Recommendation 8

HM Government Accepted in Part

The Government agrees that smoothing workload is important. We have seen how a more predictable pipeline supports workforce planning, skills retention and innovation across the supply chain. The evidence heard by the Committee from Scotland demonstrates the potential benefits of steady investment profiles in maintaining capability and reducing long-term costs. However, while there are lessons to be learned, the Government does not agree that making changes to the funding method is the right solution. Enhancements were deliberately separated from the regulated settlement following the cost and delivery challenges experienced in CP5. This separation strengthened financial control, clarified accountability and reinforced discipline in the management of discretionary investment in enhancements as distinct from the essential asset stewardship for the railway through renewals. Smoothing workload is an important objective. However, the distinction between renewals and enhancements reflects substantive differences in risk profile, procurement model and specialist capabilities that exist, rather than being purely an arbitrary administrative boundary. Whilst integration of renewals and enhancements could create benefits that include efficiencies, the net impact of proceeding with future plans with this integration as the primary goal would likely be negative, based on the experience of CP5, and given the long-term implications for the condition of the railway network created through progress on the delivery of renewals in the short-term. Renewals activity is primarily concerned with the stewardship of existing assets; replacing or refurbishing infrastructure at the appropriate point in its lifecycle to maintain safety and performance. It is typically planned on a long-term asset management basis as part of the periodic review, with relatively predictable scope and established technical standards. Procurement is often undertaken for these works through longer-term framework arrangements, providing continuity of work and supporting the retention of specialist capability within the supply chain. Enhancements, on the other hand, are discretionary investments intended to increase or improve the capability of the network or deliver wider economic benefits and outcomes. They frequently involve changes to the railway’s configuration, the introduction of new technology, planning consent processes, and more complex stakeholder engagement. The risk profile can therefore be materially different, particularly in relation to scope development, integration with operational railway performance, and interface management. Procurement approaches may vary depending on scheme size and complexity, as well as the required specialist capabilities that may be required in concentrated phases (for example in overhead line equipment, major signalling upgrades or complex civils interventions). While there are clear efficiencies in aligning delivery of renewals and enhancements where geographically and technically appropriate, merging funding routes alone would not eliminate these structural differences. Effective smoothing is more likely to be achieved through improved planning and sequencing, ensuring that opportunities for more efficient delivery of renewals and enhancements are identified early while respecting the distinct differences and disciplines that may be involved. As GBR is established, we expect there will be opportunities to further integrate planning and sequencing decisions within a coherent strategic framework. Any evolution in funding or governance arrangements will need to build upon the strengths of the current model, particularly the stability of the regulated Funding Period settlement, while ensuring that the differing risk characteristics and needs of renewals and enhancements are appropriately managed. The Long-Term Rail Strategy and the Governance of Great British Railways Committee recommendations: We welcome the provision made in the Railways Bill for a Long Term Rail Strategy: it is long past time that such a vision is set out for the railways. The Strategy must provide a basis for consensus and certainty about long-term investment priorities. If it puts in place stable scaffolding for practical plans and pipelines, the LTRS has the potential to insulate those plans from unnecessary changes of direction or delay, to convey confidence to industry and to bring improvements to the network forward more efficiently. Government response: Agree In order to achieve this: • the Strategy should set out firm objectives on matters of long- term infrastructure policy including electrification, rolling stock, accessibility and capacity; • the Strategy should be the means for setting out commitments to the largest infrastructure programmes on the railway—those at the level of HS2 or Northern Powerhouse Rail which take more than a decade— with a clear articulation of how these programmes will achieve the Government’s strategic object