Peer review: Richard Price
Chief Executive, Office of Rail Regulation
Philip Haigh’s RailReview article provides the first really forensic public analysis of Network Rail’s reclassification as a public sector body, and the potential impact on Britain’s railways. It points to the potential tensions caused by the overlapping relationship between DfT and Network Rail, and gives an insight into some of the conflicts of interest likely to arise when the spending department becomes the shareholder and encounters the temptation to micro-manage the business. It is (after all) strategist, policy maker, funder, procurer and now shareholder.
Understandably, Philip points to the overlap and potential duplication caused by the double oversight of NR by both DfT and ORR and the scope for merging the two. I’m sure he’d expect me to point out that ORR’s role in this process is set out in statute, and is rooted in enforcing NR’s delivery against the licence under which the law says it has to operate.
Putting this aside, however, the picture that Philip paints is of a world in which an economic regulator - independent of government and the industry it regulates - has an invaluable role to play in giving the public, the taxpayer and parliament assurance that the substantial sums of money invested are spent efficiently and deliver the outputs valued by passengers and freight customers.
Irrespective of reclassification, it’s also important to remember the company continues to hold a monopoly position as the owner and operator of Britain’s rail network. Both public and private monopolies can pose risks for customers, delivery and value for money.
With funders having a closer relationship with Network Rail, the role of independent regulation becomes (if anything) more important, mitigating the risk for government and rail users that detailed intervention by the sponsor department cuts across the flexibility the company needs to deliver performance targets and complex enhancement projects with the maximum possible efficiency.
Operating outside the clear and transparent structure for delivering investment, and without proper change control is a dangerous recipe for scope and cost creep on a significant scale.
The last decade has seen efficiency savings of around
£15 billion, brought about in part by independent regulation, while delivery for rail users is much stronger. Correspondingly, the challenge for Network Rail to achieve the next level of efficiency is tougher, and it would be disappointing for such a successful industry to see these advances slow, or reverse.
The continued high levels of public financial support for the railways, with billions of pounds of funding in place from taxpayers and fare payers, make it vitally important for the sector to be more transparent about service outputs, costs, and where this money actually goes. Although Philip’s article doesn’t explicitly say this, his compelling analysis makes a clear case as to why, in these new circumstances, an independent source of assurance to give this level of transparency becomes even more significant.
