Source · Select Committees · Public Accounts Committee
Tenth Report - Overview of the English rail system
Public Accounts Committee
HC 170
Published 7 July 2021
Recommendations
4
It is not yet clear that the interim National Rail contracts fairly distribute risks between...
Recommendation
It is not yet clear that the interim National Rail contracts fairly distribute risks between government and operators, or provide incentives for operators to deliver efficient, high-quality, and value-for-money passenger services. In previous reports the Committee highlighted failings in the …
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HM Treasury
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5
We are disappointed at the lack of progress in agreeing a specific and funded plan...
Recommendation
We are disappointed at the lack of progress in agreeing a specific and funded plan for the electrification required to achieve the government’s own net zero targets. Electrification of the network is the key mechanism for delivering rail decarbonisation. It …
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HM Treasury
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Conclusions (24)
2
Conclusion
In recent years, we have identified serious failings in the rail system, and the Department must now overcome significant long-standing issues to bring about complex reform. We have previously reported on the problems inherent in the rail system, such as: poor performance and reliability of the network; the lack of …
3
Conclusion
Published information from the Department and the Office of Rail and Road on whole-system costs and revenues is not sufficient to inform proper oversight of the rail system, given the extent of taxpayer exposure. The arrangements for delivering rail services in England involve complex financial flows and contractual obligations between …
6
Conclusion
It is not clear to us how Network Rail expects to achieve the remaining efficiencies planned in Control Period 6. In Control Period 5 (2014–15 to 2018–19), Network Rail failed to achieve its efficiencies target as agreed with the Office of Rail and Road (ORR). In the first two years …
1
Conclusion
On the basis of a Report by the Comptroller and Auditor General, we took evidence from the Department for Transport (the Department), Network Rail and the Office of Rail and Road on costs in the English rail system.1 We also received written evidence from a number of stakeholder bodies and …
20
Conclusion
Net government funding increased 99.7% in real terms between 2015–16 and 2019–20 from £2.6 billion to £5.1 billion. This reflects increases in expenditure on operating and maintaining rail network infrastructure and the pre-COVID-19 deterioration in the passenger rail market as growth in rail passengers plateaued.3 In addition, the Department told …
7
Conclusion
As well as providing critical revenue for the rail system, passenger rail travel supports wider government objectives around transport decarbonisation and achieving net zero. We asked the Department how they planned to encourage people out of their cars onto rail. It outlined current activities by the Rail Revenue Recovery Group, …
8
Conclusion
The Department referred to its recently published strategies on bus travel18 and cycling and walking19 and told us that integration between modes of transport is “critical” to make public transport an attractive and practical choice for passengers.20 However, in these documents we can see only limited reference to integrated travel …
9
Conclusion
We have previously reported on the problems inherent in the rail system which have led to poor performance and reliability of the network. Even before the pandemic, we and the Transport Committee had reported on the Department’s franchising model and concluded that it was a broken model.21 We reported in …
10
Conclusion
We were interested to hear the Department’s views on the main issues caused by the rail system’s current structural organisation. The Department recognised that problems have emerged over a number of years, partly the result of poor alignment between Network Rail, responsible for rail infrastructure, and operators, responsible for delivering …
11
Conclusion
After our evidence session, on 20 May, the Department published its long-delayed Rail white paper, which outlines its “once-in-a-generation” reforms planned for the rail system, including replacing franchising and better integrating infrastructure with passenger services.25 The Department acknowledges that it must overcome a “complex and…deep-rooted set of issues” to improve …
12
Conclusion
Since privatisation in the 1990s, cash flows in the rail system have become increasingly complex. Although the rail system is privatised, government still provides significant funding for infrastructure operations, maintenance and renewals, and ongoing subsidy for passenger service operations. The National Audit office’s report identifies that the lack of a …
13
Conclusion
The Rail white paper outlines government’s plans for a new rail system, with one body responsible for overseeing infrastructure and passenger services and with less complex financial transactions.32 The Office of Rail and Road told us that such a “guiding mind” could add much needed accountability for the whole system.33
14
Conclusion
Specifically in relation to passenger service operations, prior to the COVID-19 pandemic, private sector companies operated passenger services under a franchise model but still received some level of government funding. The amount of government funding provided to train operators has increased in recent years, changing from a net surplus paid …
15
Conclusion
The Department acknowledged that there were significant challenges inherent in its franchising model used prior to the pandemic. It told us that the previous surplus in franchising costs had become a deficit prior to the pandemic.37 During the final four years of Control Period 5 (2015–16 to 2018–19), net government …
16
Conclusion
Our previous reports have covered some of the commercial difficulties caused by the Department’s franchising model. In the worst-case scenarios, issues such as over- optimistic assumptions of passenger growth led to severe operator losses and early contract terminations.39 These contract terminations accelerated the Department’s exposure to the commercial issues in …
17
Conclusion
The Department updated us on the Emergency Recovery Measures Agreements (ERMAs), which it put in place as an overlay to franchising agreements in response to the dramatic loss in passenger revenue caused by the COVID-19 pandemic. The ERMAs transferred all cost risk and revenue risk from operators to the Department …
18
Conclusion
Following our session on 13 May 2021, the Department told the Transport Committee that negotiations with all train operators have concluded around terminating the underlying franchise agreements, which is necessary to enable the transition of operators 37 Qq 19, 31 38 C&AG’s report, pp 8, 15 39 Committee of Public …
19
Conclusion
We were concerned that the short-term nature of these new contracts could fail to incentivise operators to make cost savings and improve performance, and asked the Department to explain how operators would be incentivised to keep costs down. The Department said that the annual business planning approach will help identify …
21
Conclusion
The Department told us that electrifying the rail network is a key part of decarbonising and achieving net zero on the railway and that to ensure success, a steady long-term plan for electrification is needed. However, the Department acknowledged that its approach to electrification in recent years has reflected a …
22
Conclusion
The Department acknowledged that long-term, strategic direction on electrification is needed to provide market certainty for operators, rolling stock companies and the procurement of trains that will be able to operate on the network and to drive innovation. It also recognised that its erratic approach had resulted in “some extremely …
23
Conclusion
The Office of Rail and Road told us that in Control Period 5 (2014–15 to 2018–19), Network Rail became less efficient and failed to meet efficiency targets.58 Indeed, in contrast to assumptions made by the Office of Rail and Road that Network Rail could improve the efficiency of its core …
24
Conclusion
In the first year of Control Period 6 (2019–20), Network Rail exceeded its planned efficiency savings; achieving £385 million compared to £316 million expected.61 The Office of Rail and Road told us that Network Rail has improved its efficiency through the development of a bottom-up business plan which routes and …
25
Conclusion
But Network Rail recognised that there “is still a mountain to climb” to achieve the full efficiency improvements it has committed to, and that it will need to continue to increase savings.63 Network Rail estimated that 60% of remaining planned efficiencies would come from renewals activities (like for like replacements …
26
Conclusion
In 2020, the Office of Rail and Road reported inherent uncertainty in the value of some of the efficiency savings made by Network Rail in 2019–20.69 The Office of Rail and Road told us that it has now agreed a set of indicators with Network Rail which measure the likelihood …