Indeed, the framework agreement makes clear that the Transport Secretary will take a close interest in NR’s activities, with the right to hold regular meetings with NR’s chairman (as well as the right to appoint that chairman).
Despite these arguments, the framework confirms ORR’s role as NR’s economic regulator. Given the traditional tension between HM Treasury and spending departments such as DfT, ORR’s work provides the Treasury with a measure of financial assurance that has a degree of independence from the department itself.
ORR retains its safety role and its place in deciding track access allocations, because access is needed by private companies as well as by those train operators running government franchises. But NR regulation is ripe to be absorbed into DfT, despite the clauses within the DfT/NR framework agreement.
Longer-term financial certainty allows better planning from NR and its private sector contractors. The latter should be better placed to appropriately train their workforces for the long term, although NR’s continued use of framework contracts comes with no guarantee that work will actually materialise. Coupled with annual spending limits, there is a real risk of spending taps being turned off at relatively short notice.
Keeping five-year control periods sits with the promises made by Secretary of State for Transport Patrick McLoughlin in a letter to NR Chairman Richard Parry-Jones last December, shortly before the ONS announced its decision.
McLoughlin wrote of the likely ONS decision: “It would not reflect any change in the underlying substance of Network Rail’s operations, nor would it affect the security of your investors or your internal decision-making on issues such as resourcing and delivery. My overall aim would be to change as little as possible about Network Rail’s structure and its interaction with central Government, while meeting the accounting and reporting standards that apply to the public sector.”
A DfT-NR Memorandum of Understanding (MoU) that followed later the same month took the same line, and proposed the framework agreement that was published on September 1.
The memorandum talked of holding NR to the targets set by ORR’s five-year review, but also of appointing a formal accounting officer to satisfy parliamentary accounting processes. The company’s accounts will be consolidated into DfT’s (and therefore government’s), to be presented to Parliament.
Value for money
The DfT’s own accounting officer will need to be satisfied that NR is accounting properly, and that its spending represents value for money. The MoU says: “In doing so, we will seek to draw as much as we can from the existing control frameworks, in particular the duties and powers of the ORR as independent regulator.”
In addition to ORR’s oversight, the National Audit Office (NAO) will take an interest in NR. It looks to find value for money in government’s actions, and its recent reports have examined train procurement, Crossrail, Thameslink and High Speed 2. It also provides an annual review of the DfT itself, and has examined how ORR regulates NR’s efficiency.
The NAO is run by the Comptroller and Auditor General, currently Sir Amyas Morse. From next April, he will be appointed as NR’s auditor, replacing the company’s private sector auditors. To this end, the DfT requires NR to supply him with whatever information he needs.
