United Kingdom Office of Rail and Road commences 2023 Periodic Review in a period of significant challenge and change for the railway

• United Kingdom

• Transport - Rail

06-07-2021

The UK Office of Rail and Road (ORR) has launched its 2023 Periodic Review (PR23) which will determine Network Rail’s (and its successor, Great British Railways’ (GBR)) funding for Control Period 7 (CP7), which will span the period from April 2024 to March 2029, and what in return it should be required to deliver. PR23 will consider the measures by which the ORR will hold Network Rail/GBR to account for delivering the specified CP7 outputs as well as completing a review of the access charges and possessions regime to apply during that period.

PR23 comes at, and will apply to, a period of significant change for the British rail industry. The trajectory of recovery following the COVID-19 pandemic is uncertain in the context of the long-term changes in working practices and consequent travel demand patterns expected to result from it. Accordingly, it is anticipated that the impacts of the effects on the railway will continue to evolve through CP7. In addition, the railway is about to be subject to a major reform through the implementation of the Williams-Shapps Plan for Rail meaning that the organizational and regulatory structure of the industry will be fundamentally different in CP7.

As a consequence of these factors, the ORR recognizes that:

• PR23 will need to be flexible in its approach to ensure that it reflects the changing nature of the rail industry not only during the Review Period but also during CP7;
• the outputs for CP7 will also have to support the delivery of a more integrated railway delivering improvements for both passenger and freight customers; and
• the approach to CP7 needs to provide room for GBR to be able to evolve into its integrated role under which it will own, run and maintain the railway infrastructure and let and manage the passenger rail contracts currently awarded by the UK government, set fares and timetables and receive fare revenue.

Review Focus

Safety, performance, asset sustainability and efficiency are the key themes for the Review’s frame of reference. Aligned with the UK Government’s agenda, the ORR will also be considering how CP7 outputs can deliver on aspirations for progressing towards carbon net-zero by 2050 as well as delivering on political promises for regional ‘levelling up’.

Similar to the approach taken for CP6, ORR has confirmed that it will base the CP7 settlement on a ‘routes’ and ‘functions’ basis given the success of this approach in facilitating the easy identification of those routes and regions that are performing well and the reasons why. This approach is also likely to be consistent with the internal structuring of GBR, which is expected to be based on geographical business units, but it may also prove to be a transparent way to demonstrate that the CP7 settlement is being allocated in a way that achieves a levelling between regions of Great Britain. Enhancements will sit outside the CP7 settlement (as is the case for CP6) but given GBR’s wider functions, the funding associated with passenger service concessions is expressly excluded.

PR23 Timetable

The ORR, in its open letter, has invited a general consultation which remains open until 10 September 2021. This will sit alongside other more specific consultations that will be concluded by spring 2022 when the consultation outcomes will be published. In terms of other key milestones, the Department for Transport and Transport Scotland will publish their High-Level Out Specifications and Statement of Funds Available by autumn/ winter 2022, with Network Rail to publish its strategic business plan by early 2023 followed by ORR’s final determination in Autumn 2023.

Key Challenges

PR23 comes at a time when the future of the railway industry in Great Britain has rarely been more uncertain. The CP7 regulatory settlement will need to address a considerable number of potentially conflicting demands in the context of inevitably constrained public finances and competing demands for funding. A Periodic Review is always a complex process that, on the foundation of the relevant output specifications and funding statements, seeks to produce a robust settlement for the control period that will set clear outputs appropriate for the level of agreed funding, and a clear framework for accountable delivery. ORR recognizes that the challenge is to accommodate the reforms that have taken place in the industry to date and the vision set out by the UK Government – adapting the approach to PR23 to support the delivery of a more integrated railway that delivers improvements for customers – while retaining the core benefits from a five-year funding settlement.

PR23 is a very important process and we will be reporting further as it develops.

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