Overview of costs in the English rail system

Public Accounts Committee Closed Inquiry
Opened: 26 Apr 2021 Closed: 16 Nov 2021 Parliament page
The rail franchise model has high fixed costs and low profit margins. The Department for Transport’s (DfT) net income from letting franchises fell significantly from 2016-17, becoming a net government subsidy in 2019-20. As passenger numbers dropped in the COVID-19 pandemic, rail industry income fell dramatically. It is unclear how … Read more
2 Recommendations
24 Conclusions
1 Report
1 Oral session
1 Event
Activity timeline 4 events
28 Oct
2021
Report published
7 Jul
2021
Report published
13 May
2021
Oral evidence
13 May
2021
Formal meeting (oral evidence session) · The Wilson Room, Portcullis House
Oral evidence sessions 1 session
13 May 2021
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Overview of costs in the English rail system
Andrew Haines · Network Rail Bernadette Kelly CB · Department for Transport Conrad Bailey · Department for Transport John Larkinson · Office of Rail and Road
Title HC No. Published Items Response
Tenth Report - Overview of the English rail system HC 170 7 Jul 2021 26 Responded
Recommendations & Conclusions
26 results
2 Conclusion
Tenth Report - Overview of the Eng…
In recent years, we have identified serious failings in the rail system, and the Department...
In recent years, we have identified serious failings in the rail system, and the Department must now overcome significant long-standing issues to bring about complex reform. We have previously reported on the problems inherent in the rail system, such as: … Read more
Government Response
2: PAC conclusion: In recent years, we have identified serious failings in the rail system, and the Department must now overcome significant long-standing issues to bring about complex reform. 2: … Read more
HM Treasury
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3 Conclusion
Tenth Report - Overview of the Eng…
Published information from the Department and the Office of Rail and Road on whole-system costs...
Published information from the Department and the Office of Rail and Road on whole-system costs and revenues is not sufficient to inform proper oversight of the rail system, given the extent of taxpayer exposure. The arrangements for delivering rail services … Read more
Government Response
3.1 The government agrees with the Committee’s recommendation. Target implementation date: December 2021 3.2 The government will write to the Committee in December 2021. The government’s financial support for the … Read more
HM Treasury
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4 Recommendation
Tenth Report - Overview of the Eng…
It is not yet clear that the interim National Rail contracts fairly distribute risks between...
It is not yet clear that the interim National Rail contracts fairly distribute risks between government and operators, or provide incentives for operators to deliver efficient, high-quality, and value-for-money passenger services. In previous reports the Committee highlighted failings in the … Read more
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5 Recommendation
Tenth Report - Overview of the Eng…
We are disappointed at the lack of progress in agreeing a specific and funded plan...
We are disappointed at the lack of progress in agreeing a specific and funded plan for the electrification required to achieve the government’s own net zero targets. Electrification of the network is the key mechanism for delivering rail decarbonisation. It … Read more
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6 Conclusion
Tenth Report - Overview of the Eng…
It is not clear to us how Network Rail expects to achieve the remaining efficiencies...
It is not clear to us how Network Rail expects to achieve the remaining efficiencies planned in Control Period 6. In Control Period 5 (2014–15 to 2018–19), Network Rail failed to achieve its efficiencies target as agreed with the Office … Read more
Government Response
6.1 The government agrees with the Committee’s recommendation. Target implementation date: December 2021 6.2 Network Rail will write to the Committee in December 2021. Network Rail remain committed to delivering … Read more
HM Treasury
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1 Conclusion
Tenth Report - Overview of the Eng…
On the basis of a Report by the Comptroller and Auditor General, we took evidence...
On the basis of a Report by the Comptroller and Auditor General, we took evidence from the Department for Transport (the Department), Network Rail and the Office of Rail and Road on costs in the English rail system.1 We also … Read more
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20 Conclusion
Tenth Report - Overview of the Eng…
Net government funding increased 99.7% in real terms between 2015–16 and 2019–20 from £2.6 billion...
Net government funding increased 99.7% in real terms between 2015–16 and 2019–20 from £2.6 billion to £5.1 billion. This reflects increases in expenditure on operating and maintaining rail network infrastructure and the pre-COVID-19 deterioration in the passenger rail market as … Read more
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7 Conclusion
Tenth Report - Overview of the Eng…
As well as providing critical revenue for the rail system, passenger rail travel supports wider...
As well as providing critical revenue for the rail system, passenger rail travel supports wider government objectives around transport decarbonisation and achieving net zero. We asked the Department how they planned to encourage people out of their cars onto rail. … Read more
Government Response
2021. This is the government’s response to the Committee’s report. Relevant reports • NAO report: Overview of English Rail System – Session 2021-22 (HC 1373) • PAC report: Overview of … Read more
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8 Conclusion
Tenth Report - Overview of the Eng…
The Department referred to its recently published strategies on bus travel18 and cycling and walking19...
The Department referred to its recently published strategies on bus travel18 and cycling and walking19 and told us that integration between modes of transport is “critical” to make public transport an attractive and practical choice for passengers.20 However, in these … Read more
Government Response
1.3 The government agrees with the Committee’s recommendations. Target implementation date: December 2021 1.4 The government will write to the Committee in December 2021. The UK already has a well-developed … Read more
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9 Conclusion
Tenth Report - Overview of the Eng…
We have previously reported on the problems inherent in the rail system which have led...
We have previously reported on the problems inherent in the rail system which have led to poor performance and reliability of the network. Even before the pandemic, we and the Transport Committee had reported on the Department’s franchising model and … Read more
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10 Conclusion
Tenth Report - Overview of the Eng…
We were interested to hear the Department’s views on the main issues caused by the...
We were interested to hear the Department’s views on the main issues caused by the rail system’s current structural organisation. The Department recognised that problems have emerged over a number of years, partly the result of poor alignment between Network … Read more
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11 Conclusion
Tenth Report - Overview of the Eng…
After our evidence session, on 20 May, the Department published its long-delayed Rail white paper,...
After our evidence session, on 20 May, the Department published its long-delayed Rail white paper, which outlines its “once-in-a-generation” reforms planned for the rail system, including replacing franchising and better integrating infrastructure with passenger services.25 The Department acknowledges that it … Read more
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12 Conclusion
Tenth Report - Overview of the Eng…
Since privatisation in the 1990s, cash flows in the rail system have become increasingly complex.
Since privatisation in the 1990s, cash flows in the rail system have become increasingly complex. Although the rail system is privatised, government still provides significant funding for infrastructure operations, maintenance and renewals, and ongoing subsidy for passenger service operations. The … Read more
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13 Conclusion
Tenth Report - Overview of the Eng…
The Rail white paper outlines government’s plans for a new rail system, with one body...
The Rail white paper outlines government’s plans for a new rail system, with one body responsible for overseeing infrastructure and passenger services and with less complex financial transactions.32 The Office of Rail and Road told us that such a “guiding … Read more
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14 Conclusion
Tenth Report - Overview of the Eng…
Specifically in relation to passenger service operations, prior to the COVID-19 pandemic, private sector companies...
Specifically in relation to passenger service operations, prior to the COVID-19 pandemic, private sector companies operated passenger services under a franchise model but still received some level of government funding. The amount of government funding provided to train operators has … Read more
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15 Conclusion
Tenth Report - Overview of the Eng…
The Department acknowledged that there were significant challenges inherent in its franchising model used prior...
The Department acknowledged that there were significant challenges inherent in its franchising model used prior to the pandemic. It told us that the previous surplus in franchising costs had become a deficit prior to the pandemic.37 During the final four … Read more
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16 Conclusion
Tenth Report - Overview of the Eng…
Our previous reports have covered some of the commercial difficulties caused by the Department’s franchising...
Our previous reports have covered some of the commercial difficulties caused by the Department’s franchising model. In the worst-case scenarios, issues such as over- optimistic assumptions of passenger growth led to severe operator losses and early contract terminations.39 These contract … Read more
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17 Conclusion
Tenth Report - Overview of the Eng…
The Department updated us on the Emergency Recovery Measures Agreements (ERMAs), which it put in...
The Department updated us on the Emergency Recovery Measures Agreements (ERMAs), which it put in place as an overlay to franchising agreements in response to the dramatic loss in passenger revenue caused by the COVID-19 pandemic. The ERMAs transferred all … Read more
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18 Conclusion
Tenth Report - Overview of the Eng…
Following our session on 13 May 2021, the Department told the Transport Committee that negotiations...
Following our session on 13 May 2021, the Department told the Transport Committee that negotiations with all train operators have concluded around terminating the underlying franchise agreements, which is necessary to enable the transition of operators 37 Qq 19, 31 … Read more
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19 Conclusion
Tenth Report - Overview of the Eng…
We were concerned that the short-term nature of these new contracts could fail to incentivise...
We were concerned that the short-term nature of these new contracts could fail to incentivise operators to make cost savings and improve performance, and asked the Department to explain how operators would be incentivised to keep costs down. The Department … Read more
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21 Conclusion
Tenth Report - Overview of the Eng…
The Department told us that electrifying the rail network is a key part of decarbonising...
The Department told us that electrifying the rail network is a key part of decarbonising and achieving net zero on the railway and that to ensure success, a steady long-term plan for electrification is needed. However, the Department acknowledged that … Read more
Government Response
5: PAC conclusion: We are disappointed at the lack of progress in agreeing a specific and funded plan for the electrification required to achieve the government’s own net zero targets … Read more
HM Treasury
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22 Conclusion
Tenth Report - Overview of the Eng…
The Department acknowledged that long-term, strategic direction on electrification is needed to provide market certainty...
The Department acknowledged that long-term, strategic direction on electrification is needed to provide market certainty for operators, rolling stock companies and the procurement of trains that will be able to operate on the network and to drive innovation. It also … Read more
Government Response
5.1 The government agrees with the Committee’s recommendation. Target implementation date: December 2021 5.2 The government will write to the Committee in December 2021. In July 2021, the government published … Read more
HM Treasury
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23 Conclusion
Tenth Report - Overview of the Eng…
The Office of Rail and Road told us that in Control Period 5 (2014–15 to...
The Office of Rail and Road told us that in Control Period 5 (2014–15 to 2018–19), Network Rail became less efficient and failed to meet efficiency targets.58 Indeed, in contrast to assumptions made by the Office of Rail and Road … Read more
Government Response
6.2 Network Rail will write to the Committee in December 2021. Network Rail remain committed to delivering the committed efficiency improvements in Control Period 6, and Network Rail will continue … Read more
HM Treasury
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24 Conclusion
Tenth Report - Overview of the Eng…
In the first year of Control Period 6 (2019–20), Network Rail exceeded its planned efficiency...
In the first year of Control Period 6 (2019–20), Network Rail exceeded its planned efficiency savings; achieving £385 million compared to £316 million expected.61 The Office of Rail and Road told us that Network Rail has improved its efficiency through … Read more
Government Response
6.2 Network Rail will write to the Committee in December 2021. Network Rail remain committed to delivering the committed efficiency improvements in Control Period 6, and Network Rail will continue … Read more
HM Treasury
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25 Conclusion
Tenth Report - Overview of the Eng…
But Network Rail recognised that there “is still a mountain to climb” to achieve the...
But Network Rail recognised that there “is still a mountain to climb” to achieve the full efficiency improvements it has committed to, and that it will need to continue to increase savings.63 Network Rail estimated that 60% of remaining planned … Read more
Government Response
6.2 Network Rail will write to the Committee in December 2021. Network Rail remain committed to delivering the committed efficiency improvements in Control Period 6, and Network Rail will continue … Read more
HM Treasury
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26 Conclusion
Tenth Report - Overview of the Eng…
In 2020, the Office of Rail and Road reported inherent uncertainty in the value of...
In 2020, the Office of Rail and Road reported inherent uncertainty in the value of some of the efficiency savings made by Network Rail in 2019–20.69 The Office of Rail and Road told us that it has now agreed a … Read more
Government Response
6.2 Network Rail will write to the Committee in December 2021. Network Rail remain committed to delivering the committed efficiency improvements in Control Period 6, and Network Rail will continue … Read more
HM Treasury
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