Network Rail chair Sir Peter Hendy opened the second session, on "The Challenges Facing Network Rail" by welcoming the secretary of state's remarks about better integration of track and train and said the organisation had been actively pursuing this aim.
"Under Mark Carne we have been actively trying to bring the various elements of the railway together so they can work better." Mr Grayling was right that "it can be done without structural change".
He added: "it will be a magnificent achievement to devolve an organisation of this sixe by the end of the current control period, as we will. Nobody should underestimate the scale of Mark's achievement."
He reminded the audience that the connectivity provided by railways underpinned growth, jobs and housing.
With growth in passenger numbers over the last 20 years, almost all slack in the current system had been taken up. But he said "We don't want the government to think Hyperloop or automated vehicles will be a better means to produce the same connectivity. The railway is what we've got and there's more we can do."
Devolution would give the railway a more open structure. "If you look at that in the context of a very crowded railway, you have to work together to achieve the outcomes customers want, whatever contracts say," he said.
He expected the new route supervisory boards to bring together interested parties and stakeholders "to encourage co-operation outside the contractual frameworks", an approach used successfully for the 2012 London Olympics.
He said that trains would have to become more frequent. "We are going to have to run the big railway like the Underground. You can't run the railway on traditional 19th-century signalling."
He had seen the benefits of the digital railway in the new signalling systems on the Underground, which now allow up to 36 trains per hour on the Victoria Line. David Waboso had moved from TfL to Network Rail to lead its digital railway initiative. "The digital railway solutions David is pursuing now are obviously the right thing to do across the railway." Mr Waboso had changed the nature of the project from "engineering experimentation to practical implementation", Sir Peter said, and was producing strong business cases. "It can't come too quickly".
The crucial technology was not the power of the train itself but the technology to get more trains on the track.
He concluded: "If you've got growth, welcome it with open arms and find the technological means, and ways of working in the industry, to deal with it."
Prof Stephen Glaister, chair of the ORR, spoke about the current situation in the process of determining the railway's investment programme for the five years from 2019. He said the ORR's role was to navigate the five yearly periodic review process by which the Government sets out what it will pay for in the High Level Output Statement and Statement of Funds available.
These documents for the period 2019-2024 should have been produced by 21 July, but although there had been a skeleton HLOS there had been no funding statement. This was because the Government was debating internally and with the ORR about what its spending should be. The funding statement had been delayed till 13 October. By then it would be necessary to agree a statement in which the Government could have confidence. "It's not in the bag," Prof Glaister said.
From the current period there was a backlog of renewals, and Network Rail's efficiency had been worsening instead of improving. Earlier in the year the ORR had advised the Government "whatever you do, make sure the backlog is cleared in the next control period. They have accepted this," he said.
However, it is now clear that the Government intends to specify what it will spend on capacity-increasing improvements and enhancements outside the HLOS process. "We will have to wait for the Government to decide what it can afford," said Prof Glaister. This comes against a background of the backlog, severe general pressure on government funds, and Network Rail's debt burden, as well as declining efficiency, which is leading to wariness in the Treasury.
"We will do what we can to encourage private sector funding," said Prof Glaister. But though enhancements may cut costs and increase revenue to the railway, this is not usually enough to cover the cost of the enhancement project, so a big issue is how investors would get a return.
Prof Glaister said "The digital railway may increase capacity in certain circumstances," so there might be opportunities for such projects to be self-funding.
He continued: "We seem to think that we have to provide for any demand that comes along. Is there more scope for managing demand among people who wouldn't be inconvenienced by changing their behaviour slightly?"
But he added that the ORR was opposed to changing the five-year funding framework. "Network Rail is now a nationalised industry. We do not want a return to annualised funding settlements. HLOS and SoFA is a very good process. We will defend it – and it does need defending."
