Out-Law News 2 min. read
20 Oct 2017, 10:12 am
The funding, which includes a direct grant of just under £35bn plus Network Rail's expected income, will be used to "boost reliability and punctuality", as well as finance major upgrades around the country, according to transport secretary Chris Grayling. The next funding period will also coincide with a new funding process for major upgrades and enhancements, which will be used to ensure that these projects are deliverable and provide taxpayers with value for money.
The Scottish government will receive £3.6bn in central government railway funding over the same period. It will also be given more control over how best to spend the money.
The final funding settlement for England and Wales is expected to be around £10bn more than that which was allocated to the current spending 'control period' (CP), CP5. Transport expert Nigel Blundell of Pinsent Masons, the law firm behind Out-Law.com, said that the allocation was "encouraging" against an economic backdrop which included the UK's departure from the European Union and additional spending on the HS2 high speed rail project, although it covered elements of under spend from CP5.
Network Rail also intends to open up certain aspects of its planned investment to third party private sector partners, which would lead to some "interesting dynamics" and the potential growth of innovative partnership models, Blundell said.
"It will be interesting to see how the private sector makes its return on assets owned by Network Rail, whether through leasing of elements of the network or simply providing finance," he said. "Ultimately, we may end up with a wider range of potential partners interested in providing investment than just the train operating companies (TOCs)".
"Widening the number of stakeholders also opens up the potential for use of alliancing models, which allow for better sharing of the risks and rewards of a particular scheme between all the parties involved. This would be the full integration long contemplated between operators, Network Rail and its supply chain," he said.
The government currently expects to provide direct funding of up to £37.4bn to Network Rail over the coming control period, with the rest of the funding to be provided through a combination of track access charges and income from Network Rail's other commercial activities, including its property portfolio. These amounts will be refined and consulted upon next summer, with a final funding announcement expected in October 2018. Budgets will be set per route, as part of an ongoing process by Network Rail to devolve more accountability and authority to each of its geographic routes and the freight network.
The funding will be focused on the operation, maintenance and renewal of the railway, with any spending plans by Network Rail subject to "a strong efficiency challenge to maximise value for money" from the regulator, the Office of Road and Rail (ORR). The funding is also intended to cover deferred enhancements to the rail network that were originally planned for CP5, subject to ongoing assessment to ensure that they continue to deliver value for money for both rail users and taxpayers.
The money will also be used to fund early stage development of new enhancement schemes; however, the government intends to set out a new process for taking forward enhancements later in the year. This process will "ensure investment best addresses the needs of passengers and freight, and that funding commitments appropriately reflect the stage of development of those enhancements", according to the transport secretary.
In a statement to parliament, Grayling said that the funding plans were "stretching yet achievable".
"I will continue to push Network Rail to improve its effectiveness and efficiency," he said. "In particular, I support an ambitious approach to route devolution, so that Network Rail is more focused on its customers."
The government would also "modernise" its oversight of Network Rail "to properly reflect its public sector status" as part of plans for a wider rail strategy, he said.