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
7 Recommendations
19 Conclusions
1 Report
1 Oral session
1 Event
Activity timeline 3 events
28 Oct
2021
Report published
7 Jul
2021
Report published
13 May
2021
Oral evidence
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
16 results
Clear
2 Recommendation Accepted
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
The government agrees and will write to the Committee by December 2021, detailing the Rail Transformation Programme with three phases of delivery including legislative reform by 2022-23 and Great British Railways fully operational from 2024.
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3 Recommendation Accepted
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
The government accepts the recommendation and will write to the Committee in December 2021 with plans to improve transparency. It has begun developing whole-system financial reporting capabilities and will consider options for publishing this data, while noting potential commercial and regulatory constraints.
HM Treasury
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4 Recommendation Accepted
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
Government Response
The government accepts the recommendation, outlining that National Rail Contracts (NRCs) require operators to deliver against annual business plans and performance targets, with revenue and cost risk primarily with the Department. Performance-based fees directly incentivise improvements, and ABPs include commitments to specific activities and outputs.
HM Treasury
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5 Recommendation Accepted
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
Government Response
The government accepts the recommendation and will write to the Committee in December 2021. It has published the Transport Decarbonisation Plan and Rail Environment Policy Statement, committing to an ambitious electrification program guided by Network Rail’s TDNS, and will fund new schemes through the Rail Network Enhancements Pipeline.
HM Treasury
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6 Recommendation Accepted
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
The government accepts the recommendation, and Network Rail will write to the Committee by December 2021 to detail its efficiencies plan for Control Period 6. This plan will include improvements in approach, process, incentivisation, governance, efficiency targets, the framework for tracking costs, and the impact of COVID-19.
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8 Conclusion Accepted
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
The government agrees with the committee's conclusion and commits to further integrating public transport, detailing plans for bus funding, cycling facilities at stations, and integrated station management under Great British Railways.
HM Treasury
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9 Conclusion Accepted
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
Government Response
The government acknowledges the Committee's conclusions regarding past rail system problems and the broken franchising model. It has set up a comprehensive Rail Transformation Programme, aiming to deliver a new rail system with Great British Railways fully operational from 2024 onwards, through three distinct phases of design, capability building, and transition.
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10 Conclusion Accepted
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
Government Response
The government agrees and has established a Rail Transformation Programme with three phases, including designing a Target Operating Model, progressing legislation for structural reform by 2022-23, and making Great British Railways fully operational from 2024.
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11 Conclusion Accepted
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
Government Response
The government acknowledges the Committee's conclusion regarding the Rail white paper and the complex reforms it outlines, including the associated risks. It has established a Rail Transformation Programme, detailing a three-phase approach to implement reforms, design a target operating model, progress legislation, and have Great British Railways fully operational from 2024 onwards.
HM Treasury
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13 Conclusion Accepted
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
Government Response
The government agrees with the (implied) recommendation to implement its white paper, having initiated a Rail Transformation Programme. This programme involves three phases: designing a Target Operating Model, building operational capability and progressing legislation by 2022-23, and transitioning to Great British Railways fully operational from 2024 onwards.
HM Treasury
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15 Conclusion Accepted
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
Government Response
The government agrees and is implementing National Rail Contracts (NRCs) that require operators to deliver against annual business plans and performance targets, shifting revenue and cost risk to the department and incentivising performance through fees.
HM Treasury
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16 Conclusion Accepted
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
Government Response
The government agrees and is implementing National Rail Contracts (NRCs) which shift revenue and cost risk to the department, require operators to meet annually-agreed business plans, and incentivize improved performance through fees, addressing past franchising model issues.
HM Treasury
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17 Conclusion Accepted
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
Government Response
The government agrees with the committee's observation and provides details on the ongoing rollout of National Rail Contracts (NRCs), explaining how these new performance-based contracts will evolve to manage costs and incentivize efficiency.
HM Treasury
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19 Recommendation Accepted
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
Government Response
The government agrees and explains that National Rail Contracts (NRCs) with annually-agreed business plans and performance-based fees will incentivise operators to make cost savings and improve performance, with three NRCs already rolled out.
HM Treasury
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21 Conclusion Accepted
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
The government agrees with the committee's concern regarding rail electrification, committing to deliver an ambitious, sustainable, and cost-effective programme of electrification and to write to the Committee in December 2021 with further details on funding and long-term plans.
HM Treasury
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22 Recommendation Accepted
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
The government accepts the recommendation, committing to an ambitious, sustainable, and cost-effective electrification program guided by the Transport Decarbonisation Plan and Network Rail’s TDNS. New schemes will be advanced through the Rail Network Enhancements Pipeline, with Great British Railways taking future responsibility.
HM Treasury
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Government Response AI assessment · 25 of 7 classified
Accepted 16
Accepted in Part 1
Acknowledged 3
Deferred 4
Not Addressed 1
Total 7 recs + 19 conclusions