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Extension of rail franchises 'embraced by government'


Lord Bradshaw writes for ePolitix.com ahead of his oral question on the future of Network Rail. Full story at the ePolitix.com website at : http://www.epolitix.com/latestnews/article-detail/newsarticle/extension-of-rail-franchises-embraced-by-government/

Network Rail was created after the failure of the previously privatised Railtrack, and is responsible for providing the infrastructure of the railway. Network Rail was kept off the public sector borrowing requirement (PSBR) in the mistaken impression that the company could be returned to the private sector and could attract capital and be subject to normal private sector disciplines.

Meanwhile a new chairman and chief executive were required, and a virtually powerless board of 100 members was created.

The income of Network Rail is set by the Office of Rail Regulation after government has made a 'Statement of Funds Available' (SOFA). The regulatory output is set by the regulator at five-yearly intervals known as control periods.

Network Rail is monopoly supplier of railway infrastructure services and has no direct relationship with the users (passengers or freight).

The regulator has no direct cost or efficiency comparisons with which to measure Network Rail. Instead it uses 'reporters' (consultants), whose measurements are mainly about what is achieved abroad.

What needs to be done in the present financial situation? Traditionally in hard times railways have postponed some maintenance expenditure, where this may be safely achieved, and carried out their operations more cheaply (e.g. running fewer replacement bus services at weekends). This should not include major cancellation of major schemes. Network Rail and the Rail Regulator need some domestic cost comparators.

In my view Network Rail should be instructed either by the Rail Regulator or by legislation to pass some of its responsibilities to franchised operators. (Merseyrail is a good and willing example.) While Network Rail will argue that there are likely to be losses of efficiency due to a more devolved approach, this has been and is the traditional defence of all large and monopolistic organisations.

Merseyrail, Chiltern Railways, Scotland and some freight lines offer good testing grounds for a more diverse approach. Because they are both partnered or owned by state railway companies, they would not be open to accusations of jeopardising safety.

Extension of franchises is another way of testing further decentralisation and should be enthusiastically embraced by government.

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