Issuu

How the Railways Bill can get the best value from the supply sector

Contents

1. Summary

2. Introduction

3. Context – 10 key aspects of the Railways Bill

4. Opportunities

5. Recommendations

Annex: key Railways Bill passages

1. Summary

This more detailed briefing should be read in conjunction with our high level summary The Railways Bill: 10 key points from the supply chain.

As the Railways Bill progresses through Parliament, the Railway Industry Association (RIA) has assessed how the proposals can help get the best value from the rail supply sector, which will account for over half of Great British Railway’s spending. This paper sets out that:

• RIA welcomes the requirement to publish a Long Term Rail Strategy. Clarity on long term plans is needed to support business investment confidence and RIA has long called for a clear long term strategy

• RIA welcomes the ability for GBR to take integrated decisions across track and train We strongly support the requirement for GBR to produce comprehensive Business Plans covering the full range of its activities

• The proposal to create GBR out of Network Rail is appropriate to support a smooth transition; but it needs strong leadership to ensure there is a new business-friendly culture of working in the railways.

• RIA is concerned that the long-established principle of 5 year infrastructure funding settlements for rail is proposed to change so that the Secretary of State for Transport can remove funding at any point without consultation, and potentially without transparency over the consequences. This could undermine efficiency and pose risks to future performance and asset sustainability. Therefore, RIA is asking for targeted amendments to the legislation:

(1) To ensure 5 year funding settlements are maintained, with equivalent stability to today’s regime; and

(2) If a Transport Secretary seeks to reduce funding a settlement period, to require consultation and transparency, tasking the Office of Rail and Road (ORR) to independently assess and report on the reduction’s impact on railway costs, performance and safety.

• To help establish GBR as a streamlined and innovative organisation, RIA asks that the GBR operating model and licence should be subject to collaboration and consultation with supply chain partners

• GBR should be established to attract inward investment and make the UK railway easy to do business with It needs to be a commercially-empowered arm’s length body RIA recommends that the Government amends legislation to define the Secretary of State’s powers to intervene in non-GBR railway networks much more narrowly. These provisions should be tested with Third Party investors to check they will not deter future investment in the railway.

Further details are set out below.

2. Introduction

With the Government’s Railways Bill now progressing through Parliament, following its 1st Reading on 5 November 2025, it is important to consider how Great British Railways (GBR) and the UK rail supply sector can best engage with each other, to benefit both the customer (rail clients, and ultimately passengers and freight) and the railway industry, in terms of supporting and generating jobs, GVA and Treasury revenues.

More than half of all GBR’s future expenditure will be through rail businesses in the supply sector, spread right across the UK. Getting the best value from this spending requires a healthy partnership between the public sector and those companies over the long-term and the success of this partnership matters for all who use rail, as well as taxpayers.

In 2022, the Railway Industry Association (RIA), which champions a dynamic UK rail supply sector, published Five Tests for GBR1 to be a success:

(1) No hiatus in current work: More than 70% of Network Rail's spend is with the private sector – and there should not be a pause in this work;

(2) Transparency: Be clear and transparent with rail suppliers, to allow them to deliver;

(3) Partnership: Be an open and accessible client, and partner with the private sector for the best results;

(4) Productivity: Ensure the rail industry is able to thrive – financial sustainability will ensure rail delivers for UK plc; and

(5) Ambition: Leave a positive legacy, including in safety, decarbonisation, exports and the economy.

This briefing note highlights some of the implications of the Railways Bill for achieving these aims, and recommends two specific proposals for legislation to improve the value of spending through the supply chain by:

(1) Protecting 5-year infrastructure funding; and

(2) Avoiding creating uncertainty for Third Party investors into the railway.

Importantly, legislation is only part of the architecture to establish GBR. Other aspects, such as GBR’s Licence, operating model and financial and accountabilities framework, will be very important to its effectiveness too (but have not yet been set out by Government)

3. Context – 10 key aspects of the Railways Bill

There are a number of aspects in the Railways Bill of importance to the rail supply industry, including:

(1) It consolidates Network Rail’s (NR) core infrastructure and DfT-managed train operating companies together within a single entity, Great British Railways (GBR). Once established, GBR will have 100,000 employees and be one of the UK’s largest public sector employers.

(2) There is a legal requirement for the Transport Secretary to publish a Long-Term Rail Strategy

(3) The Transport Secretary will be required to set a rail freight growth target. There is not an equivalent requirement to set a passenger growth target, although GBR could have financial incentives to seek passenger revenue growth.

(4) Rail infrastructure will continue to receive funding settlements every five years across Operations, Maintenance & Renewal of infrastructure assets (as managed by NR today). There will be separate initial funding settlements for Train Operations and network enhancements, decided as part of Government Treasury’s Spending Reviews.

(5) GBR will be tasked to bring forward Business Plans that integrate Track and Train Operations, taking into account of all the different funding streams.

(6) Current Devolution powers will be maintained. Scottish and Welsh Ministers may contract public sector companies to directly deliver services, but they may also delegate services to GBR to run, or jointly own a company with GBR to run services.

(7) It is intended GBR will agree partnership arrangements with Mayoral Strategic Authorities (MSAs), including options for Mayors to fund GBR, to enable local influence over the railways and support integration with other transport modes. MSAs must be consulted before GBR makes certain decisions relating to passenger services or addition to the network, and GBR must also have regard to devolved transport strategies.

(8) GBR will have fare-setting responsibilities on the services it operates, whilst Open Access and devolved operators will remain responsible for fares on their services. It will sell tickets, combining the existing 14 rail operator websites and Apps into one: Third Party Retailers

(9) Legislation will establish an independent Passenger Watchdog to combine existing passenger bodies, with the aim of representing passengers and improving service standards.

(10) GBR will manage track access decisions, determining which operators can run services and setting access charges. The Office of Rail and Road (ORR) will have an Appeals role, though with more limited powers than currently

4. Opportunities

RIA has identified three opportunities for the railway industry, of relevance to rail suppliers:

(1) RIA supports the requirement to publish a Long Term Rail Strategy – a coherent strategy and plan for both infrastructure and rolling stock investment is essential to securing best value for taxpayers and to giving businesses confidence to invest. Businesses need clarity over long-term plans to invest with confidence and the Strategy will need to be accompanied by clear long-term plans for rolling stock and infrastructure investments, which the Government has also committed to publish. The commitment to a freight growth target is welcome, and a commensurate target for passenger growth should also be set out.

(2) RIA welcomes the ability for GBR to take more integrated decisions across track and train. We strongly support the requirement for GBR to produce a comprehensive business plan, spanning Track and Train operations, which will help identify efficiencies. Whilst funding streams for existing infrastructure, enhancements and train services will initially be separate, we welcome the flexibility to bring them together in future to i) take advantage of better integrated decisions across existing infrastructure, enhancements and operations, and ii) develop fully integrated 5 year planning cycles, with smooth transitions between periods (moving away from annual spending decisions on Train Operations and some enhancements).

(3) The proposal to create GBR out of Network Rail will help support a smooth transition. It needs to be accompanied by continuity in providing clear points of contact for suppliers and strong leadership to ensure there is a new business-friendly culture of working in the railways.

5. Recommendations

RIA has three broad recommendations as the Railways Bill makes its passage through the UK Parliament

(1) Protect the established 5-year infrastructure funding settlement

• Railways are long-lived assets and investment decisions today have consequences for decades. Steady investment in maintaining and renewing assets has been shown to be the most efficient and safety-conscious way to manage infrastructure.

• Funding settlements of at least 5 years are a long-standing principle for the effective management of infrastructure networks, and have been used in rail for over 30 years.

• Whilst the Bill requires 5-yearly funding settlements for infrastructure, RIA is concerned that the legislation as currently drafted (Schedule 2, see Annex) will allow a Transport Secretary to reopen and reduce a settlement at any time, without consultation. This risks creating future increased costs for taxpayers, declining asset condition and poor performance for rail users.

• Furthermore, there is no mechanism to ensure there is an independent transparent assessment of the impact of funding changes.

• RIA recommends the Government amends the legislation: i) to ensure 5 year funding settlements are maintained, with equivalent stability to today’s regime; and ii) if a Transport Secretary seeks to reduce funding my settlement period, to require consultation and transparency, tasking the ORR to independently assess and report on the reduction’s impact on railway costs, performance and safety

(2) Set GBR up to be an efficient and streamlined organisation with the freedom to innovate and to make the most of the supply sector

• For GBR to be successful, whilst the Government of the day should set the strategic direction of rail, hold GBR to account and avoid micromanagement, expert rail professionals should be accountable for day-to-day operational decisions. The Secretary of State’s proposed Power of Direction should be used with particular caution

• The majority of GBR’s expenditure will be through the rail supply sector, and there are many opportunities for better ways of working. RIA suggests that GBR should learn from examples such as the Core Valley Lines in Wales which combines public sector leadership and vision, with a substantial transfer of risk to the private sector supply chain to provide services to manage the railway efficiently. The support is regarded as a longterm partnership, with integrated track and train operations, rather than piecemeal.

• Conversely, the value of public spending through the supply chain is reduced by fragmented procurements, plans and funding commitments that constantly change, and a lack of visibility over future work: these factors all increase supply chain costs and hence the cost to the public sector.

(3) Establish GBR to attract inward investment and make the UK railway easy to do business with

• In order to complement Government funding and boost overall resources to run a world-class railway, the railway needs to attract Third Party investment, which includes contributions from other public authorities, ports, freight distributers, airports, developers and other private sector investors.

• The rail reforms need to provide investors with enough confidence they will get value from their financial contributions. This requires a step change in today’s culture and working practices. RIA is concerned that the legislation includes provisions (clause 72, see Annex) giving powers to the Secretary of State to make changes to non-GBR parts of the railway (such as devolved railway networks, London St Pancras High Speed, freight terminals, port and airport terminals). This means that investors in those parts of the railway will not have the certainty they need to be able to continue to own and operate their railway assets on the same basis as they do today. The effect could be to deter future investment.

• GBR will also need enough commercial freedom to do business, such as to secure investment in and around railway stations, without requiring central Government approval for each individual transaction.

• RIA recommends that GBR needs to be established as a commercially-empowered Arm’s Length body, with the ORR given a clear role to play in supporting investor confidence and streamlined investment approvals

• RIA recommends that the Government amends the legislation to define the Secretary of State’s powers to intervene in non-GBR networks much more narrowly. These provisions should be tested with Third Party investors to check they will not deter future investment in the railway.

For more information on this paper, or to discuss its content, please contact RIA Policy Director Robert Cook, at robert.cook@riagb.org.uk and 020 7201 0777 / 07951 776874

Annex: key Railways Bill passages

Protecting the established 5 year infrastructure funding settlement: Railways Bill, Schedule 2

• There will be 5 year infrastructure funding settlements for GBR, with a process akin to the control period process today. Initially (at least) this won’t include train operations or enhancements funding.

• Schedule 2 in the Bill allows the Secretary of State to make mid-period funding changes (“vary financial assistance”), including removing funding In today’s world, this would trigger a new review process by the Office of Rail and Road which could require an increase in access charges to ensure that Network Rail remains funded to deliver on its commitments.

• In future, the Secretary of State may simply decide to reduce the grant to GBR. The new process is that they notify GBR, and GBR would be expected to update its business plan (with a presumption this would be published, noting that the plan is signed off by the SoS who will have control of the narrative).

• The SoS is not required to consult or notify ORR in advance, and is only required to notify ORR if the SoS deems the impact to be material on GBR’s ability to carry out the activities it was originally funded for.

• RIA’s view is this creates a significant risk of funding reductions where the impact is not transparent. As well as objecting to the ability of SoS to remove funds at any time, we suggest an amendment to legislation to require ORR to be notified and publish an independent opinion on the impact (including long-term consequences for safety, efficiency, performance).

Extracts from Schedule 2 of the Bill

(3) If the Secretary of State proposes to vary the financial assistance to be provided under paragraph 6, the Secretary of State must notify Great British Railways of the proposed variation.

(4) The Secretary of State must notify the ORR if

(a) the proposed variation is to financial assistance to be provided for the purpose of carrying on activities in exercise of Great British Railways’ function under section 3(1)(a), (b) the proposed variation is a proposal to postpone or withdraw the provision of financial assistance or to reduce the amount of assistance to be provided, and (c) the Secretary of State considers that the proposed postponement, withdrawal or reduction is likely to have a material impact on the ability of Great British Railways to carry on the activities specified in a notification under sub-paragraph (1) in relation to the assistance.

(5) If the Secretary of State decides to vary the financial assistance to be provided under paragraph 6, the Secretary of State must

(a) notify Great British Railways of the variation, and (b) publish details of the variation if the Secretary of State considers that the variation is likely to have a material impact on the ability of Great British Railways to carry on the activities specified in a notification under sub-paragraph (1) in relation to the assistance.

Support confidence by third party investors to commit funding to the railway: Clause 72

Regulations to make changes to non-GBR infrastructure, facilities and services

• Clause 72 gives the Government powers to make future changes to legislation by regulation (i.e. outside of a Parliamentary vote – so called ‘Henry VIII powers’).

• This would provide very wide-ranging powers to make provisions about non-GBR networks and rewrite railway legislation around these networks and how they interact with the GBR network.

• With such widely specified powers, it is difficult to see how investors in non-GBR railway assets could have confidence that a future Government might not completely change the basis of their relationship with the railway.

Extract:

Clause 72 - Regulations about non-GBR infrastructure, facilities and services

(1) The Secretary of State may by regulations make provision about

(a) the management and operation of non-GBR infrastructure,

(b) rights to operate trains between places using non-GBR infrastructure,

(c) co-operation and co-ordination between Great British Railways, GBR companies and persons who manage or operate non-GBR infrastructure,

(d) the provision and supply of facilities and services which facilitate the operation of trains, and (e) competition in the market or markets for the provision and supply of such facilities and services.

(2) The regulations may, in particular

(a) make provision relating to non-GBR infrastructure that corresponds or is similar to, or consequential on, the provision relating to GBR infrastructure made by and under this Chapter;

(b) permit functions of a person who manages or operates non-GBR infrastructure to be performed by a person who operates trains that use that infrastructure;

(c) make provision about terms, conditions and charges for the use of non-GBR infrastructure and for the provision and supply of facilities and services;

(d) make provision as to circumstances in which Great British Railways is to be treated as a railway undertaking for the purposes of the 2016 Regulations, or any restatement or replacement of those regulations, despite any contrary provision made by this Act;

(e) restate, or replace with such alternative provision as the Secretary of State considers appropriate, the 2016 regulations.

(3) The regulations may

(a) include provision as to their enforcement, including by means of criminal offences punishable by a fine, civil sanctions (including penalties) or civil proceedings;

(b) include provision for appeals in relation to anything done under or by virtue of the regulations;

(d) confer power to make provision about matters arising out of or related to the regulations in a document issued by a person specified, or of a description specified, in the regulations.

(4) The power to make regulations under this section includes power to make consequential provision which amends or repeals provision contained in this or any other Act.

(5) Before making regulations under this section the Secretary of State must consult such persons as the Secretary of State considers appropriate.

(6) In this section “non-GBR infrastructure” means any network, station or track that is not operated by or on behalf of Great British Railways.