NR’s health and safety record, while not poor, is not as good as Transport for London’s. Nor does NR seem to have embraced some of the internationally accepted practices. I know that you know and accept that excellence in health and safety and delivery of maintenance, far from being competing, are actually mutually compatible and essential. Safe working is better working. Another challenge for you!
There is a widespread view that despite Mark Carne having the right approach to re-shaping the company, the tsunami of issues that keeps hitting him has not allowed him to progress either operational discipline or a blueprint for a Digital Railway. Carne is intelligent and committed, yet the question must be: is the current Chief Executive role too big for one man? Another challenge.
The thread running through all these challenges is that although there are many who aspire to lead, there are very few (if any) with authority. This gap must be filled by you! Although the NR Board has been strengthened, there is a real need for further quality in terms of your deputy. Might I suggest using the talents of the recently retired Len Porter in some capacity? Another challenge!
It is now almost a quarter of a century since the privatisation of the railways. The proposed structure was designed for a declining industry, and to take a cost base out of the Treasury at a time of slow economic recovery. The reality was that the outcome of the privatisation was unknown. Of course, history shows anything but a declining industry - rail is thriving, with the number of passenger journeys doubling.
The future is likely to feature sustained demand increases, signalling and train control system upgrades, an intention to move to a digital railway, increasing passenger quality and reliability demands, high speed lines, community rail, electrification and financial restraint. It is hardly surprising that a structure dating back 20 years, and designed with managed decline in mind, is now not fit for purpose.
All industry structures need reassessment. Therefore, it is not surprising that a structure that is over 20 years old and designed for the wrong industry model is under pressure, and needs to be re-evaluated.
Network Rail is the son of Railtrack, but without the discipline of equity. Many deride the failings of Railtrack, but fail to recognise that the British Rail maintenance regime may or may not have been excellent in an application that was too limited in its reach (not enough track upgrades were done for 50 years post-World War Two). Hence Railtrack was pilloried for its failings, and Network Rail was born without the real source of the problem being acknowledged.
The challenge for NR is to operate in the present, but plan long term. I am sure by now you will have come to the conclusion that many of the operational challenges, and the solution to how long Network Rail remains on the balance sheet of the Government, can be resolved only by considering what its long-term future should be.
Firstly, the Network Rail Framework Agreement set out by the DfT last year needs to be ditched. This document is the proverbial curate’s egg. However, where it is good it is obvious (special director, new governance), and where it is bad it is truly dreadful (daily cash flow reporting and the introduction of ‘double jeopardy’ in analysis of decision and cost review).
While we are talking about change of industry structure, perhaps it is time for a clean sweep. The purpose of the Rail Delivery Group is increasingly unclear, and it is not surprising that it has achieved little. Also, if we are to initiate change for Network Rail, it is time to review how the regulator works. The changes in structure of the industry I outline below require a regulator more along the lines of the water, gas, electricity and airport industries, rather than the current ORR.
So to the long term: the removal of stations from Network Rail is laudable, as is the tendering of some electrification contracts to outside bodies. But this will appear timid and merely tinker at the edges. There are two obvious long-term solutions to Network Rail that would prepare and structure both the company and the industry for the future.
The first solution is to split Network Rail into two or four companies. As stated previously, the current factions undertaken by Network Rail fall into about four headings: Asset Management; Network Operations; Infrastructure Project Management; and Commercial Property.
This split will give clarity of role, management, accountability, governance and financial management. It will allow the varying companies (either two, combining the first two functions into companies, or four) to meet the challenges for the next 25 to 50 years. It will allow culture change within the industry, focusing on the needs of the customers.
The second option is to vertically re-integrate the industry into between four and six regional operating companies, with a long-distance route company operating East Coast, West Coast and Great Western.
While this would require initial greater upheaval and a reshaping of the franchise system (such that they are awarded or reallocated to fit the new operating companies), it is likely to deliver many of the operational and financial advantages as per the model above. These new companies should be established on a long-term concession model, which again has additional advantages in terms of financial structure and of investment (especially network spending and rolling stock). This model also delivers clarity of responsibility.
The last government was characterised by bold decisions and financial commitment to infrastructure, despite the difficult financial position. The Chancellor, unlike so many of his predecessors, has remained committed to the belief that a high quality infrastructure is essential for increases in a country’s economic growth, and was prepared to make the resources available.
Ossification is the enemy of progress. A structure established more than a quarter of a century ago is unlikely to answer the challenges of the future. Change is the only option, and the two long-term solutions outlined above are the only realistic alternatives.
So Sir Peter: be bold, change the culture, enforce the necessary operational change, and set out the long-term vision for Network Rail and the industry. Bonne chance!
