31 August 2023
RIA has submitted its response to the Office of Rail and Road’s (ORR’s) consultation on its Draft Determination for Network Rail 2024-2029.
Our response to the draft determination emphasises:
- Understanding risks: There is a much higher need for transparency during CP7, reflecting the difficult trade-offs that will need to be made on an ongoing basis, and the long-term consequences of these decisions. This must cover transparency of:
o Asset condition and risks;
o Emerging risks e.g., financial, weather;
o Any changes in funding; and
o Prioritisation decisions taken during the course of CP7 – especially any decisions to allow asset condition to deteriorate.
- Regaining long-term financial sustainability: ORR has stated that the funding available does not allow a lowest whole-life cost solution and will require additional expenditure beyond CP7. We welcome a view from Governments on the realism of this funding assumption. There needs to be a credible long-term financial strategy for the railway. We support the ORR proposals to ensure sufficient contingency funds and to focus on core renewals, but we also need to see a clear plan to fund the strategic investments that will lower the whole-life and whole-system costs of running the railway over the longer term. Longer-term contractual partnerships with suppliers can help facilitate this, as could the use of private finance.
- Whole system ‘Profit & Loss’ and efficiency: At an industry level there needs to be as much, if not more, focus on growing revenues, than just cutting costs in the short term. We want to see NR plans evolve to actively identify ways to grow industry revenues sustainably. NR should be challenged and empowered to dynamically update their plans to maximise long-term outcomes for the railway as a whole. Clearly the Department for Transport (DfT) will need to support such a shift in planning approach and enable this through its control of train operator contracts. ORR will also need to challenge NR to show how it is identifying and sharing best practice across different regions and business units.
- Allocation and profile of spend: The final determination should require a smooth profile of investment into CP7, over the five years, and then avoiding a drop-off in the final year. It should challenge NR to provide evidence of its preparedness to spend in year 1 of CP7, including the necessary design and development work. The final determination should consider the fit with other infrastructure investments, particularly highways, and the great importance of investment certainty for SMEs.
- Supply chain engagement: As the UK Government High Level Output Specification (HLOS) recognises, a resilient and productive rail supply chain that invests in skills and innovation will help reduce the overall cost of rail. We believe there is a case for clear expectations on NR to promote the sustainability of the supply chain. ORR should monitor and challenge NR to demonstrate continuously better supply chain engagement – from large companies through to SMEs. This is especially important given the need for flexible and agile planning to respond to shocks.
- Planning process: For reasons largely beyond their control, NR’s Business Plans to the UK and Scottish Governments have been published very late in the planning cycle. We urge ORR to work with governments to consider how best to provide earlier transparency of plans in future, such as moving to transparent plans that are continuously updated and show asset investment profiles for different levels of NR funding.
The Submission