Network Rail Budget Cut

[Elecman]

It is reported in today's Sunday Times ( sorry I can't link to story) that the Treasury have written to NR to demand a cut to the agreed CP5 budget of 25%, not sure if this can happen to a legally agreed budget which is already legally agreed? Any thoughts?

 

[najaB]

Any thoughts?

There's isn't 25% fat, if it goes ahead then prepare for chaos.

 

[Aeion]

Network rail are one of the most short sighted and wasteful organisations I have ever seen. The Virgin booking offices at Liverpool lime street cost 5 million and now there ripping it down to put an extra platform in. They built a signalling centre at rugby then realised oh it's not big enough we need to build another one, which they did again costing a fortune. They never plan long term and so never use funds wisely.

 

[The Planner]

Rugby SCC was never intended to control as much as the ROC. As for the Virgin first class lounge, that is peanuts in the grand scheme of things and considering it opened in 2009 long before any real design or comprehension of the Lime St re-signalling had been thought of I'm not sure you could have done much else.

 

[kjhskj75]

ALL government departments have been instructed to plan for cuts of 25-40%.

See http://www.bbc.co.uk/news/uk-politics-33610801

Network Rail are not being singled out.

 

[LNW-GW Joint]

The ORR determines NR's budget, based on balancing what the DfT wants them to deliver and a view of the costs NR will incur to achieve that.
The budget was confirmed for CP5 (2014-19), so they are 18 months in.

If there is any truth in this (there might be, DfT is under the cosh like every non-ring-fenced department), the ORR will have to hold an interim review with NR about what they can cut from their plans.
Not easy when you are already a third of the way through your 5-year plan.
The obvious place to start is the direct grant which DfT makes to NR to top up the access payments made by the TOCs.
Delaying projects is the likely outcome.

 

[pemma]

Electrification contracts for the North West are going to be re-let. The contract with Balfour Beatty was terminated and work has stalled, so maybe Network Rail will look for a cheaper option which may mean the work takes longer?

There's also the 'paused' electrification schemes which are likely to be re-scheduled as CP6 schemes, instead of CP5 schemes.

 

[Class 170101]

It is reported in today's Sunday Times ( sorry I can't link to story) that the Treasury have written to NR to demand a cut to the agreed CP5 budget of 25%, not sure if this can happen to a legally agreed budget which is already legally agreed? Any thoughts?

Legally I believe there is a problem. That being said wasn't one of the previous control periods re-opened, by Tom Winsor, as I recall?

 

[Bertie the bus]

Network rail are one of the most short sighted and wasteful organisations I have ever seen. The Virgin booking offices at Liverpool lime street cost 5 million and now there ripping it down to put an extra platform in. They built a signalling centre at rugby then realised oh it's not big enough we need to build another one, which they did again costing a fortune. They never plan long term and so never use funds wisely.

Small change compared to the WCML upgrade and Leeds station remodelling, both which, as soon as they were completed, Network Rail announced were at full capacity and couldn't cope with any future growth.

 

[Stats]

I suspect there has probably being a misunderstanding here. I would speculate that they have been asked to find 25% "savings" in their day to day running and admin costs, with the investment budget being protected.

The Hendy Review is already reviewing what CP5 projects can be delivered to what timetable in the available budget.

 

[Elecman]

No it specifically states it's against the £35 billion agreed budget

 

[NotATrainspott]

Also remember that it's quite likely budgets wouldn't be cut by so much. George Osbourne can ask departments to plan for that level of cuts and when the truth comes around about just how much damage that would cause, he would then crow about how his other new successes as chancellor means they won't be necessary to the same extent.

For NR to become more efficient, it would be necessary for it to have protected long-term funding streams so that it could properly plan for decades ahead. It can't assume anything about how much funding will be available down the line, so it will have to make more short-termed decisions like putting that Virgin first class lounge at Lime Street where the new platforms will be put in future.

 

[LNW-GW Joint]

From another publication: http://www.ifamagazine.com/market-a...-facing-demands-to-cut-a-further-1-5bn-321280

ShareCast News) – State-owned Network Rail has reportedly been informed that it will have to make a further £1.5bn cut to its budget over the next three-and-a-half years.
The Sunday Times said it understood that a letter has been sent by the Department of Transport’s Rail Executive Jeremy Rolstone in recent weeks saying spending cuts would need to be well above its current target of 20%, with pay and bonuses said to have been highlighted as areas to achieve savings.

However, the demands could hit a major stumbling block in the form of the Office of Rail and Road, the industry’s independent regulator with which Network Rail’s five-year legally protected budget is agreed.

The reports come ahead of the initial report on Network Rail’s electrification programme by Sir Peter Hendy due by the end of this month. A number of the projects are expected to be postponed or scrapped under the government’s spending review

This is from the City world, whose grasp of railway economics is often sketchy.

 

[Clarence Yard]

I don't think there is any mistake here - NR are already under the Treasury cosh. The problem is that since they have effectively become a DfT subsidiary, they are subject to regular Treasury reporting and oversight with their budget set annually by parliament.

This effectively trumps the regulatory settlement although, in legislative terms, it should also be dealt with. What should happen is that the DfT alters the statement of funds available and an interim ORR spending review then takes place.

But as the DfT are now in charge of NR, the ORR is increasingly finding it's role in spending decisions somewhat diminished.

 

[Elecman]

Perhaps Mr Osbourne should also look at cutting the number of MPs by 25-40 %. And the number of civil servants by the same amount, especially the highly paid senior ones!. And stop using very expensive consultants for every minor little problem

Also combine the AAIB,RAIB and MAIB into just 1 Transport AIB?

 

[plcd1]

Well if we fancy a nice conspiracy theory then this might be a nice Treasury tactic to put ORR in an extremely difficult position as to who "controls" NR's spending and budget. HMT will want direct control of the money without an interfering regulator in the way. I wouldn't be shocked if there is a staged programme of "reform" already written down and agreed and McLoughlin did the first bit after the election and we now await the next steps. :roll:

 

[kieron]

Perhaps Mr Osbourne should also look at cutting the number of MPs by 25-40 %.

They did that a few years ago, only to find that the Isle of Wight alone needed twice as many generously paid MPs as it already had.

 

[SF-02]

Just as well passenger numbers, along with population growth, aren't at the highest levels in decades. Politicians have encouraged huge population growth but don't want to provides services - housing, transport, energy etc - to deal with it.

 

[pemma]

They did that a few years ago, only to find that the Isle of Wight alone needed twice as many generously paid MPs as it already had.

I believe it was a cut of 50 MPs they proposed. The reason it got nowhere is they proposed new constituencies which would see some of the marginal seats disappear. For instance, George Osborne would have stood for a 'Northwich' seat, with 'Northwich' being part of Tatton and Weaver Vale. Osborne would have been expected to win the seat with a lower majority than he would have got for Tatton but critically there wouldn't have been a Weaver Vale seat, which Labour could have easily won back from the Conservatives.

 

[physics34]

i know how they can save 25%........ do everything in-house... stop paying consultants and sub-contractors over the odds!

 

[Class 170101]

Reduce MPs and ministers pay by 25% to 40% as well as their number.

 

[mikeg]

Dare I say this is why I am a trifle sceptical about renationalising the railways at the moment... the treasury would control the purse-strings. Whilst financial markets may be short-sighted, nothing is so short-sighted as the treasury. The railways have a good business case of booming passenger numbers, stable freight, a demand from operators for network improvements... The private sector I'm sure wouldn't be slashing upfront spending right now, they'd be investing. I am all too aware of the shortfalls of private ownership and though not a fan of half-measures think a part-privatisation could be a viable alternative.

Unless that's the plan, present an option of cuts or privatisation, which is less than ideal. I support public investment first and foremost, but privatisation if needs must.

Reduce MPs and ministers pay by 25% to 40% as well as their number.

At the risk of going off-topic, would that not be a false economy? There are already enough poorly written laws going through, constituents going unrepresented, etc. Democratic process is a tiny part of government expenditure, but has the huge potential to alter the country in ways good or bad. I'd therefore rather spend a little more to get it right.

 

[WatcherZero]

1.5bn from a 35bn budget is not 25%! Its something like 3-5%.

 

[30907]

Small change compared to the WCML upgrade and Leeds station remodelling, both which, as soon as they were completed, Network Rail announced were at full capacity and couldn't cope with any future growth.

To be fair, the WCML was significantly descoped because the technology wasn't ready.

And there's nothing more you can do at Leeds within the existing footprint - but lengthening platforms around West Yorks to allow longer trains is certainly possible if not always easy.

 

[hello]

The private sector I'm sure wouldn't be slashing upfront spending right now, they'd be investing.

theres me thinking the railways were privatised in the 90's !!!!!!!!!!!!

stupid me, i must have missed the natiolisation of all these private companies back into the public sector and doing so much not to take as much money as possible out of the system without putting anything back

 

[SpacePhoenix]

If NR does end up with the 25% cut to it's budget, what schemes will likely be delayed by a good few years and what schemes might get axed?

Does the budget for HS2 come under NR or is that completely separate?

What impact could it have on the overall situation with DMUs? Could we end up with loads of new DMUs having to be ordered and all pacers kept?

 

[LNW-GW Joint]

theres me thinking the railways were privatised in the 90's !!!!!!!!!!!!
stupid me, i must have missed the natiolisation of all these private companies back into the public sector and doing so much not to take as much money as possible out of the system without putting anything back

You do realise Network Rail is now in the public sector?
If it was still in the private sector they would have some protection from the Treasury, as happened a decade ago to the great annoyance of Gordon Brown.
The Regulator ensured NR's budget was maintained.
This time NR's £34 billion debt and £38 billion budget are on the government's books.
The privately-owned TOCs, ROSCOs and Open Access can pressure ORR to maintain the budget (otherwise it damages their business).

 

[edwin_m]

Making substantial cuts to real and committed investment programmes now would simply be continuing the stop-go policies that are one of the reasons rail investment costs so much in the first place. I suspect the only real area for cuts in CP5, unless existing contracts are cancelled with substantial penalty payments, is the various schemes given the go-ahead by the previous government which haven't actually progressed far enough to place contracts and were probably never going to happen in CP5 anyway.

There are about 650 MPs, each of whom probably costs around £200K per year in pay and expenses. That's £130m per year which is a drop in the ocean compared to NR's budget (and would still be even if the cost is double that). So while cutting the number/salary of MPs might be a popular move it doesn't make any real difference.

 

[Class 170101]

Firstly - Every Little Helps as a certain supermarket keeps telling us.

Secondly We are all in this together - aren't we?

 

[Elecman]

Firstly - Every Little Helps as a certain supermarket keeps telling us.

Secondly We are all in this together - aren't we?

Indeed or so Cameron et al keep telling us !!!