The Office of Rail and Road (ORR) has today stated that it wants Network Rail to focus more on train performance and renewing core assets in its spending plan for the next five-year period.

Last month, Network Rail published its plans for April 2024 to March 2029, the time period known as Control Period 7 (CP7), during which it will spend £40 billion in England and Wales NS £4.8 billion in Scotland, a total of £44.8 billion.

ORR has scrutinised the plans and has today published its draft determination, which is now open to consultation, the regulator takes the view that ORR says that while Network Rail’s plans largely deliver the UK and Scottish governments’ priorities, it needs to do more to improve train performance for the benefit of both passengers and freight, and to maintain core assets like track, structures and earthworks, which are under increasing threat from climate change.

ORR will issue its final determination on the plans in October, having taken into account comments made during the consultation period. It hopes that by then, Network Rail – which it acknowledges is still developing its plan – will have provided more detail on certain key areas, as follows.

Train performance:

• ORR will set specific targets that are demanding than those in Network Rail’s plans: these will include improvements to punctuality and reliability in services for both passengers and freight.
• ORR also proposes that Network Rail dedicates reserved funding to further support improvements to train performance improvement.
• This will require Network Rail to work closely with train operators to ensure that they also deliver improvements.

Renewing the railway:

• ORR proposes that Network Rail increases its spending on core assets for the rail network by £600 million, by redirecting money from areas that the regulator considers less important.
• ORR wants Network Rail to manage assets are sustainably, to better deliver on safety, performance, asset sustainability and efficiency.

Risk funding:

• ORR proposes that Network Rail increases its financial provisions for risk so that it can respond to uncertainties such as severe weather and rapidly-changing inflation rates.
• For England and Wales, ORR proposes that Network Rail applies a variant of its plan to release significant funding and take the total risk provision to around £2 billion, funded within the published budget for CP7.
• For Scotland, Network Rail’s interim plan proposed £206 million of risk funding. ORR assesses that the budget can accommodate increasing this by around £100 million.

Efficiency:

• ORR wants Network Rail to continue its recent efficiency initiatives, and believes Network Rail’s efficiency targets for the next five years to be “stretching but achievable”.
• This would see Network Rail deliver at least £3.2 billion in England & Wales and £0.4 billion of efficiencies in Scotland.

Information on ORR’s draft determination and how to respond to it can be found here.

ORR also announced today that it will keep the same charging structure for passenger and freight operators as now. Specifically:

• New open access operators will pay charges that incorporate a portion of the fixed network costs, where the demand is strong enough that the operator can pay.
• Freight operators’ variable charges will continue to be capped, helping to mitigate the impact of charges increasing in response to traffic-driven costs.
• ORR will allow Network Rail and train operators to include incentives to limit service disruption in the contracts between them, which can be updated within the control period. ORR is also allowing the removal of these payments between Great British Railways (GBR) and its contracted operators, should legislation be introduced to establish GBR.

John Larkinson, ORR Chief Executive, said: “I’m pleased to see that Network Rail’s plans respond to government priorities and have not shirked from making clear judgements on how to deliver these within constrained budgets.

“Improving performance for passengers and freight is, however, a top priority and while we acknowledge there is no easy fix, Network Rail has to be more ambitious if positive change is to happen.

“Our assessment is that while the plans are generally well founded, greater investment and focus is needed on the renewal of core assets such as structures and earthworks. These are essential for a reliable and safe service for passengers and freight, particularly given the pressures from climate change.”