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Rail Freight: Market Growth and Support from Government

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Rail Freight: Market Growth and Support from Government Rail freight: market growth and support from Government Statement to Parliament by Transport Secretary Alistair Darling on the Government's objectives for rail freight. Delivered: 19 July 2005. The Secretary of State for Transport, Mr Alistair Darling As prosperity and the demand for goods grow, efficient freight transport is increasingly vital to the UK economy. The Railways Act 2005 has placed responsibility for rail freight in England with the Department for Transport and, with the repeal of Section 206 of the Transport Act 2000, the SRA's (Strategic Rail Authority) 2001 Rail Freight Strategy will cease to be in force. It is important, therefore, that the Government restates clearly its objectives for rail freight. The Ten Year Plan for Transport, published in 2000, forecast potential growth in rail freight of up to 80% to 2010. This was interpreted by many as a target, though we had always made it clear that actual growth would depend on a number of factors - in particular, the success of rail freight operators in winning business in highly competitive markets. In fact, although it is now recognised that the 80% forecast is unlikely to be met, growth in the rail freight market has been impressive. Rail freight is a thriving and competitive private sector industry, and since privatisation (1995), levels of freight moved have increased by 55% (measured in tonne km). Rail freight's market share also increased over the same period from 8.5% to 11.5%. The Government welcomes this growth and wishes to see it continue. Our clear policy aim is to see goods being moved in a sustainable way, which maximises benefits to the economy and to society. For instance, because they generally have less impact on society than road transport, rail and water freight can bring substantial benefits. In 2004-05, the rail freight industry moved the equivalent of over 7 million lorry journeys and saved 1.43 billion lorry kilometres, delivering significant reductions in pollution and congestion. We believe rail therefore has a crucial role to play in goods transport alongside other modes, and we wish to see freight travelling by rail instead of road wherever this makes most sense. This aim can be delivered most effectively by a competitive and dynamic private sector rail freight industry, and this is borne out by the growth since privatisation, which has been driven by real on-rail competition throughout the industry, including several new entrants to the market. We will not dictate to the industry how it should run its business or become involved in operational issues. Where disputes occur with other parts of the railway, they should be resolved through established rail industry dispute procedures. But Government does have a role to play and a relationship with the rail freight industry. Rail freight companies run on the same tracks as the publicly-specified passenger railway - therefore, Government has to be mindful of their needs. And Government recognises and wishes to encourage the important environmental and economic benefits that rail freight can bring. We will therefore ensure that our policies and regulations do not put unnecessary obstacles in the way of future growth; we will continue to provide financial support where it is affordable and offers the greatest environmental, congestion and safety benefits when assessed alongside support for other modes; and we will ensure that in specifying the passenger railways, we recognise and take into account the consequences of our decisions upon the rail freight industry. To achieve this, we will: Continue to support the principle of incremental access charges for freight operators. 1 Rail freight: market growth and support from Government Rail freight's ability to compete against road and other modes is dependent upon stable and affordable charging for access to the network. The Government supports this and believes it is best achieved through the principle of freight operators paying charges which reflect only the costs that they impose upon the network (in line with the charging principles set out in EU Directive 2001/14). We will therefore work with the rail industry to ensure this remains the case - for instance, providing clear guidance if and when the level of freight charges is reviewed by the ORR. Work with the freight industry to understand its needs when setting the strategy for the rail network, and to provide the greatest possible certainty of access. In order for rail freight companies and their customers to invest, they need certainty about where and when they can run trains on the network. The Government will work with the industry to develop robust demand forecasting and modelling tools, and to ensure that it understands the needs of the freight industry when developing its High Level Output Specification and other key policies. We will ensure that our appraisal methodologies treat freight and passenger interests equitably, and we have also committed through the Railways Act to ensuring that appropriate compensation will be provided should the contractual interests of freight companies or others be impaired by changes in outputs. In addition, we welcome Network Rail's decision to produce a national freight utilisation strategy, which will act as a key input to the route utilisation strategies, and also the ORR's recently published policy that UK freight operators should be eligible for access contracts of up to ten years (and longer in exceptional circumstances). Ensure grant funding is targeted to deliver the maximum benefits in terms of reducing congestion, pollution and accidents. From 2007-08, the Government's funding programmes for rail freight, including the reopened Freight Facilities Grant, will be incorporated alongside water and road freight grant programmes into a cross-modal Sustainable Distribution Fund. This will prioritise funding across all three modes to favour those grants that offer the maximum benefits for the money being spent. In the meantime, the Department will consider in consultation with the industry the most appropriate future form for Company Neutral Revenue Support and other grant programmes (which may include opening funding to flows originating from the Channel Tunnel) within the Sustainable Distribution Fund, and seek renewed State Aids clearance. Work to ensure that regional and local planning decisions reflect Government priorities relating to the sustainable movement of goods. We wish to see private sector investment in major rail freight facilities, such as intermodal terminals, continue. It is not appropriate for the Government to promote individual schemes - it is for the private sector to develop proposals and progress them through the necessary approvals including planning consent. But the Government does want due account to be taken of our policy goals for the sustainable movement of goods. This does not imply an active role in individual cases, but if necessary we will be ready to act to ensure decision makers are better informed particularly in the application of planning guidance. We will also be ready to consider changes to planning guidance where appropriate. Work with the industry and Network Rail to establish how freight growth can be accommodated on the network. The ORR is currently carrying out work in conjunction with Network Rail to establish the baseline capability of the network. Once that has been completed, we will consider with the industry how we can support, fund and accommodate change. This could be through reallocations of capacity within the existing network which make sense for both passengers and freight, incorporating incremental freight benefits into planned renewals, or considering how freight- specific enhancements might be taken forward by either the private sector or, in the long-term, Government (subject to strict affordability and value for money criteria). 2 Rail freight: market growth and support from Government Work with the devolved administrations, and with the EC to ensure a consistent UK- and Europe- wide approach to rail freight. Rail freight is a cross-border business. The Railways Act gave increased powers to support rail freight to the devolved administrations, and we will work with them (and with other partners such as TfL and the Passenger Transport Executives) to ensure that policies relating to rail freight across the UK are consistent. We will also continue to work with the EC to liberalise access to the wider European rail freight market and increase competition, including through the Channel Tunnel. (This speech represented existing departmental policy but the words may not have been the same as those used by the Minister.) 3 .
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