from rail users about recent events, such as providing long-distance taxis to get people home, these are funded by Schedule 8 payments and without them it is not clear how train operators will cover the cost of emergency arrangements.
The regulator has decided that abolition of such payments is not the right thing to do until a single tier management structure under Great British Railways is a reality. A reduced budget of £1.6 billion has been retained for passenger compensation – but it is likely that the cutback in track renewals will result in a greater number of equipment failures, and thus service disruptions.
Increases in energy costs, as a result of the disruption caused by the ongoing war in Ukraine, has had a significant effect on payments for electric traction current, which are forecast to rise by 61% from £3.1 to £5 billion during CP7. This increase has also changed the business case for electrification which, although necessary for plans to achieve net zero emissions, has resulted in subdued enthusiasm for the expansion of electric haulage. In fact, some freight operators have recently reverted to diesel haulage ‘under the wires’ as it is more economic.
Excluded items
Proposals for enhancing capacity and electrification remain outside the financial settlement however, and individual projects will be approved if a business case can be made and funds are available.
The funding implicit in the ‘Restoring Your Railway’ initiative is also absent in the ORR’s figures. But additional resources could be channelled to worthwhile reopening projects, from the money released by cancellation of HS2’s northern extensions.
The enhancement programme was previously driven by an assumption there would be a steady growth in passenger numbers, for which an annual figure of 2.5% was used in the development of business cases.
The current unsaid expectation is that future growth will be less, given the impact of digital technology allowing home working, and thus a reduced demand for travel. This is a questionable conclusion, however, given that statistics released by the ORR for journeys made from April 1 to June 30 show passenger demand has recovered to 89% of pre-Covid levels. Year-onyear figures for these three months show an increase of 19% to 390 million journeys, despite including five railway strike days. For the year to June 30, 1447 million trips were made (see also story on page 14).
It is worth remembering that in 1995, the final year of British Rail operations, the total number of passenger trips was 735 million, while the all-time high in 1920 of 2186 million journeys was when the rail network was significantly larger than today.
Although passenger numbers are moving back towards pre-pandemic levels, revenue continues to be supressed. Farebox income for the three months to June 30 increased by 10% to £2.6 billion, compared to £2.3 billion for the same period in 2022. But with a 19% increase in passengers in the same period, it is no surprise that the average fare per journey reduced from
£7.07 to £6.55 – despite a fare increase of 5.6% in March.
Analysis of the decline in the price being paid identifies a number of causes, including the reduced use of season tickets in favour of less regular travel and cheaper one-off journey fares. Season tickets were used for just 13% of journeys, earning £193 million or 7.5% of the total. The greater use of split-ticketing for an estimated 5% of longer distance journeys is also a factor in the reduced level of the average fare.
“Without such payments there will be no funds available to pay for rail replacement services”