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Network Rail Strategic Business Plan Control Period 4

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Network Rail Strategic Business Plan Control Period 4 Network Rail Strategic Business Plan Control Period 4 October 2007 Contents Contents Executive summary 1 1 The strategic context 20 2 The demand for rail 25 3 The industry strategy 33 4 Network Rail’s policies and strategies 52 5 Efficiency and input prices 84 6 Our plan for CP4 119 7 Expenditure and financing 171 8 Outputs 174 9 Options and sensitivities 194 10 Summary of future developments 201 Appendices 204 Network Rail October 2007 Strategic Business Plan 1 Executive summary summary Executive Executive summary The last review was therefore necessary to place the business on a secure financial footing so that The demand for both passenger and freight rail we could begin to address these problems services has increased dramatically over the last together with our industry partners in Control decade. Last year alone, total passenger Period 3 (CP3). demand increased by more than eight per cent and freight demand has also continued to grow Change is a gradual process not just in the strongly. railway but elsewhere as well. Despite this, we are approaching the 2008 periodic review from a Moreover, there is a clear consensus throughout very different position compared to the last the industry that demand growth from review. We always said that the early years of passengers and freight users will remain strong Network Rail were about stabilising the company for the foreseeable future. Increasing congestion while preparing for the further challenges ahead on roads and increasing environmental sensitivity and we have now largely completed the first two mean that rail should be well placed to continue phases of our three-phase transformation winning market share. programme (“fix the basics”, “one way of doing things” and “be the best”). In delivering this plan, we therefore aim to build on the success which the industry as a whole We have kept pace with the challenging has achieved over the last five years. Rarely efficiency and reliability targets set by the Office before has the railway had such a great of Rail Regulation (ORR). In doing so, we have opportunity to continue to improve rail services continued to improve safety and the railway is for the benefit of passengers and freight users, now widely recognised as being the safest form our industry partners, taxpayers and the of transport. Confidence in the railway has largely economy as a whole. been restored and the growth in demand has now accelerated. We have invested substantially This plan represents a major challenge for all our in renewal of the infrastructure and have made people. It requires that Network Rail becomes the significant improvements in the condition of our best at everything we do. We need world class assets. At the same time, we have become infrastructure and operations, supported by the increasingly focussed on developing the network right processes and delivered by great people. to meet the growing demand for rail services. We This challenge provides an exciting opportunity are working much more closely in partnership for everyone in the business. with train operators and we are more aware of the needs of passengers and freight users. We We are also very conscious that the plan cannot also have a vastly improved understanding of our be delivered by Network Rail alone. We need to costs and of what needs to be done to meet continue working closely with our industry demand. partners focussed jointly on the best way of delivering what is expected of us. The 2008 periodic review therefore represents a great opportunity to build on the collective Strategic context success of the last few years as we go into Five years ago, in October 2002, Network Rail Control Period 4 (CP4) in April 2009. We can had just taken over the railway infrastructure in deliver a railway that contributes positively to the Great Britain and we were preparing for the 2003 productivity, quality of life and environment in the interim review of access charges. Stronger cost UK. To achieve this, the review needs to provide controls were being put in place, reliability was the necessary funding to meet the continually poor and the railway was not recognised as growing expectations of passengers and freight being as safe as it actually was. Expenditure on users. It must provide challenging but realistic the railway had increased substantially in the targets for continuous improvement in our period following Hatfield and, although there was efficiency and outputs. And it must provide clarity a relatively poor understanding of costs, there about what is expected, while allowing sufficient was an increasing recognition that this flexibility for the business, and the industry as a investment needed to continue if we were to whole, to deliver these requirements in the most begin addressing the legacy of under-investment effective way. We accept the need to be held to in the railway. The scale and complexity of the account for the delivery of our commitments, but challenge was daunting. we believe that the ORR should focus primarily on whether we are delivering the required outputs and on where their judgement may be Network Rail October 2007 Strategic Business Plan 2 Executive summary Executive brought to areas of disagreement with our increased our focus on enhancements, this customers and funders. represents a further step change in the level of investment in improving the railway. The High Level Output Specifications (HLOSs) and Statements of Funds Available (SOFAs) Fourth, another sign of success is that there is an together with the associated strategies published increasing need to move towards a “seven-day by the Department for Transport (DfT) and railway”, particularly by reducing disruption at Transport Scotland have provided a sound basis weekends and by offering more services during to build on this opportunity. Government in Sunday. Combined with growth in demand from England and Wales is clear that the investment freight, this reduces the time available to inspect, priority is the provision of capacity to tackle maintain and renew the network. We are being crowding and to accommodate anticipated challenged as an industry to find ways of growth in demand focussed particularly on the responding to this. busiest services. In Scotland the industry is expected to bring forward proposals which Each of these challenges requires fundamental contribute towards the three key strategic changes in the way we do things, considerable outcomes – improved journey time and investment in systems and training, and closer connections, reduced emissions and improving collaboration between Network Rail and train quality, accessibility and affordability. Both operators focussed on common objectives. governments have also committed substantial Taken together the challenge is even greater funds to facilitate these investments. than the sum of the parts. As well as providing a great opportunity for the We need to respond to these challenges in a way railway and its users, this review highlights the which builds on rail’s position as the safest and tough challenges which we face. Despite the most sustainable form of transport. We also progress outlined above, we know that there is need to remain focussed on the long-term much more to be done to modernise the culture condition of the infrastructure and optimise the and processes both within Network Rail and railway system as a whole taking account of the across the industry. We face a number of issues, interaction of the infrastructure with rolling stock each of which, taken even in isolation, would and operations. represent a major challenge for any business. We are committed to making the changes First, on top of the 31 per cent target efficiency needed to meet these challenges. This Strategic improvements in the current control period, Business Plan (SBP) represents our response. It government has assumed that we can achieve builds on the Initial Strategic Business Plan further savings of five per cent a year in most (ISBP) published in June 2006. It responds areas while absorbing continuing increases in directly to the HLOSs published by government real wages and other input prices. Even ignoring in London and Edinburgh while also taking the impact of input price changes, this implies a account of the reasonable requirements of our total efficiency improvement of nearly 50 per cent other customers and funders. Finally, it over 10 years. comprises our first major submission to the ORR’s 2008 periodic review. Second, the industry has already improved punctuality from around 78.7 per cent five years This plan incorporates the result of extensive ago to 88.7 per cent today (a reduction of 47 per further analysis since the ISBP. It is the result of cent in the proportion of trains which are late or intensive engagement with our stakeholders, cancelled despite running more trains). We are particularly train operators and our main funders. now being asked to state how we could improve Much of this engagement with passenger this to 92.6 per cent (a further reduction of 34 per operators has been through existing initiatives, cent) by the end of CP4 while also reducing the such as the Route Utilisation Strategies (RUSs), number of trains which are severely delayed. but we have also held extensive discussions around the development of the SBP itself. We Third, because of the growth in demand and have been able to take account of the greatly increased confidence in the railway to deliver improved understanding of freight requirements major projects, we are being asked to manage a which was gained through the Freight RUS. We major programme of enhancements worth up to are now looking forward to building on the £2 billion a year. This is on top of the base level experience of producing these plans to engage in of renewals which we need to invest to sustain an ongoing dialogue with our industry partners on the existing railway.
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