Tuesday 24 November 2015

Serious Concerns Over Rail Investment

A damning report by MPs into Network Rail’s aborted five-year investment plan has warned that the public will foot the bill for “staggering and unacceptable” cost increases after the government and industry agreed to pay for work that could never have been delivered in time and on budget.

In an assessment that will put the future of the rail regulator further in doubt, the Public Accounts Committee (PAC) said it had serious concerns over rail investment following the admission of further delays and overspending in the £38.3bn programme of rail works.
MPs on the committee said the track and signalling operator Network Rail had “lost its grip” and demanded clearer accountability for project costs and management. They also questioned if the Office of Rail and Road (ORR), the regulator that signed off the “unrealistic” programme, was fit for purpose.
It said that even after the planning and budgeting failures, there remained far too 

much uncertainty over the costs and delivery of major rail electrification works on the TransPennine route and the Midland Main Line, and that more projects could be delayed to balance the books. Electrifying the Great Western Main Line from London to Cardiff is now expected to cost £2.8bn, rather than the £1.6bn estimated a year ago, the committee found.
The PAC called for a fundamental review of the regulator’s role and effectiveness in planning rail infrastructure, noting: “We are concerned that the ORR lacks the capability to robustly scrutinise Network Rail’s plans.”
Meg Hillier, chair of the PAC, said: “Network Rail has lost its grip on managing large infrastructure projects. The result is a twofold blow to taxpayers: delays in the delivery of promised improvements, and a vastly bigger bill for delivering them.
“The government has identified rail infrastructure as a vital part of its economic plans, for example in establishing what it describes as a ‘Northern powerhouse’. It is alarming that, in planning work intended to support these plans, its judgment should be so flawed.
“Our inquiry has found that the agreed work could never have been delivered within the agreed budget and timeframe. Yet Network Rail, the Department for Transport and the regulator – the Office of Rail and Road – signed up to the plans anyway.
“Passengers and the public are paying a heavy price and we must question whether the ORR is fit for purpose.”
The first public admission from the government that the £38.3bn plan was going off the rails came in June, when the government replaced the chairman of Network Rail and announced three reviews into its investment plan and structures. The first, Sir Peter Hendy’s assessment of how much work can realistically now be conducted by 2019 for the budget provided, is expected to be published next week.

Responding to the report, Network Rail said it had now made significant changes to planning and budgeting. A spokesperson said: “It is clear that we, as an industry, have been overly ambitious about what could be accomplished with the funds and resources available. Network Rail has successfully delivered over 5,000 projects over the past five years, but our understanding of how best to plan and deliver major new electrification schemes was not good enough.”
A transport department spokesperson said: “We are proud to have a hugely ambitious investment programme, but agree that lessons should be learned on all sides. We are committed to seeing the £38bn programme through and delivering the railway that passengers deserve.”
The ORR said it welcomed the report. A spokesperson said: “We need to learn the lessons, and agree with PAC’s recommendations that uncertainties in key projects need to be addressed differently.
“With the changes to Network Rail’s ownership and finances since it became a public sector company, ORR agrees that a review of its own role in major projects is appropriate.”

Electrification of three major routes was at the heart of rail upgrades described as vital by Network Rail and promised in the Conservative party manifesto. But just weeks after the election two of the three schemes were paused by the government, while the Great Western scheme will be delayed, potentially incurring further costs associated with new trains on order from Hitachi.