ORR APPROVES £43.1BN PLAN TO DELIVER A SAFE AND CUSTOMER-FOCUSED RAILWAY
ORR has set out its final determination of Network Rail’s £43.1bn plans (£38.5bn in England and Wales, £4.6bn in Scotland) to deliver a safe and customer focused railway. The plans cover the five years from 1 April 2024, known as Control Period 7 (CP7).
Since the ORR’s draft determination in June, Network Rail has revised its plans, responding positively to ORR’s challenge in a number of areas. This includes Network Rail increasing spending on core railway infrastructure by approximately £600mn to bolster asset sustainability, safety and performance.
ORR's decisions are set out in its final determination. The key points are:
ORR’s final determination sets specific train performance requirements that protect the interests of passengers and freight. The targets are more challenging than originally proposed by Network Rail but are realistic. Meeting these targets will require Network Rail to work with operators to ensure that cancellations are reduced and that punctuality is maintained across Great Britain, even as passenger numbers increase.
ORR recognises the challenges to accurately forecasting train performance at this time and so will reassess passenger train performance targets for England & Wales in advance of year three of CP7. This two-year window allows train companies to work with Network Rail to align planning processes better.
ORR has set appropriately challenging targets for what Network Rail delivers for freight operators. Network Rail will be required to reduce freight cancellations from current levels.
ORR has set rail freight growth targets across Great Britain for the first time. Network Rail will need to play its full role in supporting growth of 7.5% in rail freight for England & Wales and 8.7% for Scotland. ORR supports Network Rail’s plans to upgrade its structures to support freight better and it now needs to work with the industry to deliver the conditions for growth.
ORR is also continuing to cap track access charges for freight operators below cost.
Renewing the railway
ORR welcomes Network Rail’s increase in spending on renewing core assets (such as track, structures and earthworks). This addresses our concerns from the draft determination and will bolster asset sustainability, safety and performance. This is particularly important with the challenges presented by climate change.
ORR considers that Network Rail has a suitable framework to understand and manage the change in risk from carrying out fewer renewals and a move to greater maintenance of existing assets.
Managing risks effectively
Significant uncertainty has shaped the development of Network Rail’s plans and our review of them. For example, inflation has increased financial challenges and climate change presents further uncertainty. Effective risk management will therefore be important as will risk funding.
ORR requires Network Rail to maintain sufficient and well-managed levels of risk funding. We conclude that Network Rail should retain provisions for risk funding of £1.5bn in England & Wales and £225mn in Scotland.
Delivering value for money
ORR recognises the tight fiscal context in which Network Rail’s plans have been developed. It is therefore vital that Network Rail continues to build on the success of recent efficiency initiatives, to help secure a financially sustainable railway and deliver value for money for passengers, freight and funders of the railway.
ORR has carefully reviewed Network Rail’s efficiency targets for the next five years and, drawing on a range of evidence, found these to be stretching but achievable. This would see Network Rail deliver efficiencies of at least £3.2bn in England & Wales and £0.4bn in Scotland.
Protecting the environment
To support the move towards a low-emissions railway, ORR will hold Network Rail to account for delivering a more than 20% reduction in its carbon emissions. ORR has also set a target for Network Rail’s efforts to conserve and enhance biodiversity.