R A I LT R AC K - The Railways Archive

introduction
We are keen to
have stronger volume
incentives... either
through revenue
sharing... or an
incentives element
within track access
charges
16
1.5
1.5 Economic incentives framework
Our income is derived from a number of sources:track
access charges paid by train operators,stations and depots
access charges, and property rentals and disposals.
We operate under a single-till arrangement.Under this,
the Rail Regulator calculates an overall total revenue
requirement for the Control Period.From this is deducted
expected income from freight and property to give a
revenue requirement from passenger franchise operators.
This is then divided between track access charges and
station charges.
The effect of the single till is to allow income from
property and other non-franchise sources to reduce the
amount that needs to be raised from passenger franchise
operators for using the network.Because the Government
provides financial support to franchise train operators,the
effect of the single till is to reduce the amount of
Government subsidy required.
The relative magnitude of the different components
of Railtrack’s income is shown below:
Components of Railtrack’s income
Source:Railtrack’ s Annual Accounts 1997/98
Other 2%
P r o p e rty 5%
Freight 7%
F ranchise passenger
o p e ra t o rs 86%
Government support to passenger franchise operators is
expected to fall from £1.6bn (1998/99) to £900M
(in 2003/04).Over this period,most long-distance train
operators are expected to become profitable and then pay
contributions to the Franchising Director. Almost all of the
remaining subsidy will be directed at services in Scotland,
Wales and the English regions including the Passenger
Transport Executive (PTE) areas,with that in Scotland under
the aegis of the devolved Parliament.
The current framework of access charges was
established at a time when there was little expectation of
traffic growth.It is ill-suited to the situation that the industry
now faces.While train operators have strong financial
incentives to grow traffic volumes, we currently receive little
benefit from traffic growth on the network because 91% of
track access income is fixed.Recent work suggests that a
much higher proportion of our usage costs,both passenger
and freight,vary with traffic volume, suggesting figures
broadly in line with a recent European Union study across all
member states. We are now exploring the implications of
this with our customers and the Rail Regulator. In this
Statement we assume that our charges in the next Control
Period are set at a level that at least covers our marginal
costs.In addition, we are keen to have stronger volume
incentives – either through specific revenue sharing
arrangements with train operators,or through an incentives
element within track access charges.
Subsidy to the rail industry is declining
Subsidies to rail industry (£M)
2000
1500
1000
500
1998/99
However, our ability to invest depends ultimately on the
financial framework which is set out by the Rail Regulator. In
his December document*,he set out the challenge for us –
whether we wanted to be a low-risk utility essentially acting
as a contractor for Government or the Shadow Strategic
Rail Authority, or a commercial organisation willing to take
demand risk through innovative approaches to networ k
development.
1999/2000
2000/01
2001/02
2002/03
*The periodic review of Railtra c k ’s access charg e s :the Rail Regulator’s
conclusions on the Financial Fra m e wo rk (Third Paper) December 1998.
2003/04