14
Acknowledged
Specifically in relation to passenger service operations, prior to the COVID-19 pandemic, private sector companies...
Conclusion
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 increased in recent years, changing from a net surplus paid to the Department to net a deficit paid to operators in 2018–19.34 In March 2020, the Department told us it made a “conscious choice” to keep rail services running during the COVID-19 pandemic, despite the dramatic reduction in passenger numbers and associated revenue earned by operators. As a result, taxpayer financial support paid to operators increased significantly. The Department told us it will continue to pay operators to deliver services under the contracting system being drawn up as they transition operators from emergency measures. The Department acknowledged that transparency is “desirable” and will better enable Parliament and the public to understand what they are paying for in the rail system. The Department outlined its proposed quarterly review process for these new contracts, the outcomes of which should be made available to Parliament and the public.35 Written evidence we received reiterated the importance of improved financial transparency in light of recent significant increases in taxpayer funding to the rail system.36 30 C&AG’s report, p4 31 Q 34 32 Secretary of State for Transport, Great British Railways, The Williams-Shapps Plan for Rail, Department for Transport, May 2021 33 Q 23 34 C&AG’s report, p15 35 Qq 31, 42 36 Porterbrook (OE0001), paras 1.2, 6.2 12 Overview of the English rail system 2 Financial and environmental sustainability Interim National Rail contracts for passenger service delivery
Government Response Summary
The government acknowledges the Committee's conclusion regarding the significant increase in taxpayer funding and the Department's new contractual arrangements for passenger services. It details that National Rail Contracts (NRCs) involve annual business plans, with revenue and cost risk primarily with the Department, and performance incentivised through fees and contractual commitments, with NRC rollout ongoing.
Government Response
Acknowledged
Government Response
Acknowledged
HM Government
Acknowledged
4.1 The government agrees with the Committee’s recommendation. Target implementation date: Summer 2021 4.2 National Rail Contracts (NRCs) require train operators to deliver against annually-agreed business plans (ABPs) and performance targets. This allows these contracts to evolve as the industry recovers from the COVID-19 pandemic and reforms are implemented. Each year, the department will specify its objectives and negotiate updated business plans to help deliver those. 4.3 Revenue and cost risk sit with the department, subject to stringent tests of the efficiency of costs and revenue collection. Having limited financial risk allows operators to focus on operational areas within their control to drive improvements. The government will benefit from post-COVID-19 pandemic revenue recovery and cost savings from efficiency improvements. Annual budgets set caps for cost reimbursement to operators – NRCs require evidence and mitigating action before those caps can be increased. 4.4 The performance-based fee directly incentivises improved performance, with flexibility to switch from qualitative to quantified measures as circumstances permit. Fees are reduced if performance is poor; the department can require operators to develop and implement improvement plans. 4.5 ABPs will include commitments to specific activities, outputs and timescales, with operators contractually obliged to meet those commitments and the department can require remedial plans where they are not met. Where appropriate, the department can agree ‘Industry Change Projects’ with operators to further incentivise delivery of reforms that expose the operator to significant additional risk. 4.6 NRC rollout is ongoing, with three now in place (South Western, TransPenine Express and c2c). Before NRCs are agreed, a full business case is approved to ensure the contract is designed to incentivise improved performance, including Williams/Shapps Plan for Rail reforms.
Source
Committee
Public Accounts Committee
Report
Tenth Report - Overview of the English rail system
07 Jul 2021
HC 170
Addressee Bodies
HM Treasury
Timeline
Recommendation age
5.1 yrs
Report published
07 Jul 2021