Tenth Report - Overview of the English rail system

Select Committee

Public Accounts Committee HC 170 7 July 2021

Report Status Government responded

Conclusions & Recommendations 26 items (7 recs)

Source View on Parliament website

Government Response (AI assessment · 25 of 26 classified)

Accepted 16

Accepted in Part 1

Deferred 4

Not Addressed 1

Government response

Treasury minutes: Government response to the Committee of Public Accounts on the Tenth report from Session 2021-22 · published 28 Oct 2021

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Recommendations & Conclusions

16 results

2 Recommendation Accepted

In recent years, we have identified serious failings in the rail system, and the Department...

Recommendation

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 Summary

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.

HM Treasury

3 Recommendation Accepted

Published information from the Department and the Office of Rail and Road on whole-system costs...

Recommendation

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 Summary

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

4 Recommendation Accepted

It is not yet clear that the interim National Rail contracts fairly distribute risks between...

Recommendation

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 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 Department’s previous commercial model of rail franchising. The COVID-19 pandemic brought an end to this approach and transferred all revenue and cost risk from operators to the government through two rounds of emergency measures which overlaid franchise agreements. These arrangements directly expose the taxpayer to operators’ income and expenditure positions and led to significant financial support to operators during 2020–21. The Department is now putting in place interim National Rail contracts as a bridge between emergency measures brought in in response to the COVID-19 pandemic and implementing long-term reforms to service delivery set out in the Rail white paper. It will be vital to put in place contracts which reduce taxpayer risk exposure, alongside providing the necessary resilience, and meaningfully incentivising operators to grow revenue, reduce cost and harness commercial expertise. However, the Department has not set out in sufficient detail the exact nature of these contracts, nor how it will use them to incentivise improved performance. In addition, we are concerned that the majority of cost risk Overview of the English rail system 7 and revenue risk will remain with government under these contracts, leaving the taxpayer exposed to fund a currently unquantified bill. The Department will also require significant resource to manage and oversee these new contracts. Recommendation: The Department should set out in its Treasury Minute response the high-level terms of the new National Rail contracts, where revenue and cost risk will lie, and how it is using these to incentive improved performance, beyond the planned performance-based management fees. Show less

Government Response Summary

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

5 Recommendation Accepted

We are disappointed at the lack of progress in agreeing a specific and funded plan...

Recommendation

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 Summary

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

6 Recommendation Accepted

It is not clear to us how Network Rail expects to achieve the remaining efficiencies...

Recommendation

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 Summary

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.

HM Treasury

8 Conclusion Accepted

The Department referred to its recently published strategies on bus travel18 and cycling and walking19...

Conclusion

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 Summary

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

9 Conclusion Accepted

We have previously reported on the problems inherent in the rail system which have led...

Conclusion

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 Summary

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.

HM Treasury

10 Conclusion Accepted

We were interested to hear the Department’s views on the main issues caused by the...

Conclusion

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 Summary

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.

HM Treasury

11 Conclusion Accepted

After our evidence session, on 20 May, the Department published its long-delayed Rail white paper,...

Conclusion

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 Summary

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

13 Conclusion Accepted

The Rail white paper outlines government’s plans for a new rail system, with one body...

Conclusion

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 Summary

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

15 Conclusion Accepted

The Department acknowledged that there were significant challenges inherent in its franchising model used prior...

Conclusion

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 Summary

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

16 Conclusion Accepted

Our previous reports have covered some of the commercial difficulties caused by the Department’s franchising...

Conclusion

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 Summary

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

17 Conclusion Accepted

The Department updated us on the Emergency Recovery Measures Agreements (ERMAs), which it put in...

Conclusion

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 Summary

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

19 Recommendation Accepted

We were concerned that the short-term nature of these new contracts could fail to incentivise...

Recommendation

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 Summary

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

21 Conclusion Accepted

The Department told us that electrifying the rail network is a key part of decarbonising...

Conclusion

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 Summary

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

22 Recommendation Accepted

The Department acknowledged that long-term, strategic direction on electrification is needed to provide market certainty...

Recommendation

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 Summary

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