Rail News

RIA: ‘Boom and Bust’ System of Rail Funding Needs to End

Trade body the Railway Industry Association (RIA) has told the Transport Select Committee that the current ‘boom and bust’ system of rail funding needs to end, to benefit passengers, taxpayers, Government and the railway sector.

Rail Funding
Proposed HS2 Euston Station © DfT

Rail Funding in the UK

The current system of funding the rail network through five yearly cycles known as Control Periods is an improvement on the old British Rail system of annualised budgets but has meant that rail suppliers see overspends in the early years of the Control Period followed by underspend towards the end, having a damaging effect on the industry and meaning rail companies are forced to freeze recruitment or make redundancies, or even stop investing in the sector. Specialist SME companies sometimes do not survive until the next ‘boom’.

This ‘boom and bust’ cycle also adds up to 30% to the cost of maintaining the UK’s railways, meaning a higher bill for taxpayers and passengers. So in its evidence RIA has suggested three possible ‘scenarios for change’ to the funding system, as a spur to further debate in 2018:

  • Scenario 1 would be a rolling five year programme with no start/stop date with regular reviews
  • Scenario 2 considers longer Control Periods of, say, 7-10 years, rather than 5.
  • Scenario 3 looks at a baseline of work and funding to deliver a steady state ahead of a SoFA announcement/Final Determination for the following Control Period.
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Darren Caplan, Chief Executive of RIA, commented:

Rail infrastructure in the UK is being funded in ‘boom and bust’ cycles, where rail suppliers see large ramp-ups in workloads, before steep drop-offs a few years later. This directly affects the cost of running the railways, as the price of infrastructure improvements increases when suppliers have to expand and contract over the course of a few years.

For rail suppliers, the slowdown in workload can mean freezing recruitment or making redundancies and cutting back on innovation and training. For multinationals, it can mean moving investment to other sectors or overseas, whilst SMEs often struggle to survive. What’s most frustrating is that these companies then have to rapidly increase capabilities once the funding is turned back on a few years later.

It is clear that this situation cannot continue. So RIA is calling for everyone to come together – Government, Network Rail, the Office of Rail and Road, suppliers and other key rail organisations – to plan how Control Periods can be smoothed to ensure greater consistency. This would ultimately benefit not just the rail supply sector but also the Government, taxpayers, passengers and rail freight services. Today, before the Transport Select Committee, we set out some possible ways of doing so – we hope all the parties will now come together to look for a solution.

About the Railway Industry Association

The Railway Industry Association (RIA) is the representative body for UK-based suppliers to the UK and world-wide railways. It has some 200 companies in membership and the sector employs 240,000 people and contributes annually £11 billion Gross Value Added (GVA). It is also a growing industry with the number of rail journeys expected to double over the next 25 years and freight set to grow significantly too. RIA’s membership is active across the whole of railway supply, covering a diverse range of products and services and including both multi-national companies and SMEs (60% by number). RIA works to promote the importance of the rail system to UK plc, to help export UK expertise around the globe and to share best practice and innovation across the industry.

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Original article © RIA.

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