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Network Rail May Find Itself £50 Billion in the Hole Before the End of the Decade

Network Rail Engineers Working on Safety BarrierThe travel industry in the UK has come a long way since the economic downturn. While some areas of the travel industry have started to rebound, there are others that are still struggling to get by. This includes Britain’s rail industry. In fact, the UK government has just recently been told by the Office of Rail Regulation that the railways in Britain are on the edge of a huge funding crisis.

The Office of Rail Regulation says that Network Rail’s interest payments are going to take up more than one-third of its whole budget before the year 2030. This rail watchdog is calling for the government to make things more transparent so the public can clearly see the costs of running a railway.

Besides the direct government funding that the rail industry receives each year, the railway investments are being paid by borrowing. During the year of 2012, Network Rail’s net debt went up by £3.1 billion. According to projections, the debt for the railway will jump nearly £20 billion by 2020.

The Office of Rail Regulation tried to prove its point by adding that the repayment method of the railway is guaranteed by the government. In short, this means that Network Rail actually gets to borrow money on the same credit rating as the state. Unfortunately, the ability to service these debts and raise any kind of additional financing will depend completely on direct government support and creditors. With this kind of model, there is no way for the rail industry to keep its debts in check.

Network Rail has already acknowledged that it has a debt problem, and it looks like this problem might keep growing. No one wants the cost of tickets to go up, but no one seems to understand what it costs to run a railway.

LSE professor and leading public finance expert Tony Travers said that there is a real problem at Network Rail, and it is growing fast. The scale of this debt is already huge, and it shows no signs of slowing down. At some point, this debt is going to damage Network Rail, and under the current model, there is nothing the company can do. Less money means fewer funds to maintain the railways. If things keep going like this, the government is going to have to pay off Network Rail’s debts.

Maria Eagle, the shadow transport secretary, said that ministers think that the rising annual cost for Network Rail does not put any pressure on the day-to-day maintenance costs of the network. This is a dangerous mistake, and the rail industry is going to suffer from the same problems it has had in the past.

For the time beginning, safety fears are taking a front-row seat. People are worried that, with a lack of money, there is no way that Network Rail can keep the rail industry safe. Some experts are even worried that it is going to take a huge accident to wake people up and show them that this is a serious problem.



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