Friday 2 December 2016 3:30 pm

Network Rail pays £316m in penalties for planned engineering works over the last year

Network Rail has revealed which rail companies benefit the most from penalty payments for planned engineering works. And London's commuters may be shocked to hear the name that isn't at the top…

No, neither Southern nor parent company Govia top the pile of operators which receive handouts from the publicly funded body in charge of Britain's rail infrastructure.

Read more: Southern rail commuters offered a Christmas windfall

Network Rail's top five beneficiaries

Company Bill (£)
Great Western Railway £59,622,749
Virgin West Coast £52,552,554
South Eastern £31,547,233
Govia Thameslink £27,354,118
Virgin Trains East Coast £22,546,137

Schedules 4 and 8? Clear as mud…

The penalties – paid by Network Rail to the rail operators – relate to payments made under what rail authorities call "Schedule 4".

The rail industry is rather well-versed in over-complicating what is already quite a challenging structure. So what this means in English, is Network Rail must pay the operators to "compensate" them for disruption due to planned (rather than unplanned) engineering works.

Schedule 4 payments are one of two key penalty structures that train operating companies use for compensation from Network Rail.

Read more: Govia launches legal action against Aslef union to stop industrial action

The other is through "Schedule 8" payments – these are for unscheduled disruption to the railways. Network Rail must compensate the rail companies for delays even when they are due to events completely out of its control, such as trespassing or vandalism to the tracks.

As reported exclusively by City A.M. in October, it was under Schedule 8 that Southern rail's owner Govia raked in more than £48m in fines over the last year. It just takes Network Rail a little longer to publish the Schedule 4 data.

Southern and Govia

There is something of a caveat to all of the top five though.

Southern and its operator Govia function in a rather confusing way, making listing how much each network receives a little complicated.

Southern rail as an entity from Network Rail's statistical perspective does actually exist anymore – it was swallowed up in August 2015 by Govia Thameslink. 

Read more: The true causes of the Southern Rail-RMT war revealed

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So together the £48m Govia received under schedule 8, Govia has netted £117m during the last year.

Sources close to the Govia have previously tried to explain to City A.M. why this really, really… really isn't an income stream: 

The system of schedule 8 – and schedule 4 – payments was designed by civil servants and overseen by the rail regulator, which acts as a protection for taxpayers.

Without it, when bidding for franchises, train companies would have to factor in possible disruption caused by things beyond their control that could put people off from travelling by train in the future.

That in turn would increase the cost of franchising to taxpayers, and could lead to less money going to government to reinvest in improving the railway.

As if this all wasn't complicated enough, it should also be noted that in Govia Thameslink's case, this mean is actually recycled back to the Department for Transport. 

Because Govia Thameslink operates under a management contract, receiving a fixed fee for services and not exposing itself to passenger or "revenue risk", it can't hold onto the money it receives from Network Rail. 

On the up

All in all, Network Rail is having to shell out more and more to the rail firms each year for expected, or planned, engineering works.

Read more: Taking the piss: How Network Rail is cashing in on the Southern strikes

(Source: Network Rail)

The growing costs do not help Network Rail's building debt pile – currently standing at £43bn.

And because it can no longer go to the market and issue corporate bonds, the non-departmental government organisation must go cap in hand to the Department of Transport. It is current drawing down on a multi-billion pound facility at a rate of £9m per day.