Role of regulator under scrutiny y at Select Committee hearing

THE roles of the Office of Rail and Road (ORR) and Network Rail were scrutinised at the Commons Transport Select Committee’s latest hearing in its inquiry into rail infrastructure investment on March 12.

Stephenson Harwood Partner Tammy Samuel questioned whether NR has to own, operate, manage and renew every part of the railway, saying that the move to a centralised System Operator function is “right” but that “lots of the other bits of NR can be devolved now”.

RMT Assistant General Secretary Mick Lynch said the union’s preferred solution would be for an independent safety regulator with NR directly responsible to the Department for Transport.

“We think that there are too many people influencing the ORR. They are not strong enough as a regulatory body,” he said.

RAIL Managing Editor Nigel Harris also appeared at the evidence session. He pointed out that while originally the regulator existed to protect the interests of the private sector from political risk, “we only ever talk about the regulator’s role now with regard to Network Rail… I find it bizarre that we have drifted into the position where the regulator is almost second-guessing and man-marking Network Rail on every decision, which is hardly a good use of time, or any use at all.” He called for a “major refocus” about the regulator’s role.

Lynch argued that the railway currently lacks a definition of what the calls for improved efficiency actually entail, saying there is not enough regulation and “too much slackness”.

Devolution of Network Rail was largely welcomed, with Harris suggesting that efficiencies could be driven from a frontline perspective rather than a top-down approach.

Andrew Smith, Professor of Transport Performance and Economics at the University of Leeds, said: “There is a place for the regulator. Reputational incentives for Network Rail management, as well as performance incentives, can be a way of making that model work. Obviously, one other way of making it work is to privatise the routes eventually, if one wanted to go down that route.”

The question of whether NR’s five-year Control Periods should be extended was examined, with Smith arguing that there was “not a particularly strong case” for doing so. Samuel suggested Control Periods could be more closely tied in with the length of franchises, and that devolution of NR could help to enable this.

Lynch described the current process as having a “lumpy, stopstart nature”, with companies having to leave expensive equipment and labour idle during periods where there is little work, or lay off highly trained and experienced staff.

Harris agreed, saying: “I have heard the contracting industry say ‘look, all we want is consistency.’ Mick is right about that. If you are investing in big yellow equipment and you want to train apprentices, and you then have to lay them off, not buy equipment and when the jobs come you have to hire equipment and hire agency staff at higher rates with lower skills, it causes all sorts of problems.”

He added that five-year Control Periods could work, but said: “I do not disagree with Mick that 15 years would be great.”

On issues around projects planned for Control Period 5 (2014-19) that either overran or exceeded their budgets, Samuel said: “At the beginning, there was the High Level Output Specification [HLOS] and things were priced at too early a stage, from my understanding. The HLOS and the statement of funds were available, so the question was ‘what can you do for this money?’

“A lot of the projects that were put into that Control Period were just not at an advanced enough stage to cost accurately what they were going to do.”

The decision to move enhancement projects out of the

“We think that there are too many people influencing the ORR.” Mick Lynch, RMT Assistant General Secretary “We have to look at how we get more railway for our money.” Nigel Harris, RAIL Managing Editor “There is a place for the regulator.” Andrew Smith, Professor of Transport Performance and Economics at the University of Leeds “You can take a really narrow approach and say that all the System Operator is there to do is what is required by law.” Tammy Samuel, Partner Stephenson Harwood

Control Period process was viewed positively by the witnesses, but some concerns were expressed about the System Operator function of Network Rail.

Samuel explained: “You can take a really narrow approach and say that all the System Operator is there to do is what is required by law - capacity allocation and charging. That is all that is required from that independent body, but actually what we are seeing coming out of the ORR and consultation is that that body is going to take a greater role in tieing the network back together. There will be devolved management at the roots, but a fairly big centre of Network Rail will be the System Operator looking at how you tie those back together.”

On devolution, Smith highlighted the ability to compare the performance between different routes, and identify where costs are higher and find a solution - although he acknowledged that with different routes sometimes doing things differently, there could be a risk of incorrect decisions being made.

Harris concluded his submission to the inquiry by saying: “It is about creating more railway for the money we are spending. That is what we absolutely have to keep sight of. The Treasury has come up with £48 billion for the settlement for CP6, which is £10bn more than CP5, so there is confidence, but we are not spending that money wisely.

“If we constantly look at the top end, and from the top down, in a very bureaucratic system, I do not think we will get anywhere. We have to look at how we get more railway for our money.”