UK Rail Strategy 2024 looking to the future

The direction that the UK rail industry takes in the next few months is taxing the minds of many and generating much speculation. To try to understand the issues and to perceive the likely way forward, an online conference was recently organised by the Westminster Energy, Environment and Transport Forum. The outcome probably raised a considerable degree of uncertainty amongst the attendees. Mixed messages emerged but the availability of finance was at the heart of the debate.

Rail reform

To set the scene, Jonny Mood from the National Audit Office (NAO) – the independent public spending watchdog in support of parliament – questioned whether the Department for Transport (DfT) really understood the rail sector. That rail systems need to change is pretty much agreed as taxpayer funding is too high and performance for both passengers and freight is not good enough.

The government has produced a Rail Reform Bill but with a timetable that is high risk. The establishment of Great British Railways (GBR) has been planned for over three years but there has been little progress toward implementation. The plans are front end loaded for expenditure, but the Treasury wants £2.6 billion in savings to come from the reform of work practices.

The government plans are viewed as too complicated, and the delays have added to the financial uncertainties resulting in higher costs. The DfT and the Treasury are not seeing eye to eye on the resultant risks. With little expected to happen before the general election, any potential savings will not be realised before the next parliament. New passenger contracts will not happen, leaving items listed in the Bill as unclear. The impact of Covid is recognised but the return of passenger growth is misaligned between the TOCs and DfT. Even short-term activities aimed at implementation in 2025 are in doubt.

Optimisation of rail timetables and a fundamental shake up of fares and ticketing is vital but there is difficulty in getting rail companies to buy into this. The last three years have seen some progress and will be relevant to the ongoing situation. Getting an understanding of targets and scope changes will be fundamental.

The NAO concludes that performance has not been good enough, with the DfT not understanding the implementation issues or able to translate these into deliverables.

A legal perspective

The recent announcement by the Labour Party on future rail policy has caused legal minds to analyse what it means, according to Tammy Samuel from Stephenson Harwood. The timing and structure of rail reform remains uncertain, but GBR will happen as it is already operating in shadow mode.

The nationalisation of the rail passenger services as TOC contracts expire has made headline news but needs analysing. LNER, South Eastern, Northern, and Trans Pennine Express are already effectively nationalised as they are operated by the government following poor performance or financial irregularities. Railways in Wales are owned by Transport for Wales, a Welsh-government-controlled company and Scotrail is similarly owned and operated by the Scottish parliament.

It is therefore only the remaining franchised TOCs that will be nationalised. Open access operators, the rolling stock leasing companies (ROSCOs), and the freight companies will not be.

At privatisation, the original franchised TOCs had great decision-making power but this has ebbed away with the abandonment of most private sector involvement. It is hoped that if Labour win the election, private sector involvement will be encouraged.

All this uncertainty has exacerbated the skills shortage, and building back confidence for career futures will be important. Whatever happens, organisational reform must not interfere with performance improvements.

Passengers’ viewpoint

Natasha Grice from Transport Focus informed participants of a recent survey of 15,000 passengers. Their main concerns were obtaining value for money, punctuality, and reliability, but train frequencies and information when disruption occurs were also mentioned. Overall, 85% of passengers were satisfied with the service but this number varied across the TOCs; 74% for Wales up to 92% for Great Northern.

Rail use has changed since the pandemic began with lapsed users wanting lower fares to trigger a return to rail. The help of frontline staff can be a big factor, particularly when buying tickets. Minimising the effect of engineering work is a worry. Blockades are financially beneficial to undertake renewals compared to a multiplicity of weekend work, although it was acknowledged that information provision, especially on the availability of alternative routes, could be much improved.

In short, fares & ticketing, train capacity, information provision, and day to day performance all need improvement if the passenger market is to grow.

A trade union perspective

News and media headlines invariably cast the trade unions in a negative light by being unwilling to change working practices. However, their views can be important as invariably they see life at the ‘coal face’. Mick Whelan from ASLEF emphasised the need for the rail industry to work as a partnership. In the last five years, the privatised model for rail operation has become seen as flawed by most people. For example, despite rail’s ability to offer a ‘turn up and go’ offering, the price of so doing is often extortionate and people use other means of travelling. Scotland is leading the way to get this put right.

The discontinuity of the European Train Control System (ETCS) programme is a concern. A little here, a little there, but with not much joined up. This makes it difficult and inefficient for the training of drivers and the familiarity of other staff. An accelerated programme for whole route conversions would be welcomed.

The way people work has changed since the pandemic with season ticket income (almost a type of bond) all but disappeared. Capacity planning has to align with this but is slow in being realised. The ‘directing mind’ of someone who knows the intricacies and pressure points of the industry is badly needed and establishing GBR is therefore welcomed. The demand for rail freight growth is welcomed but currently drivers in that sector are leaving in droves and it will become a major problem to crew trains if the perceived growth is realised.

The present industrial relations dispute was referred to. Interestingly, there is no problem in Wales and Scotland, as well as with Merseyrail and some others, but elsewhere no meaningful negotiations have happened for months with the government seemingly dictating what or what not to do. The plea was made – just talk to us and a deal will be arrived at.

Rail Future vision

As would be expected, Chris Page from Rail Future would like to see a bigger, better railway but the financial hole of the industry was recognised. There needs to be a better understanding of what the railway is for. In addition to basic travel and reliability, sustainability and environment issues should be part of the agenda.

Fundamental will be firming up on future structure and ownership. Empowering expert leaders, creating a trajectory for revenue spend, and publishing a longer-term investment pipeline will be crucial. Decarbonising via a strategy for electrification or battery traction would be welcomed. Reforming fares and ticketing is top of the agenda with decisions removed from ministers and civil servants. Playing politics is very damaging.

Industry requirements

Robert Cook spoke for the Railway Industry Association (RIA) which represents industrial suppliers to the railway ranging from large international groups down to small and medium enterprises (SMEs). To get efficient deliverables from industry, a long-term strategy is needed with a 30 year plan and a refresh every five years. This will give confidence to invest in staff, planning and factory deliverables. No business can currently do this with any certainty.

GBR is key to a having a long-term financial strategy whilst recognising the risk of allowing a build-up of renewals work that will eventually impact on train services. The future relationship between GBR and government must not restrict rolling stock procurement or timetable creation.

Northern Power House

This organisation has been prominent in its objectives for many years but has been somewhat wrongfooted by the cancellation of Phase 2a of HS2 and the associated problem of congestion on the West Coast Main Line around Stafford. Henri Munson considered the impact and what might replace it. Central government funding for major projects does not seem to work but alternative finance provision is a dilemma. Maybe a localised tax base would help, but how would this work in practice and how can savings be made? Council Tax increases are ruled out so funding from the local private sector might work if this benefits local businesses plus, perhaps, a settlement from central government.

Northern Power House would like to see electrification of the Trans Pennine route all the way from Liverpool to Hull including the links to Selby and Doncaster. This would avoid the need for hybrid trains which are more expensive than electric trains. Rail keeps making partial decisions on investment without any real idea of the end game.

More ambitious ideas envisage a new line from Huddersfield to Warrington as a second part of the Trans Pennine upgrade, plus a need to better connect the East and West Midlands using Leicester as a hub, with joined up thinking across the counties.
The state of the infrastructure

Rail infrastructure is all part of the system and not something to be considered in isolation, so said Professor Paul Plummer from University of Birmingham and one time head of the Rail Delivery Group. A long-term plan to understand what infrastructure resilience will cost is also required.

Common standards across the network are needed, but putting customers first is a priority. GBR and rail reform will help, but a clear and consistent narrative on environment, sustainability and decarbonisation objectives has to part of the plan.

At grass roots level, Alastair MacDonald from Balfour Beatty spoke of the major work to replace the viaduct between Oxford and Didcot, and the associated disruption this caused. Similar major works will be required at other locations as weaknesses become known. Constant strengthening of banks and cuttings is happening with real time monitoring showing up emerging problems before major failures occur.

One hundred and twenty thousand engineers and technicians are required every year to keep the infrastructure in good order, meaning that investment in apprenticeships and graduates must be ramped up with an emphasis put on local suppliers to encourage new recruitment. Off-site manufacture of components will help this.

Regrettably, the actual money spent at the worksites as compared to the overheads of renewal provision is a decreasing percentage. There is an urgency to get requirements firmed up at the start and not to then change the scope. The five-year control periods do give the supply industry a degree of certainty but much improved planning is vital.

A touch of reality

Rail reform is mentioned constantly but the real problems are something different, so said Stephen Glaister, emeritus Professor of Transport and Infrastructure at Imperial College London, and a former head at the Office of Rail and Road (ORR). First, the size of the railway has increased by a factor of three over 15 years. Government fiscal support in 2019 was £12 billion per year but post-Covid lockdowns, the next government will face a support level of £18 billion per year, which represents about £600 for every household. The terms of reference for the Williams Shapp report precluded any increase in government money, whereas the public expectation is a reduction in fares and better services.

The equations do not stack up. Questionable is why various parts of the railway are subsidised differently: Northern is 29.5p per passenger, Great Western is 10.8p, Greater Anglia is 1.1p, whereas C2C is -1.4p (i.e., it makes a contribution). The average is 6.4p per passenger, so what accounts for these vast differences?

Secondly, governance is an issue where three things need attention – a more effective system operation which is already much improved, better procurement of passenger services which might come with nationalisation, and the resolution of ongoing industrial relations problems.

Much is talked about the creation of GBR but beware of learning from the demise of the previous Strategic Rail Authority. Reading the history of this in the Terry Gourvish report should be mandatory. The subsidy for bus operation and the maintenance of local roads will be big money devolved to Local Authorities and where rail has only 10% of the market. Transport taxation and fuel duty is controversial but policies for net zero carbon may influence this.

On a brighter note, CP6 did deliver the efficiencies set out but it is difficult to see how this would work for a nationalised railway.

Delivering the strategy

While GBR will eventually become a reality, in the short term it will be largely down to Network Rail to deliver the strategy, according to Paul McMahon, Network Rail’s director for planning and regulation. With £45.4 billion allocated for maintenance and renewals in CP7, the plans for spending this money will be owned by the regions and functions. HQ will coordinate and align the strategy across the network, ever mindful of delivering the UK and Scottish governments objectives. With its devolved organisation, NR’s plans will concentrate on:

• Improving train performance.
• Growing rail freight.
• Improving environmental performance.
• Keeping asset age to a minimum.
• Increasing efficiency to combat inflation.
• Infrastructure monitoring and climate change recognition.
• Speeding up the introduction of digital signalling (ETCS).
• Improving public, passenger, and workforce safety.

To achieve these, four areas of working practice will need to be reviewed and modernised:

• Capability – skills and competence, use of technology, and processes.
• Efficiency – contracting, standards, maintenance modernisation, obtaining a whole industry approach.
• Agility – response to emergency challenges and opportunities.
• Collaboration – working together with industry and stakeholders.

Monitoring the strategy deliverables

The ORR has a duty to police the effectiveness of any new strategy but with a priority to focus efforts on the end user, said Will Godfrey, its director of economics, finance, and markets. Periodic reviews take account of the items listed by NR but also structural changes in demand (e.g. during a pandemic) and industrial action.

During the Covid pandemic emergency, train punctuality improved measurably because there were fewer passengers and trains. Freight traffic declined by 8% between 2014/5 and 2023/4 but a target of 1.3% growth is set for CP7. Of the £45.4 billion allocated for the period, 40% of expenditure will be for keeping the network in good order but with less spend on renewals and more on maintenance. Up to £2.8 billion will focus on improving network resilience. Access charges must remain below inflation to ensure the future for open access operators and freight.

Obtaining value for money means significant efficiencies are needed but these were obtained in CP6 which delivered £4 billion of savings, better than the target of £3.5 billion. CP7 requires £3.6 billion of savings. There are uncertainties ahead, but passenger recovery and inflation are going in the right direction. There is room for optimism.

In summary

There is little doubt that the next few years will see change as to how the railway is structured and operated. Just how this will happen is far from clear and several mixed messages emerged from this conference. Finance will be key to everything but with the competing pressures from the health service, social security, defence, policing, and education, it is difficult to judge exactly where rail sits in the pecking order. Much will depend on how rail performs in the short term but building back confidence and getting costs under control will be key factors. We have to wait until after the general election to see how rail reform will actually take shape.

Image credit: iStockphoto.com