Network Rail spent around £15.9 billion operating, maintaining, renewing and enhancing Britain’s rail infrastructure in the 2022 to 2023 financial year. Such large public expenditure requires effective oversight and scrutiny, and this is a principal role of ORR. This annual report, therefore, details our findings on Network Rail's expenditure to ensure better outcomes for rail users and efficient use of taxpayer money.
In our Annual Efficiency and Finance Assessment of Network Rail we also review the company’s current standing before the next five-year funding period – Control Period 7 - which begins next April. It will inform our final determination of the periodic review (PR23) which will set out our assessment of Network Rail’s plans and what the company is required to deliver for the next control period.
We found that Network Rail’s delivery of efficiency improved in the last year despite numerous challenges. The company appears on track to exceed the original target ORR set, with £949 million of efficiencies achieved in the year to March 2023, an improvement on its £934 million delivery target.
With £2.9 billion of efficiencies now delivered over the first four years of Control Period 6, Network Rail remains on track to deliver its £4 billion revised target for the control period, ahead of its £3.5 billion commitment set by ORR at the 2018 periodic review. However, we found that there are regional variations, with some regions highlighting that they may fall short of their revised targets.
Despite exceeding its efficiency target for the year, Network Rail’s overall financial performance was nevertheless below target and the company spent £974 million more for what it was funded to deliver. Several factors contributed to this underperformance: industrial action (mostly through higher payments to train operators in relation to service disruption) and worse than expected weather conditions affecting assets and speed restrictions.
Looking ahead to PR23
As noted above, with the current control period ending in March 2024, we are working on the 2023 periodic review of Network Rail (PR23). In June, we published our PR23 draft determination setting out how Network Rail should have a greater focus on train performance and renewing core assets in its plans for the next five years, provide better train service to benefit passengers and freight customers, and ensure that core assets such as track, structures and earthworks remain resilient given the challenges presented by climate change.
You can read the full Annual Efficiency and Finance Assessment of Network Rail by clicking the links below. We will publish our PR23 final determination in October.