Source · Select Committees · Public Accounts Committee
Recommendation 10
10
Acknowledged
Pandemic exposed rail cost challenges and created conflicting priorities for financial framework.
Conclusion
The Department told us that the pandemic presented a fundamental challenge to sustainably funding the railways and that the financial pressures have driven a stronger focus to look at the whole system and improve performance, both financially and for passengers.21 The pandemic also exposed the scale of challenge on costs. Network Rail told us that, in previous years, despite excessive costs in the system “the top revenue line was growing. It took the imperative out of the system [to focus on costs] because the numbers were still balancing themselves.”22 The interim financial framework for the railways put in place in response to the pandemic means that HM Treasury carries the risk of any shortfalls in revenue, as it was uncertain how passenger demand would recover. The separation of cost and revenue risk has meant that the Department, HM Treasury, and train operating companies have different priorities when making decisions which impact revenue.23
Government Response Summary
The government agrees with the Committee’s recommendation. They are committed to delivering a unified and simplified governance structure for the railways, alongside passenger train services under public ownership, with the objective of providing improved services for passengers and better value for money for taxpayers.
Government Response
Acknowledged
HM Government
Acknowledged
2.4 The government agrees with the Committee’s recommendation. Target implementation date: Spring 2025 2.5 The government is committed to delivering a unified and simplified governance structure for the railways, alongside passenger train services under public ownership, with the 51 objective of providing improved services for passengers and better value for money for taxpayers. This model will address current disincentives by ensuring costs and revenue across infrastructure and operations are aligned to optimize performance and drive efficiency. 2.6 The department expects to see these reforms delivered over the course of this parliamentary term, as new legislation is enacted, and private train operators move into public ownership. 2.7 During the transition to these new arrangements, the department will continue to use the annual business planning exercise with the train operating companies to ensure that costs are being closely managed, but also that opportunities for revenue growth are being considered. The department’s objective is to make the cost base as efficient as possible, increasing revenue and passenger numbers and reducing the net taxpayer subsidy. The department will work closely with HM Treasury to ensure costs and revenues are managed effectively.