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Network Rail bosses are evaluating which of its planned schemes could be pushed back if the rail operator is asked to cut its expenditure by government.
In board minutes from October, which have just been made public, Network Rail bosses discussed a number of “scenarios […] to mitigate the effects of Covid-19” after recording a £96M financial underperformance driven by overspend on renewals combined with lower than expected revenue.
Consequently, Network Rail has begun preparing a revised business plan, which includes cost savings should government reduce its budget.
“Should Network Rail be asked to cut cost from its Business Plan, the revised plan would split cost savings between deferrals and reduced output,” the minutes state.
“The board discussed whether the changes to technical standards was delivering efficiencies and noted that these were starting to be ascertained and would be reported in due course.
“The board also discussed the challenge of altering embedded working practices and conventions to the delivery of efficiencies.
“The board noted that the same drag on change was not only encountered regarding efficient working, but also in relation to the changes to improve the personal safety of frontline workers.”
Network Rail's funding for the next four years had already been cut back, after the Treasury slashed £1bn from the CP6 Rail Enhancements funding pot in the Chancellor’s one-year spending review.
The board minutes also reveal a £96M financial underperformance “due mainly to the Covid-19 pandemic”.
The minutes add: “Income from property and track access were both down (£100[M] and £39M respectively), while operating expenditure was up.
“This was partly offset by Schedule 8 payments coming into Network Rail.
“Renewals delivery was strong, with investment ahead of target. However, the cost of renewals increased as restrictions at the start of the pandemic meant works took longer.”
As the shortlist of schemes facing the axe is being drawn up, trade body the Rail Industry Association (RIA) has expressed concerns about the lack of certainty about future work for the industry.
RIA chief executive Darren Caplan said: “The rail industry still doesn’t have sight of what rail enhancement projects are coming up – we were told that there are more than 80 projects in the government’s rail network enhancements pipeline, yet with the news that there is over £1bn less in the funding pot, it is unclear what schemes will be going ahead and what will not be.”
He added: “Taking our foot off the pedal now on rail investment will not help for when passengers return following the coronavirus pandemic.”
To ensure the rail industry does have a strong pipeline of work for the year ahead, Network Rail chief executive Andrew Haines revealed that a list of “no regret” electrification schemes to go ahead has been sent to ministers for approval.
The list will be submitted to the Treasury and the Department for Transport (DfT) ahead of the publication of the government’s transport decarbonisation plan.
Haines described the list as a series of “quick wins” with strong business cases to ensure a pipeline of work is maintained after schemes such as the electrification of the Midland Main Line draw to a close. He added that Network Rail is still working out the implications of the autumn Spending Review on investment plans.
In particular, he said that Network Rail is waiting for more details of the Rail Enhancements Pipeline after the Treasury’s decision to cut £1bn from the CP6 funding pot.
“We are still waiting for more information about what that means for individual schemes moving forwards,” said Haines. “What I will say is that we have got to bust a gut to prove to the Treasury that some of these schemes still have very good business cases and I will fight anyone to the death over the suggestion that we don’t do anything for the next two or three years.”
He added: “We have a lot of schemes that are ready to go, and even after Covid they still have very, very good business cases.” In particular Haines pointed out that work on the Transpennine Route Upgrade is “waiting and ready to go”.
He also backed the DfT’s Restoring your Railway Fund which has so far backed the development of proposals to reopen 25 railway lines that were closed during the 1960s Beeching cuts.
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