Better train performance and prioritising spend on core assets: ORR’s assessment of Network Rail Scotland’s plans over the next five years

In its draft determination, published today and now out for consultation, ORR has found that while Network Rail Scotland’s interim plans largely deliver against Scottish Ministers’ priorities, a greater focus is needed on train performance and renewing core assets.

ORR recognises that Network Rail Scotland’s interim plans for CP7 have been produced to challenging timescales and continue to evolve. ORR evaluated the interim plan, submitted by Network Rail Scotland in February. We require more detail on certain key areas before we issue our final determination in October, which will also take account of stakeholders’ responses to our consultation.

Network Rail will shortly publish its updated plans which are expected to be more developed than the interim plan and should address some of the areas where ORR has highlighted the need for further detail.

Train performance

There is a need to improve punctuality and reliability from current levels. ORR will introduce performance targets that are more stretching than those Network Rail Scotland proposed in its interim plan and will hold Network Rail Scotland to account for Scottish Ministers’ challenging passenger performance target of 92.5% of trains arriving at their end destination within five minutes of their scheduled arrival time. ORR also proposes that dedicated funding is reserved to further support performance improvement. Delivering these targets will require Network Rail Scotland to work closely with train operators and ORR will hold Network Rail Scotland to account on this.

Renewing the railway

ORR proposes an additional £50m to spend on core asset renewals to ensure assets are managed to better deliver on safety, performance, asset sustainability and efficiency.

Efficiency

It is vital that Network Rail Scotland continues to deliver efficiencies to help secure a financially sustainable railway and value for money. ORR considers Network Rail Scotland’s proposed efficiency target of £429 million, of which £380 million is to be delivered by Network Rail Scotland, will be challenging. Ahead of our final determination we expect Network Rail Scotland to further clarify how its efficiency target would be achieved.

Risk funding

ORR has identified that dedicated risk funding in the interim plan is likely to be insufficient to respond to increased uncertainties such as severe weather and rapidly changing inflation. ORR has proposed that Network Rail Scotland increases the funding for managing risk using a proportion of any funding which remains unallocated once it has prioritised our proposed increase on core renewals.
 

John Larkinson, ORR Chief Executive, said:

ORR has also announced today that it will retain the same structure of charges for passenger and freight operators as now. Specifically:

• New open access operators will pay charges that recover some of the fixed network costs, where the demand is sufficiently strong that the operator is able to pay.
• Variable charges for freight operators will continue to be capped. This will help mitigate the impact of charges increasing to reflect traffic driven costs.

Notes to editors

1.  PR23 documents
   
   ORR’s consultation on its PR23 draft determination, published today, is open until 31 August. Details of how to respond are on our PR23 web page.
   
   Periodic reviews like PR23 are one of the principal mechanisms by which ORR holds the infrastructure manager for the mainline rail network in Great Britain, Network Rail, to account and secures value for money for users and funders (including taxpayers) of the railway. The periodic review determines what Network Rail is expected to deliver with respect to its operation, support, maintenance and renewal (OSMR) of the network during control period 7 (CP7), which will run from 1 April 2024 to 31 March 2029, and how the available funding should be best used to support this.
    
2. Network Rail receives the majority of its funding from the UK and Scottish Governments. In addition to making available separate funding, each government also sets out a High- Level Output Specification (HLOS) detailing what it expects Network Rail to deliver using the funding available. The remainder of Network Rail’s income comes from charges to passenger and freight operators and commercial income such as from property. All figures above are adjusted for inflation and expressed in 2023/24 prices.
   
    
3. The Scottish Ministers’ HLOS expects Network Rail Scotland to maintain a strong standard of safety, manage efficient costs and achieve value for money for taxpayers, maintain focus on punctuality, reliability and asset sustainability.
    
4. Performance Measure – Scotland
   
   In their HLOS, Scottish Ministers specified a target of 92.5% for an adjusted version of the ScotRail Public Performance Measure (PPM). The measure is adjusted where delays are caused by speed restrictions during severe weather, or where trains have been delayed to permit connections from other late running trains or ferries. In recognition of the importance to Scottish Ministers, we will use this as the primary passenger train performance measure to hold Network Rail Scotland to account in CP7. ORR’s proposed baseline trajectory for this measure is 92.5% in each year of CP7.
    
5. The plan assessed by ORR was considered ‘interim’ by Network Rail Scotland due to the short time it had to finalise its plans between the publication of Scottish Ministers’ HLOS and Statement of Funds Available (SoFA). Network Rail Scotland has worked on a 'final' Strategic Business Plan which it expects to publish after our draft determination.
    
6. The proposed allocation of further expenditure on core assets is particularly directed at railway structures in Scotland.
    
7. The funding available in Scottish Ministers’ SoFA is £221 million greater than the planning assumptions Network Rail Scotland used to develop its CP7 interim plan. Network Rail Scotland has held this amount as contingent risk funding in the interim plan and advised that it would consider how this would be used as its plans evolved. Our assessment considers that there is room within the budget, once Network Rail Scotland has prioritised ORR’s proposed increase in expenditure on core renewals, to increase the funding for managing risk by approximately £100m on the basis of the interim plan.
    
8. Network Rail Scotland is proposing to deliver £429 million of efficiencies during CP7 (£380 million of efficiencies delivered by Network Rail Scotland and £49 million of efficiencies allocated from national functions, which supply Network Rail Scotland with services which centralised teams are best placed to provide).
    
9. PR23 timeline