Control Period 6 – what can we expect?

Jean-Paul Sartre, writing in 1964, noted that ‘Life begins on the other side of despair’. Were he a railwayman, he might have been commenting on Control Period 5, a five-year period that most in Government, Network Rail and the Office of Rail and Road will be glad to see the back of. For despite its successes, and there have been many, it will be remembered for the disastrous start to the enhancement programme, long-running industrial action, franchise failures and the timetabling crisis of last year. Yet Sartre also asked the question ‘When I cannot see myself… I wonder if I really exist’. And so perhaps it might be with the CP6 settlement. It exists, but what does it mean in today’s changing world? And will it continue to exist for the whole five years? This is far from certain.

The ORR’s final determination published last autumn sets the framework for Network Rail from now to 2024. It is truly complex, but essentially has three elements; the funding available, the outputs to be delivered and the charges for users.

Funding is the most critical of these, and the headline figures are good with Government(s) committing £35 billion over five years for the day-to-day running of the network. Yet behind the scenes, changes to Network Rail’s status make this less certain. Although the CP6 settlement remains for five years, the actual release of cash is now annual, with limited flexibility to transfer between years. If the money is not spent, it could be lost, and the actual available funds could be lower. It will certainly require a renewed budget discipline from Network Rail – and look out for all those fences being repainted towards the end of March each year! More seriously, there will be implications for the supply chain and for other contractors if this is not managed effectively. Another funding change relates to enhancement projects. In CP5 and indeed CP4 Government bought enhancements through the regulated settlement, with the final determination containing the projects to be undertaken. This meant the enhancement funding was essentially ‘safeguarded’.

This will be different in CP6. Although Government has committed money for enhancements, it remains held in Westminster and Holyrood outwith the settlement. The ‘RNEP’ pipeline process will release cash for projects at each development stage, giving Government greater control of where and how money is spent. Yet it is not clear how priorities will be balanced, for example regionally, nor how the funds will be spread over the five years. And there is a much greater risk that the money will not be there at all if the Government spending review is as tough as some would suggest. Turning to outputs, CP6 moved towards Route-based regulation.

Rather than central targets measured at company level, each Route is now regulated via its own scorecard.

As well as the eight geographic Routes, the scorecards for the System Operator and the Freight and National Passengers (FNPO) Route are also under scrutiny. This approach aims to allow greater benchmarking of Routes, but also align the regulatory approach with Network Rail’s own devolution.

Yet the scorecards are already out of date. Andrew Haines’ 100-day review has recommended the creation of 13 Routes, up from the current eight, grouped into five Regions. Significant parts of the System Operator look set to be moved into those Regions, and the FNPO Route merges with the remaining central functions into a single directorate. How therefore will the current regulated structure overlay – or will it need to be redrawn to match these new boundaries? And what happens in the interim?

The final area is charges, which is close to the heart of all those in freight. The ORR conclusions set charges for five years, within a 10-year structure. This included some unwelcome increases, particularly in the heavy bulk sectors. Yet already we are seeing changes, with the proposal to take the Valley Lines out of Network Rail control meaning new charges will need to be set by Transport for Wales. Importantly, the ORR has indicated that these charges will not be regulated. Whilst this is a minor issue for a small number of trains, all eyes are on the outcome of the Williams review, and whether there will be any wider attempt to create separate infrastructure managers across the network.

With funding, outputs and charges all seemingly up for change, CP6 does appear to be somewhat existential. Yet it is the only basis we have on which to rely, and we can only hope that the changes are gradual and leave the railway in a better place than now.

An opinion column of the Rail Freight Group,