After the Chancellors’ recent spending review the rail infrastructure budget has been cut by £1bn from £10.4bn to £9.4bn in the current control period 6 (April 2019-March 2024). This announcement has caused concern over planned improvements to rail infrastructure. The cut is likely to leave some projects without funding or severely reduced resources. In addition, due to the pandemic, the rail industry was unable to use all of its budget for the year. Therefore, if the government decides to take this funding back it could reduce the budget by as much as 10%. However, the day-to-day operating budget which includes everyday repairs, maintenance, and renewal work will be unaffected.
How will the rail budget cut affect the rail industry?
Some experts believe that a well-funded rail budget is essential for maintaining and improving our rail network for the future and reducing carbon emissions so that travelling by rail is more environmentally friendly. It is also essential for improving reliability, connectivity, and customer experience. With the day-to-day budget being unaffected and with the government prioritising projects such as HS2 and Northern Powerhouse Rail, this cut will most likely affect smaller local schemes the most. The Railway Industry Association were told that there are more than 80 projects in the pipeline, but it is currently unclear which projects this announcement will affect, and whether they will have to be cancelled or postponed.
The government has responded saying that even though they have cut public investment in the network, they have spent an additional £3.5 billion subsidising the rail network in order to keep trains running during the lockdown. Furthermore, emergency measure agreements have been extended by 18 months enabling trains to run even with fewer passengers.
Transport Partner at Hawsons, Paul Wormald commented: ‘The whole area of funding rail infrastructure improvements during and after the current pandemic was always going to be a political hot potato.
Reduced passenger numbers has meant that the public purse has had to fund Train Operating Companies via Emergency Measures Agreements, and with fewer passengers using the network currently, the questions over the viability of some major infrastructure projects scheduled for CP6 were inevitable.
The chancellor told the Commons that the Government would deliver on its “record investment plans in infrastructure” in his recent Spending Review and this announcement seems to have been slid under the radar in the hope that it would not get noticed. The announcement also seems to go against the grain of the Government’s “Green Industrial Revolution” plans that were published last month as the Treasury coffers still have £27bn earmarked for arguably less environmentally friendly road-building schemes.
With this announcement and continuing scrutiny of the HS2 project, it is clear that the businesses involved in the rail infrastructure supply chain are going to have to plan very carefully over the remaining years of CP6.’
How can we help?
At Hawsons we have a dedicated team of transport accountants at our offices in Sheffield, Doncaster, and Northampton. We act for a large number of clients in this sector across our three offices, ranging from hauliers to international couriers, and understand the challenges this dynamic sector faces.
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Paul Wormald
Partner, Doncaster