THE CONSENSUAL APPROACH TO REGULATION
141. When we took evidence about Network Rail's prolonged
problems in meeting its T-12 obligation for the release of timetables
to train operators,[152]
we were surprised to learn of the softly-softly approach adopted
by the Office of Rail Regulation (ORR). Given the severe levels
of disruption experienced by passengers, not least in the run-up
to the festive season in 2004, the regulator appears to have taken
a timid approach.
142. The ORR approach to Network Rail's problems
was co-operative and consensus-building, encouraging Network Rail
to produce a recovery plan which was then approved by the ORR
and monitored regularly for progress.[153]
No enforcement or sanctions were imposed, an approach apparently
supported by the Government.[154]
Mr. Bolt, Chairman of the ORR told the Committee that they had
achieved "the right outcome for passengers."[155]
Mr. Bolt explained what kind of situations, in his view, would
warrant punitive action from the regulator:
"I think if you take the situation as we
found it last year, if Network Rail had not come up with a plausible
recovery plan, that would have been grounds potentially for enforcement.
If Network Rail, having proposed a recovery plan, simply did not
deliver on that plan so that it was not getting back into compliance
with the licence again, that is the sort of thing where enforcement
would be appropriate. We want enforcement to be an effective weapon
and if you have got licence holders taking the right action without
enforcement it actually means when you do have to take enforcement
it is all the more powerful."[156]
143. Some of our evidence contradicted the ORR's
position on the regulation of Network Rail. With reference to
the issue of timetables being made available to train operators
at T-12, the Railway Consultancy suggested that provisions for
penalty payments should be strengthened as a means of providing
an incentive for Network Rail to perform its obligations satisfactorily.[157]
144. Quite apart from the question of whether results
might have been delivered earlier had sanctions been imposed,
there are questions about the signals that the ORR's co-operative
and consensus-based approach sends out to passengers and the industry.
This approach clearly has its merits, but it also potentially
signals to the outside world that the regulator is weak and overly
cosy with the primary organisation that it regulates, Network
Rail. It would have been helpful if the regulator had at least
spelt out at an early stage precisely what sanctions would have
been applied, and at what stage, in the event that Network Rail
had failed to deliver its recovery plan.
145. The recent fine of £250,000 imposed by
ORR on Network Rail for failing to ensure the accuracy of certain
types of information provided to the industry may signal a new
willingness on the part of the ORR to flex its enforcement muscles.[158]
A fine of this magnitude is small by rail industry standards,
but as discussed above, the signals sent out to the industry and
to passengers could prove very valuable. We hope this move signifies
a new era of more proactive and firm regulation.
146. It is vital that the Regulator should have
the power and willingness to take effective remedial action swiftly
where problems arise. Although T-12 compliance is now acceptable,
the Office for Rail Regulation could have secured compliance by
Network Rail more quickly through a more forceful approach to
regulation. The Office for Rail Regulation must consider the efficacy
of a tougher regulatory approach.
141 
