Network Rail’s annual report has revealed it is almost £5bn more in debt this year than last and the overall amount is expected to reach £50bn as it struggles to finance its upgrade plan.
The figures were revealed as Control Period 6 (CP6) negotiations between Network Rail and the Department for Transport enter a crucial stage. The outcome will determine the amount of money Network Rail has to spend from the government between 2019 and 2024 and what it can spend the money on.
Today the sector expects to see the high-level output specification (HLOS), which says what Network Rail plans to do during CP6. The transport secretary is also expected to publish the Statement of funds available (SoFA), laying out how much cash Network Rail will get. It is up to the Office for Rail and Road (ORR) to decide whether the work can feasibly be carried out with the amount of cash.
It has been reported that electrification will be scaled back during CP6 in favour of bi-mode trains which run on both diesel and electricity. Senior rail figures have recently spoken out against bi-mode trains, saying diesel engines are heavy and require expensive maintenance.
In its annual report, Network Rail said that net debt was £46.3bn for 2016/7 compared to £41.6bn the year before.
A spokeswoman for Network Rail said: “The amount of debt is exactly what the ORR expected. This is what is funding our Railway Upgrade Plan. A £50bn ceiling will be reached by the end of CP5.”
The annual report also showed revenue is £6.2bn compared to £6.1bn the year before. Profit before tax is £483M compared to £411M for 2015/6. Operating costs are £2.8bn compared to £2.7bn for 2015/6.
The report also revealed that from 1 July 2017, chief executive Mark Carne will be paid £681,750. The full pay deal, including bonus, takes his overall pay to £820,000.
A record figure of £3.9bn was spent on enhancements last year. Network Rail said: “Almost all significant project milestones were met, although two were not – Gospel Oak to Barking electrification, and one on the Edinburgh to Glasgow improvement project.”
In the report, it said that in terms of efficiency, had been taken out 40% of cost base in ‘real terms’, but the recession recovery in the supply chain, shorter windows to carry out work and capital investment is stepping up meant that it cost around £1.7bn more to operate, renew and enhance the railway this year than the ORR assumed when setting charges four years ago.
In its annual report on Network Rail’s performance, the ORR said it would be commissioning a further study by an independent consultant into Network Rail’s progress in developing its proposals on the efficient level of maintenance and renewals spend needed.
Chief executive Joanna Whittington said: “Network Rail’s performance over 2016-17 has been mixed. The railway continued to be safe and the reliability of some assets has increased. However, these benefits have been overshadowed by continued inefficiency and poor train performance.
“We’re changing the way we regulate Network Rail to sharpen its focus on efficiency and performance. Network Rail must do its part and press on with its transformation programme, demonstrating that this will start to address inefficiency and meet performance expectations of passengers and freight customers now and into the spending period starting in 2019.”