The Secretary of State for Transport (SoS) today published the Government's High Level Output Specification (HLOS) and Statement of Funding Available (SOFA) for Network Rail's next regulatory control period starting in 2024. The statements are required by the Railways Act and relate only to the railway in England and Wales with the Scottish Government anticipated to publish their own requirements in the coming weeks.
What does the HLOS tell us?
It's a high-level document and it relates only to Operations, Maintenance and Renewals with enhancements dealt separately. Despite this it is possible to potentially take some inferences from the document. It is also a formal and very public document unlike the conversations that Ministers and officials might be having with Train Operators and Network Rail in regard to the current affordability challenge. My personal takeaways and reflections are below.
The usual and a bit of evolution
- There are no great changes to priorities. The five strategic priorities for the railway, developed as part of the reform process, are referenced. Commitment to improving the accessiblity, inclusivity and sustainability of the railway is maintained with no metrics offered.
- There are no specific targets for train performance, and this was the same at the 2017 HLOS for CP6. However, what it is missing for this latest HLOS is the table on capacity requirements for key cities that was provided in an appendix to 2017's HLOS. Perhaps this reflects the difficulty in forecasting where demand might be through the Control Period and at its end in 2029.
- There is an explicit recognition that Network Rail must work with Train Operators and the Department's Annual Business Planning (ABP) process to develop a consistent set of proposals for CP7. I'd argue that this is the first material light being shone in the public arena on the ABP process and its importance and relevancy to those other than Train Operators is increasing.
- Given the engagement and marriage of ABP with CP7 the SoS recognises that this will require flexibility with "structured change control" in the Control Period. This could be a challenge for ORR and could obviously increase the risk of persistent meddling in Network Rail's plans but agility is required as the railway's usage continues to emerge after pandemic and recession.
- The importance of appropriate evidence and analytical assurance to justify the proposed plans is noted. That analysis needs to consider rail as part of a wider transport system and be consistently provided through CP7 with an understanding of impacts on customer requirements and accessibility.
- There is evidence of an increased aspiration for the railways to operate as part of an integrated transport system. Network Rail is instructed to work with Local Authorities on their Local Transport Plans toward this goal with Government guidance for these plans promised.
A more radical focus on affordability?
- The current spending challenge across Government and arguably the railway's affordability challenge is noted explicitly, and the railway is ordered to play its part. Arguably no surprise in that but what is of interest to this reader was the HLOS' explicit requirement that its asset management strategy "supports key revenue-generative flows, whilst ensuring that flows with services that typically see a higher subsidy requirement continue to receive an appropriate level of service". To me, this implies very strong market focus with the permission to reconsider what "appropriate" might mean in this current fiscal context.
- The affordability issue is further highlighted with demand for the industry to develop whole-industry solutions to deliver outcomes as well as the more typical efficiency language that the SoS "expects clear evidence of the use of broader initiatives to ensure accelerated delivery and more efficiency delivery, to drive improvement, as well as close, effective collaboration with the supply chain to drive efficiencies"
- Arguably the Government appears to be supporting Network Rail ambitions for a prioritised approach to maintenance and renewal rather than national standards as it asks for an "approach to asset management which particularly reflects those assets that have the greatest impact on how the railway performs for its customers". It is also important to note that Government is clear that "the actions should not be actions which simply move costs or impose other adverse financial consequences onto other parties". Arguably this could mean that deferring renewals into CP8 or 9 is a higher risk tactic for Network Rail where the Government wants a more affordable railway.
Lastly, the HLOS appears to end at paragraph 40 but the printed versions then contain 3 blank pages - conspiracy theorists will suggest redaction or last-minute changes no doubt!
With the affordability challenge all around the Government has now set out its requirements for Network Rail. What is yet to be fully clear is whether Government, the ORR and wider industry can match the potential radicalism that the HLOS implies and is arguably required given the £44bn settlement indicated in the SOFA.
