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David Higgins: Rail's £37.5bn big pitch

Network Rail’s chief executive Sir David Higgins reveals the thinking behind its next five year, £37.5bn spending plan, which is currently being scrutinised by the Office of Rail Regulation. His key goal is to focus on neglected structures after years of under-investment. Mark Hansford reports.

It’s a big year for Network Rail, with decisions to be made about its five year funding settlement. Right now the rail regulator is scrutinising Network Rail’s Strategic Business Plan for the railways from 2014-2019 and will give its initial response next month.

Network Rail has asked the regulator for permission to spend £37.5bn on running and expanding Britain’s railways in Control Period 5 (CP5), the next five year regulated spending period. CP5 starts in 2014 and, while there are some major projects in the mix, at £11bn these really only account for a fraction of the spend.

Network Rail’s major projects

Rail graphic

Network Rail’s CP5 submission includes a request for money to complete a number of ongoing projects, notably £900M to complete the rebuilding of Reading station, £600M to complete the redevelopment of Birmingham New Street station, £560M to do the bulk of the Northern Hub, and £300M for the Borders Rail.

But the biggest rail project has no cash attached. Network Rail is merely “supporting” High Speed 2 (HS2). Yet it could be the biggest thing in there. For Higgins it certainly is. “We haven’t built a railway line north of London in more than 100 years,” he says. “We’ve been very strongly supportive from the start and all I’ve ever said is build it faster and cheaper. Why do we have to wait until 2032?”

For Network Rail, HS2 is about relieving overcrowding on the London to Birmingham route and improving connectivity between London and the Midlands and onto the North and Scotland.

“The point to make is that it isn’t a high speed bypass but a central spine of the network. It’s a spine that is integrated into the network and how the trains and the public converge onto it is critical to get right,” says Higgins. “It can be incredibly effective; a spine that offers resilience to existing networks and frees up other routes.”

So for Higgins, getting the enabling legislation through Parliament is vital.

“The best thing is we have bipartisan political support and we all need to be focused now on getting the legislation through. Everyone should focus on that,” he states. And that means everyone.

“If you look at Crossrail, the great thing was that there was such unity of support. Businesses through London First, and the City of London Corporation and Canary Wharf Group were behind it.

“We need that same coalition now to completely reinforce the message because HS2 is not a vote winner. It needs support from industry and from cities along the route.”

Most of the cash will go on continued efforts to drag Britain’s Victorian rail infrastructure into the 21st Century. Specifically, Network Rail’s funding request includes an extra £600M to improve Network Rail’s 30,000 structures and earthworks, taking civils renewals spending to £2.25bn (NCE17 January).

Spending on asset management may not be the highest profile part of Network Rail’s activities, but it is something that chief executive Sir David Higgins knows he must keep control of.

That’s because asset management is an ongoing challenge for Network Rail, and one that – at least in the eyes of the Office of  Rail Regulation (ORR) – may be beyond it.

As the ORR says in its most recent quarterly monitoring report: “Asset management has been a long-term concern and we need reassurance that resources are in place to manage assets competently and efficiently into the future.”

Asset management seems set to be the main battleground, as Higgins is adamant that at least 10 years is needed to drag its structures and embankments up to standard.

“We haven’t invested enough for years and years and years,” he says. “We know that as we had to prioritise other areas for lots of reasons.

“In the last 10 years we have put our efforts into track and switches and crossings.” First it was track. “Post-Hatfield, that was obvious,” he notes.

Then, post-Greyrigg, it was switches and crossings. That too was obvious. “And if you look at the results of that focus, the condition of the asset has certainly improved,” he says.

Now, says Higgins, it is the turn of the civils infrastructure. “We need a 10 year plan. In our current analysis we need two control periods. It’s not sustainable today,” he stresses. “Our bridges aren’t being maintained to a sustainable standard.”

But it’s not all down to lack of cash.

“One of the reasons was we didn’t understand our structures,” accepts Higgins. It is this lack of basic knowledge that goes to the root of the regulator’s concerns.  Having been held to account, Network Rail has spent the last year completing high priority load assessments of its bridges and has vowed to assess the rest by the end of December.

That work is critical, as without knowing the condition of all its bridge assets – or even knowing exactly how many bridge assets it has –it’s hard to convince that you have a sound strategy for sustainably maintaining them.

But it’s a good start, and the regulator acknowledges that progress is being made. “Network Rail has made significant progress in developing its civils assets policies for the next control period,” the ORR says. But it warns that “improving the accuracy of asset information (including accurate reporting of the number of bridge assets) remains an important issue across all civils assets.”

So Higgins is focusing a lot of his time on this. “I’ve been heavily involved in drafting these policies,” he says, extracting the latest draft of the company’s bridge maintenance manual from his desk drawer. It’s a kind of idiot’s guide to working out what needs doing to all kinds of different bridge structures in all kinds of different conditions.

Higgins is confident it’s the sort of work that will yield returns similar to that on track; 12 years ago, in the immediate aftermath of Hatfield, Network Rail would have 900 rail breaks a year. Last year it was 122. The regulator has rightly highlighted an upsurge this year to 178, and has highlighted the London North Eastern route as being of particular concern (NCE28 February).  But Higgins stresses the need to look at the big picture.

“Compare us across Europe,” he says. “We are substantially below Germany and France on rail breaks because of early interventions. We have made huge ground on track monitoring. We know our business has world class capability on rolling contact fatigue,” he says. Rolling contact fatigue was found to be the cause of the rail break that led to the Hatfield disaster. “Because of Hatfield the UK railway remains one of Europe’s safest railways,” says Higgins.

The question now is, can the same work be done on civils assets without a Hatfield or a Grayrigg to focus the mind – or trigger the cash? That, ultimately, is a question for the regulator, and Higgins is at pains to stress the difficult job it has in balancing affordability with risk.

“We’re not party to the issue of how much money there is. We don’t know the assumptions being made on the revenue that may come from franchising. So we don’t know what is truly - affordable.

“So when the regulator decides, and it is his decision, we will have to decide what is affordable.

“All people would say is: ‘let’s have that honest conversation and work out the consequences, as there will be trade-offs’,” he says, adding that Network Rail’s devolution of management responsibilities to the regions will be a major boost here. Having Network Rail maintenance teams sitting close, or even, in some regions, side by side with train operators means that very clear statements on priorities are expected to emerge.

“The great thing about devolution is you get to really understand the trade-offs. So then if this needs to be done in an extended period, fine, but let’s have a clear and transparent conversation about that. It may increase the risk, but it may be a risk everyone is prepared to take,” says Higgins.

“Because that’s what this is about – balancing affordability with the risk of fatality on the railway,” he adds.

And, while the last passenger killed on the railway was six years ago now at Grayrigg, “thank goodness”, says Higgins, it is a statistical certainty that there will be another. “All of our calculations say that fatalities are inevitable over a period time,” he notes.

The reality is that harm to passenger or members of the public caused by infrastructure failure is actually a very low risk – and likely to be the cause of about 20% of all accidents. The biggest risk is the 40% of accidents likely to happen at level crossings.

“In the last two years in particular there has been a big focus on level crossings,” says Higgins. “And we need to continue there as the risk never goes away.”

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