Out-Law News 2 min. read
12 Mar 2012, 5:03 pm
In a paper (78-page / 735KB PDF) outlining the savings, Transport Secretary Justine Greening said that the money would be invested in rolling stock and better infrastructure as well as capping increases in regulated fares at the rate of inflation.
"Inefficiency and waste in the railways is costing hard-pressed farepayers and taxpayers £3.5bn a year and I will no longer allow them to be lumbered with this unnecessary burden. We are setting out a roadmap for action alongside the industry to root out inefficiency," Greening said.
"[The paper] is about building a more efficient and affordable rail network that serves its passengers better, encourages the rail industry to thrive and grow and ultimately reinvigorates and sustains Britain's economy."
Last year railways operator Network Rail set out its plans for infrastructure improvements worth £10bn over its next five year regulatory period, which begins in 2014. The operator, which is seeking less than the £11.8bn investment it needed from 2009, aims to cut the cost of running the railways by £1.3bn per year to 2019.
The Government will also consult on devolving decisions about the railways to sub-national bodies to "give communities more control over local services", Greening said. However, large scale enhancements that represent a "step-change" for the railways, for example the Crossrail project and ongoing electrification of key parts of the network, will remain the responsibility of central Government.
The proposals follow a value-for-money study conducted by Sir Roy McNulty in 2011, which said that the UK's railways were among the most expensive in Europe.
In a statement to Parliament, Greening said that longer franchises would give train operators "the flexibility they have been asking for", with more time to deliver bigger investments. However, the paper warned that contractual protections against "wider economic forces that [operators] cannot control" contained in current arrangements could be exacerbated if care was not taken to share external economic risks at the renegotiating stage.
The paper sets out potential risk-sharing mechanisms based on the new InterCity West Coast franchise, which will index-link franchise payments to the UK's gross domestic product (GDP). The Government could also "take a share of profits above a defined level", to prevent train operators earning disproportionate profits as a result of external changes that increase rail travel, such as economic growth.
Fourteen franchises, including the West and East Coast Main Lines and the Great Western Main Line, will be re-let over the next four years.
The paper backed McNulty's recommendation that Network Rail be able to let "long-term concessions" for infrastructure management on particular areas of its network to third parties, but warned that "a one size infrastructure concession will not fit all".
Maintenance of the high speed rail line which connects London St Pancras International to the Channel Tunnel, known as High Speed 1 (HS1), is currently let on a 30-year concession basis. In the paper, the Government said that network routes including Kent, Anglia and Wessex may be "particularly suitable" to be run on this basis.
"Concessions can happen as soon as Network Rail is ready and Government will not arbitrarily attempt to create a programme which ties concessions to the letting of new franchises," the paper said.
It added that any proposals had to offer value for money to the taxpayer, be based on a detailed understanding of the asset condition and be offered in a way that was compatible with European competition law.
The paper also proposes the introduction of smartcard payment options, similar to London's OysterCard, across England and Wales and the provision of better punctuality and real-time travel information.
