Posted 26th June 2015 | 18 Comments

Dismay after Network Rail cash crisis revealed

THE railway industry has been reacting to the decision by the government to tighten its control of Network Rail after the costs of major enhancement projects ballooned.

Transport secretary Patrick McLoughlin has ordered changes to top management, placed key projects on hold indefinitely and said that there will be no bonuses for board level directors this year. The Public Members, who were intended to represent shareholders, will no longer be required.

There will be an independent review of the way Network Rail plans and costs major enhancement projects, to be led by economist Dame Colette Bowe.

The transport commissioner for London Sir Peter Hendy is to replace Richard Parry-Jones as chairman, while former Eurostar chief and Department for Transport franchising adviser Richard Brown is joining the Network Rail board as a special director -- effectively making him the man from the ministry.

Electrification has been cut back in a bid to bring Network Rail's budgets under control. The scheme to electrify the Midland Main Line between Bedford, Sheffield and Nottingham has been 'paused', following the decision earlier this month to rethink the Northern Transpennine electrification between Manchester and York. Both schemes are now postponed indefinitely.

Transport secretary Patrick McLoughlin told MPs: "Important aspects of Network Rail's investment programme are costing more and taking longer. Electrification is difficult. The UK supply chain for the complex signalling works needs to be stronger. Construction rates have been slow. It has taken longer to obtain planning consents from some local authorities than expected. But that is no excuse. All of these problems could and should have been foreseen by Network Rail."

Network Rail, which became a government body in the public sector last September, agreed that its pace of progress had been 'behind expectations', conceding that 'more detailed project costs have been higher than assumed at the earliest stages of definition.  As a result, the total enhancement programme cost now exceeds the available five-year budget'.

Chief executive Mark Carne said: “During my first year in the job I have looked closely at every aspect of our business and it has become clear that Network Rail signed up to highly ambitious five-year targets set by the regulator. Based on historic improvements from a low base, we were overly optimistic about the capacity of our company and our supplier base to step up several gears in order to achieve the plan, especially given the complexities of a network that is at full capacity much of the time."

Network Rail has also been under fire for repeated disruption at London Bridge over the past six months so, as work continues on rebuilding the station for the Thameslink Programme.

The reassessment of its spending and priority projects has caused widespread disappointment and concern.

Louise Ellman, who is continuing to chair the new House of Commons transport committee, said: "The Secretary of State’s statement on Network Rail was disappointing. It is clear that some of the important schemes ministers have previously announced will not happen or will be delayed. But it is unclear what the practical implications of ‘pausing’ electrification will be for the Midland main line and the Transpennine route between Leeds and Manchester.

"The Transport Committee I chaired last Parliament questioned whether the planned rail investment programme was deliverable. That Committee warned the Department in January that there were problems with escalating costs and poor planning and management. The costs of the Great Western Main Line electrification are much higher than Network Rail and the ORR forecast. This should have been foreseen."

She also indicated that her Committee will be staging its own investigation soon, once its members have been appointed.

Philippa Oldham, head of transport at the Institution of Mechanical Engineers, said: “An urgent review is needed to get a better understanding as to why costs have escalated and timings missed. Government needs to press ahead not just with these upgrades, but with delivering new projects such as HS2. We need to remove the bottlenecks in our transport infrastructure, to improve the efficiency and increase capacity, which will help to bridge the North South divide."

Reader Comments:

Views expressed in submitted comments are that of the author, and not necessarily shared by Railnews.

  • David Faircloth, Derby

    Stating the obvious, this has to be regretted; we must all now wait and hope that it is just a pause, and that all of the works planned for CP5 are eventually completed, and as quickly as possible. Patrick McLoughlin has already taken some action, but is what he has done correct and does it go far enough? For surely what is needed is a comprehensive look at this situation; and before blame games start, it needs to be clearly understood as to how the situation got to the point were much of the CP5 major works had to be paused. I believe that although this is an extremely complex situation, it should not have been a complete surprise to David Cameron when his Secretary of State told him recently of the problems with these schemes; unless Patrick McLoughlin had deliberately been withholding information (which has not been suggested), there are major problems within the DfT again! and these also need to be addressed as a matter of urgency.

  • david c smith, Bletchley

    Just a quick question to the Editor - am I right in thinking the Moderation of competition rules were originally intended to be short - lived and to be phased out over th e first few years of the privatised era ?
    [You are indeed right, but no time limit was ever given. There was a degree of relaxation in 2004 and I don't believe MOC clauses are included in modern franchise agreements as such. In practice, open access applications to the ORR are still subjected to the rigorous 'abstraction of revenue' test. Most of them seem to fall at that hurdle.--Editor.]

  • david c smith, Bletchley

    Going back to a pre 1923 series of vertically integrated TOC's wuldn't work today. Each TOC would be confined to its own tracks with limited competition possible, whilst freight and cross country / interregional would be severely hampered.

    The point of having a seperate NR is to allow all TOC's ( freight and passenger ) the freedom of the network. Pasenger franchises were originally intended to be minimum serviice contracts with TOC's free to expand and develop beyond this. Unfortunately, since the advent of the Strategic Rail Authority this has been curtailed, resultng in a series of loalised quasi - monopolies.

    [I think you will find that the envisaged commercial freedom of TOCs as set out in the 1992 White Paper was being restricted by 'moderation of competition' clauses before the first franchises even started to operate. The SRA more or less continued that policy, probably because it was told to do do.--Editor.]

  • Steve Sherwood, St Austell

    Aside from all the promises that now not look as if they are going to be kept, I would very much like to see NR press on with a focus on GW electrification as planned, followed by a demonstration from the top down that lessons to be learned are identified and action points drawn up to improve the next focus, which would presumably be the Midland Main Line.

    If they cannot deliver this then any further work on existing lines, let alone building a brand new line, will suffer from the same escalation and drift.

    I hope the Tories have learned from their disastrous initial privatisation, which resulted in 'Railtrack' not knowing anything about their own network, and the inevitable decline in track condition and the tragedies that resulted.

  • Jack Lamb, Upper Beeding

    Surely it's time to go back to how things were run in the old days, when railways were at their best in this country? Each TOC (Train Operating Company) should be responsible for for the upkeep and the updating of it's own network. Re-Privatisation has never been the same as the original. All the time we have this body that run everything the TOC's are going to suffer. If a train is late due to engineering works or other traffic delays the TOC's have to deal with all the backlash of complaints and unhappy passengers which also leads to customers taking their business else where. We should have seen that things were not in a good way after the failure of Railtrack. The Victorians were efficient all that time ago.* Why can't we take a leaf out of their book?

    [*Not particularly so, but they were helped by an abundance of cheap labour, while hundreds of railway staff were killed on duty every year. There never was a golden age, as contemporary accounts make clear. One of the favourite jokes in 'Punch' was the lateness of trains. Nothing changes! --Editor.]

  • MikeB, Liverpool

    Surely we also have to ask ourselves "how many miles of electrification were completed during the Thatcher/Major years?" Whilst I do not have any figures to hand, I would suspect the answer is NIL*. Thatcher and her government had no time whatsoever for the railways and the Major government spent their time on the botched privatisation.

    [*The southern section of the Midland Main Line between Bedford and London was electrified in 1982 (80km, or almost 50 miles), while third-rail electrification was extended from Bournemouth to Weymouth in 1988 (56km/35m). The big one was the East Coast Main Line -- electrified between Hitchin and Leeds/Edinburgh between 1984 and 1991 (631km/392m). There were others, such as North Woolwich (1985), Farringdon-Snow Hill Tunnel (1988) and Leeds-Bradford/Skipton (1991).--Editor.]

  • david c smith, Bletchley

    First it was Railtrack which failed due to lack of incentive to put "safety first".Next came NR mk 1, whose management had little incentive to chase efficiency / cost - effectiveness and now we have NR mk 2 with all the problems arising from quasi - nationalisation.

    Let's have a structure that gives incentive for a safe, efficient and innovative body!

    Perhaps we could emulate Sweden and have a combined infrastructure authority for motorways, trunk roads and rail main lines, with local roads and railways managed locally ?

  • Chris Jones-Bridger, Buckley Flintshire

    It is to be hoped that being a transport professional and with his experience within the politically charged environment of TfL that Sir Peter Hendy will be able to hit the ground running with NR and provide much needed strategic direction to the executive team that previous occupants of the chairman's position have clearly failed to demonstrate.It is to be hoped he also becomes a visable spokesman for NR in the face of an increasingly hostile political environment.

    The admission that NR cannot deliver the outputs desired from the CP5 budget after only the first year casts a very dark shadow over all who contributed to it's production. While NR is bearing the brunt of criticism the ORR and DfT stand equally guilty for agreeing and signing up to the schemes to be delivered.

    Ministers and the DfT can't hide away that they didn't know projects were overrunning and costs escalating. Slippage has been reported since CP5 began. Indeed tender documents for the Trans Pennine and Northern franchises were delayed to take account of the changing electrification plans as scope and delivery timescales were amended. The Transport Secretary and Rail Minister have remained in place after the election and do not have the excuse to being new and unbriefed.

    While the vultures may be circling over NR there is a need for stability.

    Most importantly NR needs to get a grip on planned renewals. As ORR have reported day to day track and signalling renewal outputs are under budget and overcost.

  • claydon william, Norwich, Norfolk

    Louise Ellman, who is continuing to chair the new House of Commons transport committee, said: "The Secretary of State’s statement on Network Rail was disappointing. It is clear that some of the important schemes ministers have previously announced will not happen or will be delayed. But it is unclear what the practical implications of ‘pausing’ electrification will be for the Midland main line and the Transpennine route between Leeds and Manchester. "The Transport Committee I chaired last Parliament questioned whether the planned rail investment programme was deliverable. That Committee warned the Department in January that there were problems with escalating costs and poor planning and management. The costs of the Great Western Main Line electrification are much higher than Network Rail and the ORR forecast. This should have been foreseen."
    =========================================================

    Dear Mrs Ellman.

    Just quickly remind us how many total rail miles were electrified when your beloved Blair/Brown government were in power from 1997-2010..........

    Then shut-up please.

    The only reason the GW/ MML and TPE schemes are so expensive now, is because of the complete lack of electrification activity the last time you were in power.......


  • claydon william, Norwich, Norfolk

    Entirely predictable, and result of expensive, dogmatic procurement policies.

    The costs of electrification of the network were always bound to be prohibitively expensive, so long as we approach electrification on a piecemeal basis; contract by individual contract.

    It would have been much, much cheaper to have set up a couple of teams of 50 or so 'DfT employed' electrification engineers using factory electrification trains, to slowly electrify the required electric network over a 20-year rolling period, and slowly get the network done. Keep 'Network Rail' out of it.

    A good chunk of the costs of these schemes is the planning and training of the specialist staff, who have to be found and procured every time a new scheme starts.

    See Switzerland for details.......

  • MikeB, Liverpool

    When the Tory/Lib Dem Coalition came to power in 2010, they agreed to proceed with both the North West and Great Western electrification schemes, that were originated by Labour's Andrew Adonis. In my opinion, someone then came up with the idea that the Coalition had to show the electorate that they were going to electrify far more miles of railway than the previous Labour administration. Hence, the various electrification announcements by McLoughlin and Osborne during the months leading up to the recent elections but they probably knew then that they were making promises that they may not be able to keep.

  • Chris Neville-Smith, Durham

    "Projects usually have weekly meetings and reports - and if its not on time or budget - then its a meeting with your Superior."

    I think there's a Dilbert cartoon to this effect. It went something like:

    - 'My project is going disastrously. It's way over budget, badly behind schedule, and it's doubtful whether we can complete this at all.'

    - 'It's customary to say things are going fine.'

  • barry coward, GAINSBOROUGH

    Sir Peter Parker submitted all the current eletrificiation projects to Secretary of State Bill Rodgers in 1976. We are still waiting. I suspect the dead hand of HM Treasury is the real reason we have waited so long.

  • Tony Pearce, Reading

    This should never have happened - and I don't think it would in private industry. Projects usually have weekly meetings and reports - and if its not on time or budget - then its a meeting with your Superior. You must have justifications and proof on why the project is going wrong. If a project is going seriously wrong - then it would be highlighted to the Board - who would then summon a senior Manager with Technical Staff to explain - usally within hours. Lie and you are sacked. If the project really looks doomed - at whatever stage of its life - then no Board throws good money after bad - and it would be cancelled there and then. And you run the project down saving as much money. So I can't believe that Network Rail runs projects that go this wrong. 'Project Management' is now often done with programs on Computers and is a very disciplined art. This is not back-of-the-envelope stuff any more.

  • Melvyn Windebank, Canvey Island, Essex

    Just think it was barely 3 months ago that MPs on the government side were asking the SoS, Chancellor and PM when their lines would be electrified and were given positive answers despite these schemes needing MML or TPE schemes first . Shame questions to the house are not given by minister wearing a pork pie hat..!

    As for MML the section to Corby could be added to Thameslink project given inbalance between the project on MML to ECML with main line to Corby to follow at a later date.

    Hopefully, the upgrade part of the MML will continue given how HSTs on this line have only just started at their top speed of 125mph on sections and work to raise brides , improve stations etc will continue. While the pause in electrification raises the question as to Meridian trains on MML should gain extra carriage with pantograph to allow them to use overhead to Bedford , then Corby etc .

    The real long term problem has been a lack of electrification projects well now we have the projects we need a rolling program instead of stop start stop!

    Whatever happens new diesel trains is not an alternative ..

  • Tim Price, Bestwood Village

    I'm biting my tongue as i'm still livid that MML electrification has been..... "Paused".
    The route with by far the best business case, where millions of pounds has already been spent preparing infrastructure, and where millions more will probably be spent on penalties for breached contracts. A route where a significant proportion of the rolling stock is nearly 40 years old and only kept going by the sterling work of the maintenance teams.
    Just what is the future for the line? Does it even have a future?
    Meanwhile, HS2, Crossrail 2 and other projects where there aren't even shovels in the ground proceed as normal.
    Utterly disgraceful decision.

  • Roger Capel, Sheffield

    So given that most of the enabling works on that section are either done or ongoing, can we expect a revival of the costing just to wire Bedford to Corby, which the powers that be asked for before announcing full MML wiring?

  • Simon, London

    NR cannot take all the blame for this, DFT/ORR pull the strings and they should have seen this coming in relation to the delay to projects on the network. NR are in some respects are the scrapegoat for the DFT not helping matters. Interesting this announcement does not give any timescales as to when it is envisaged work to electrify the MML to Sheffield which I believe would have fallen in the next control period from 2019 onwards. The South Wales electrification should continue as it will but lesson need to be learnt from when the DFT suddenly realised that NR were never going to deliver these import projects on time and on budget.