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Regulator promises tougher targets for Network Rail

The Office of Rail Regulation (ORR) has said Network Rail must meet a new minimum level of outputs, but will also be eligible for incentives for out-performance. The regulator said Network Rail could do more to drive costs down in its strategic business plan, and provisionally approved 'early start' work on the renovation of London's Kings Cross station.

According to Network Rail's chief executive, Bill Emery, "Our initial review of Network Rail's business plan leads us to believe the company can make significantly greater efficiency savings than those assumed in its present plans, without affecting delivery of the railway the nation requires. We expect the company to respond to this challenge."

According to the ORR's update on Network Rail's outputs and business plan, published today, the regulator is, "concerned that there are many parts of the plan that we do not consider robust or sufficiently well justified to enable us to use them without making material adjustments in our determinations."

The ORR said plans for performance "do not represent a clear and robust approach", while expenditure plans, other than expenditure on track renewals, were "poorly developed". The ORR also said, "Network Rail may be at least 30% less efficient than the average of other European rail infrastructure managers". The regulator was also "not fully convinced" Network Rail would be able to deliver work in a "timely and efficient manner".

For Network Rail's new regime, the ORR will introduce minimum outputs, for example in network capacity or total delay minutes, for the length of the 2009-2014 financial control period. Network Rail would have to meet further annual targets and a series of monitoring indicators. Failure to meet these targets could trigger a licence breach investigation by the regulator.

But the ORR offers a carrot in addition to the stick. Where Network Rail outperforms its targets, then outputs can be fine-tuned to extra capacity, or an "outperformance benefit-sharing mechanism" could come into play, where Network Rail can share its outperformance with train or freight operating companies. Network Rail will also benefit from increases in volume.

However, reducing safety risk by 3% between 2009-2014 did not throw up any, "insurmountable concerns".

Emery said: "Today's publication represents an important milestone in our review of Network Rail's access charges and outputs. We are setting out details of how we will hold the company accountable for delivery of the specifications set by government and of the needs of its customers.

"The objectives of this review are for Network Rail, working with its industry partners, to deliver a railway that is safer and more reliable than ever, while carrying ever more passengers and freight at a cost that represents ever better value for money for rail users and taxpayers.

"We will be establishing a wider range of obligations on Network Rail, filling in important gaps in the current suite of regulatory output requirements. Network Rail will be required to meet new targets on the amount of time the network is available to run train services and, for the first time, specific five-year targets for improvements in reliability for individual train operators - all of which will be enforced by ORR."

The ORR also gave its draft opinions on whether 'early start' work on a series of projects were justified, and has approved most, including the renovation of Kings Cross:

• Kings Cross renovation
• Airdrie to Bathgate route.
• Thameslink, subject to no major issues with the output / funding match.
• Reading and Birmingham New Street stations
• SW main line 10 car upgrade
• Bletchley-Milton Keynes reinstatement, the 'East-West rail' line
• North London Line: subject to further information from Network Rail
• National stations improvement programme – the ORR confirms the first tranche of projects
• Access for all allowance.

A Network Rail spokesman said, "We note the ORR's latest assessment of our plans to expand and re-build the railway between 2009 and 2014. Much has already been delivered with improved train performance and big reductions in costs.

"We have already submitted detailed proposals for the next five years and will continue to work with our industry partners to deliver a bigger, better railway within the tough framework of efficiency savings."

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