Management Plans

Network Rail Strategic Business Plan Update Control Period 4 April 2008 C o n t en ts Executive summary 1 1 Introduction 16 2 The demand for rail 18 3 The industry strategy 19 4 Network Rail’s policies and strategies 26 5 Efficiency and input prices 36 6 Our plan for CP4 49 7 Expenditure and financing 87 8 Outputs 91 Appendices 103 Network Rail April 2008 Strategic Business Plan update 1 Exe Executive summary next control period. ORR noted that the SBP was c utive summar a considerable improvement on earlier plans and In October 2007 Network Rail published its that Network Rail had made good progress in a Strategic Business Plan (SBP) for Control Period number of areas. It also expressed concern that y 4 (CP4) which runs from April 2009 to March some parts of the plan were not robust and these 2014. This document provides an update and generally coincided with the areas which had further justification for elements of the SBP. been highlighted in our SBP as requiring further work. Of greater concern, however, ORR said The Strategic Business Plan that it believed Network Rail had significantly The SBP was published against a background of under-estimated the scope for it to improve strong growth, improving safety and sustained efficiency in the next control period. improvements across the whole industry. This presented a unique opportunity for continuing We welcome the fact that ORR seems to agree improvement in services for the benefit of with much of our plan and we believe that this passengers and freight users, our industry reflects progress made by the industry as a partners, taxpayers, the economy and the whole. However, following the publication of environment in which we live. ORR’s initial analysis, we expressed our concern to ORR about its efficiency assumptions. We The SBP aimed to build on the industry’s clearly recognised the need for challenging success over the last few years by challenging assumptions, but we also emphasised the need ourselves to become the best at everything we for these assumptions to be realistic if we are to do. We said that we need to deliver world class continue to succeed as an industry. infrastructure and operations, supported by the right processes and delivered by great people. Since the SBP was published, the industry has Above all, the company as a whole needs to continued to make progress on a number of become more customer-focussed. fronts. In particular, demand growth has remained strong and punctuality is now The SBP set out what Network Rail plans to do in approaching 90 per cent across Britain on a CP4 consistent with an overall industry strategy moving annual average basis for the first time for and a longer term view of how the industry a decade. We have also worked closely with train should meet the challenges of the future. This operators and suppliers to develop and improve plan was based on extensive discussion with our our plans. However, the engineering overruns at industry partners and we were pleased that the New Year further highlighted the scale of the SBP was generally well received. At the same challenge facing us to demonstrate that our plans time, however, we clearly recognised that there are deliverable on-time, at an acceptable cost were aspects of our plans which required further and without causing excessive disruption to development (such as our performance plans passengers and freight users. We are being and our financing plans). We also recognised challenged to: that we needed to continue to improve the way in which we work with our industry partners to • deliver substantial improvements in efficiency deliver our plans for CP4 and to develop robust on top of the progress we have achieved over longer term plans for CP5 and beyond. the last few years; • reach levels of punctuality which have never The SBP represented Network Rail’s main been seen before with more people and submission to the Office of Rail Regulation’s improved journey times; (ORR) periodic review of our access charges for • deliver several billion pounds of investment CP4. It responded formally to specifications of every year while continuing to operate an the outputs which government (in England & increasingly congested railway; Wales and in Scotland) wants to buy from the • operate an increasingly seven-day railway to railway (the High Level Output Specifications, or create additional industry revenue and better HLOSs, and their corresponding Statements of services to users; and Funds Available, or SOFAs). • become more flexible in meeting the aspirations of our industry partners. Following the publication of the SBP, ORR published its initial assessment of the affordability While these challenges are entirely of the governments’ output specifications. It understandable, they cannot be looked at in concluded that there was a high likelihood that isolation and the overall package must be these specifications could be delivered within the challenging but realistic. The update to our plans funds they had committed to the railways for the needs to be looked at in this context. Network Rail April 2008 Strategic Business Plan update 2 E x e c The SBP Update The main areas where we have done further utive summar This document aims to address the outstanding work and updated our projections following the issues associated with the October 2007 SBP. In SBP are explained below: particular, it sets out our position in those areas y which we acknowledged required further work or • the budget for 2008/09 – the last year of this where this has become apparent from discussion control period; with ORR and our industry partners. In other • changes in our core maintenance and renewal areas it provides further justification and evidence volumes for CP4; in support of the projections in our SBP. This • updated assessment of the cost of delivering document does not, however, aim to provide a the HLOS performance targets in England & full refresh of the SBP. It should therefore be Wales; and read in conjunction with that plan and the • refinements to our plans for delivering the supporting material which was presented with it. HLOS capacity enhancements. The remainder of this summary highlights the key The budget for 2008/09 areas where we have developed or provided further justification for our plans under the • Our budget for the last year of CP3 reflects following headings: increases in the cost of track renewals and the West Coast Route Modernisation. • our plans for delivering the HLOSs and other • Efficiency improvements elsewhere are required outputs; generally in line with ORR’s targets. • potential investment to deliver non-HLOS • Our delay minutes target for this year is worse outputs; than our previous stretch target but better than • our updated projections of our expenditure the ORR’s CP3 target; and punctuality across requirements over the next control period; Britain will shortly reach 90 per cent for the first • the scope for improving efficiency and the time. deliverability of our plans; • our financing plans and assumptions; and Since we published the SBP, we have developed • our revenue and financial projections. our detailed budgets for 2008/09 and have updated our forecasts for this year. This has The SBP included details of our plans for resulted in some changes to the forecasts improving the safety of our workers and included in the SBP. passengers. As a result of these plans, we indicated that we at least expect the industry to Although we are continuing to reduce the costs of meet the HLOS safety outputs specified by the running the network, it is becoming increasingly Secretary of State. Safety remains an over-riding difficult to achieve savings. Our projected priority for the business. We are particularly operating costs and maintenance expenditure focussed on understanding the impact on risk will be around £40 million higher for CP3 than we arising from changes required to deliver the had previously published. This is largely due to HLOS and providing the necessary assurance to the more restricted engineering access on the ORR. This document does not therefore provide West Coast main line with the implementation of an extensive update on our plans in this area. the new December 2008 timetable (which we had previously assumed would not have a major Plans for delivering HLOS outputs impact until the following year) and the impact of The SBP and supporting documents set out in enhancements and increases in traffic. considerable detail our policies and strategies for delivering the HLOS outputs. ORR’s initial For most asset categories, renewals expenditure assessment welcomed progress in a number of is forecast to be broadly consistent with the SBP. areas including the ongoing development of the However, we have increased track renewals Infrastructure Cost Model (ICM) and the closer expenditure in the final two years of CP3 by working with train operators in some areas. around £50 million as we are not confident that There were clearly a number of areas where we we will achieve the planned efficiency savings of had not provided sufficient evidence to justify our 23 per cent by the end of CP3. The implications proposed plans. Equally, however, it is essential of this for CP4 are explained further below. We that we understand the basis of any adjustments have carried out significant further work in which ORR plans to make in its draft conclusions updating the national telecoms programme and so that we can understand the implications and this has resulted in some reprofiling of our how we might reprioritise our activities expenditure plans. We have also deferred accordingly. Network Rail April 2008 Strategic Business Plan update 3 Exe electrification and plant spend of £60 million to • we have incorporated our plans for overhead c utive summar CP4 so that this can be delivered efficiently.

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