OTHER REGULATORY ROLES
The above analysis is principally focused on the role of an economic regulator. In the UK (and elsewhere - such as in Sweden), the regulator does not only undertake an economic role. Since April 2006 (when Her Majesty’s Railway Inspectorate (HMRI) was transferred from the Health and Safety Executive), ORR has also been the safety regulator for the railways. In that capacity it investigates safety incidents and issues guidance about the safety standards to be expected.
The alignment of the economic regulator and safety regulator in this way is widely seen as having been successful. The UK has one of the safest railways in Europe - both statistically and operationally - and its safety enforcement is seen to be conducted by specialists in the industry.
Cullen himself stopped short of recommending the transfer of safety into ORR. But the benefits identified in his Public Inquiry into Ladbroke Grove, and the resulting debate, informed the later decision by government to transfer the safety role from HSE to ORR in 2005.
The benefits identified included a joint regulator being able to more accurately assess where the costs and benefits of safety steps might lie, as well as having the overall clout to ensure that safety expenditure was properly budgeted and factored in. ERTMS, for example, is a multi billion-pound investment into capacity, efficient operation and safety. The elements are meshed, and the regulatory system approving it logically needs to reflect that.
There are currently no loud calls for safety regulation to be realigned elsewhere in the industry. However, there may be an argument that a substantial change to the nature of ORR’s economic functions or powers would in part dilute the perceived advantages of integrating safety and economic regulation. If it were determined that future regulation would be better achieved by a more limited role for the economic regulator, it might also be appropriate to consider the delivery of safety regulation at the same time.
CONCLUSION
It is likely for both commercial and European legal reasons that a privatised rail industry will require an expert independent regulator. In line with best practice, that regulator’s scope and duties should properly be clear, focused and in line with long-term government policy. However, the precise nature and width of the regulator’s role is a subject for debate, and has been implemented in different countries in substantially different ways.
Ultimately, the regulator needs to be resourced and structured to deliver the right role for the structure of the industry that is introduced. As industry structures are proposed and revisited (following reviews by the likes of Bowe, Shaw, Brown and the CMA), and where the regulator’s duties have been organically developed over 20 years of privatisation, there is good reason to reassess whether the current regulatory constitution is optimised for the future.
Where future changes to the industry are introduced (or have been - in the case of the reclassification of Network Rail), appropriate changes to the regulator should be made. However, underlying any regulator’s remit and credibility must be an understanding that investment and stability require long-term clarity about the regulator as much as the laws that bind it.
As the Government’s principles on economic regulation confirm: “In order to maximise the benefits from a stable regulatory system, Government should offer a credible commitment to restrain itself, as strategic visions should not be changed too frequently.”
