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Grayling announces £48bn for Network Rail in CP6

NCE stock rail

Transport secretary Chris Grayling has set out the funding plans for Network Rail in Control Period 6 [CP6], announcing that around £48bn will be spent on the network over the five year period from 2019 to 2024.

The Statement of Funds Available (SoFA) is made up of a direct government grant of up to £34.7bn. Total spending will be around £47.9bn once Network Rail’s expected income is calculated and added to the pot. The income will come from areas such as track access charges and Network Rail’s property.

Grayling said: “Government has already made clear that it expects new enhancements to the rail network to be developed outside of the regulatory system. However, the SoFA published today includes funding to continue to take forward the enhancements that were deferred from control period 5. In line with the new process for enhancements these schemes will continue to be subject to ongoing consideration to ensure they deliver the best results for both rail users and taxpayers.

“In addition to this, I am making funding available for the early-stage development of new enhancement schemes. I will announce further details on a new process for taking forward enhancements later in the year.”

Grayling said that although the funding includes money for the early stages of developing new rail schemes, decisions on funding for major upgrades will be made separately.

The announcement was originally due in July but was pushed back until this week due to Network Rail’s poor financial performance, as transport secretary Chris Grayling said he needed more assurances on costs for CP6.

In response, Network Rail chief executive Mark Carne said: “Continued high levels of investment in our railway is essential to create the jobs, housing and economic boost our country needs to prosper. Today’s announcement shows the Government’s endorsement of this approach.

“Over the next 12-18 months millions of passengers will experience significant improvements to their services as thousands of new trains, faster and more frequent services come on-stream.

“Network Rail is transforming into devolved businesses to better respond to its local customers and communities. This local focus, combined with opening up the funding, financing and delivery of investment projects to third parties, will help to drive efficiencies and value for the taxpayer.

“We will submit our detailed plans to the regulator in the next few months that will help to finalise the railways funding for the five years to 2024 and continue to drive our company’s transformation to better equip it for the demands ahead.”

In an interview with New Civil Engineer out this week, Carne said: “Going forward it will be much more of a rolling programme of enhancements, with projects confirmed when we have done the [development] work.”

“We need to make a very clear distinction between the way we manage enhancements and the way we manage operations, maintenance and renewals (OMR). OMR needs funding certainty from a regulated five-year cycle to get efficiencies from the supply chain. That is absolutely key.

“Enhancements are separate, distinct investments that can be, and are, better managed outside of that.” 

The current financial control period, CP5, has been beset with problems.

In November 2015 an influential panel of MPs tore into the way Network Rail’s much heralded £38bn five-year spending programme was set-up and managed.

The cross-party public accounts committee said the Control Period 5 [CP5] investment programme was “unrealistic” from the outset.

It also said that it had seen “staggering” cost increases; and that scrutiny from the regulator had been “unconvincing”.

Network Rail chief executive Mark Carne had also admitted in October that year that the estimated cost of electrifying the Great Western Main Line between South Wales and London had soared from £874M in 2013 to between £2.5bn and £2.8bn.

However the publication of a report by Network Rail’s chairman Sir Peter Hendy, also in November 2015, came up with a plan to resolve the financial woes.

Hendy had been appointed by the transport secretary at the time, Patrick McLoughlin, to take a fresh look at Network Rail’s spending plans. It found Network Rail needed an extra £2.5bn to complete CP5.

The report suggested Network Rail sell £1.8bn of assets, borrow £700M and delay certain projects beyond 2019.

The problems mean Network Rail goes into CP6 in debt and with a huge backlog of work.

A report this week by the rail regulator the Office of Rail and Road (ORR) found Network Rail has become less efficient at the same time as it faces increasing financial pressure.

 

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