Office of the Rail Regulator

Regulator establishes sound basis for improved delivery by Network Rail
_______________________________________________________________

date 12 December 2003
source Office of the Rail Regulator
type Press release

note ORR/22/03

The Rail Regulator, Tom Winsor, in his final conclusions on Network Rail's funding requirements, published today, has decided the company will receive £22.2bn -- substantially less than the company had originally asked for for the operation, maintenance and renewal of the rail network in Great Britain over the five years starting in April 2004.

Among his other conclusions the Regulator has established:

o the income Network Rail will need to cover this
expenditure;
o the outputs Network Rail must deliver (in terms
of cutting delays and improving asset condition;
o the outputs from and funding for the West Coast
Main Line route modernisation;
o performance incentives that will apply; and
tightly defined provision for future access charges
reviews within the next five years.
o Mr Winsor said: In return for this increased funding,
which is substantially less than the company had
originally requested, Network Rail must improve the
punctuality and reliability of railway services, by
increasing the volume and quality of maintenance and
renewal work it undertakes and thus deliver
improvements in the overall condition of the rail
infrastructure, and by improving its operational
management of the network.

Mr Winsor said: The increase will enable Network Rail safely and effectively to tackle the legacy it inherited from Railtrack: a legacy resulting from, among other things, poor planning and project delivery.

On the West Coast Main Line, I have concluded that Network Rail should be funded to deliver the outputs planned for September 2004 and the journey-time improvements to Liverpool and Scotland in 2005.

However, beyond that it is important to get the delivery mechanisms right if tight resources are not to be squandered regardless of the cost. Substantial savings, amounting to 22% of the estimates made by Network Rail in September 2003, can be achieved by extending the timescale for delivering certain other elements of the project which will provide a greater certainty of those outputs being delivered on time and on budget.

Total income
from access
charges paid
by franchised
passenger
operators
(£ million)

Total
revenues
including
income
from other
sources (£
million)

2004/05 3,135 5,125
2005/06 3,745 5,114
2006/07 3,676 4,949
2007/08 4,199 4,898
2008/09 4,137 4,843
Totals 18,892 24,929

The Regulator's conclusions also provide for a mechanism by which he could reduce the resulting increase in track access charges payable by franchised passenger train operators if Network Rail brings forward proposals, agreed with the Strategic Rail Authority and the Department for Transport, to change the balance in Network Rail's income between access charges and
direct grants from Government.

Tom Winsor said: Currently most of Network Rail's income comes from track access charges and the rest in grants. However, the Department for Transport has asked that I allow a change to the proportions between access charges and grants. This request has come too late for me to make a decision, but I have agreed to provide extra time until 29 February 2004 for a firm
proposal to be put forward on which I can make a decision.

I will consider any such proposals against a series of tests derived from my statutory duties, key among which are the need to ensure that Network Rail benefits from a sound and sustainable financial framework and that its focus is firmly on meeting the requirements of its train operator customers, and I will be seeking rail industry views by the end of January 2004 on the
criteria I propose to apply.

[The document -- Access charges review 2003: final conclusions -- published on 12 December 2003 is available at www.rail-reg.gov.uk/filestore/bluedocs/184.pdf.] [[see related documents]]


Notes for editors:

1. Track access charges, payable by franchised
passenger train operators, are needed to fund
Network Rails activities in the operation,
maintenance and renewal of the national railway
infrastructure in a manner that will efficiently and
economically meet the reasonable requirements of
its train operator customers, in accordance with
the terms of its network licence. The review
began in November 2002 with any revision of
access charges found necessary coming into
effect from April 2004.

2. The draft conclusions document - The interim
review of track access charges: draft conclusions
published on 17 October 2003.

3. The third consultation document - The interim
review of track access charges: Third consultation
published on 24 July 2003.

4. Also published on 24 July 2003 was a further
document in this series - The interim review of
track access charges: West Coast Route
Modernisation : Provisional conclusions.
This document sets out:
(a) the background of the West Coast Route
Modernisation (WCRM) project, latest
requirements and plans for delivery;
(b) the Regulators functions and duties with
regard to the WCRM project;
(c) the findings of his consultants Booz Allen
Hamilton;
(d) potential options for the way forward; and
(e) proposed next steps, including the Regulators
proposed future regulatory approach to the
WCRM project.

5. The second consultation document - The interim
review of track access charges: Second
consultation paper: The incentive and financial
framework: - published on 13 February 2003.

6. The first consultation document - The interim
review of track access charges: Initial
consultation published on 15 November 2002.

7. [The statement Network Rail: Interim review of
access charges, published on 25 September 2002,
is available from the ORR website at
www.rail-reg.gov.uk/filestore/bluedocs/150.pdf.]

8. The documents are also available from Sue
MacSwan, ORR Librarian, 1 Waterhouse Square,
138-142 Holborn, London EC1N 2TQ. Tel: 020
7282 2001; fax: 020 7282 2045; email :
rail.library@orr.gsi.gov.uk.

Press enquiries
ORR Press Office: 020 7282 2002/2007
Out of hours pager 07659 127303

Railhub Archive ::: 2003-12-12 ORR-001