Letter from Karen Dunnell Chief Statistician
to Chairman of the Treasury Sub-Committee
On 19 November 2004 my predecessor Len Cook
wrote to you about the ONS view on the Future of Rail White Paper
and the national accounts sector classification of Network Rail.
In line with standard practice, following examination of the Railways
Act 2005, I am writing to confirm the view that the changes in
the institutional arrangements introduced by the legislation have
no impact on the national accounts sector classification of Network
Rail as a private non-financial corporation. The main effect is
to transfer responsibilities within the public sector as defined
in the national accounts, rather than to change materially the
degree of public sector control over the rail industry.
The Act winds up the Strategic Rail Authority
(SRA) and simplifies the involvement of other public sector bodies.
The SRA, part of the public sector in the national accounts, will
cease to exist in spring 2006 and its functions will pass to the
Secretary of State at Department for Transport and the devolved
administrations. The Office of Rail Regulation (ORR) will cover
safety (ie certain responsibilities transfer from Health and Safety
Executive and Department for Work and Pensions), as well as economic
regulation. The ORR has no influence on the governance of Network
Rail apart from the existing licence conditions, which remain
Setting the high level outputs for the railways
will be the responsibility of the Secretary of State and Scottish
Ministers. ORR will have a key role in translating these high
level outputs and the allocated budget into specific outputs for
Network Rail to deliver. For Train Operating Companies (TOCs),
this will be done through franchise agreements. This delivery
will be ensured through the regulatory system, contracts and other
arrangements which will clarify responsibilities. Although the
ORR will set specific outputs for Network Rail, it will not dictate
how the outputs are to be delivered.
The first High Level Output Specification will
be published in summer 2007 as the starting point for the next
ORR periodic review for the time period 2009-14. The conclusions
to the periodic review will set the specific outputs Network Rail
has to deliver and the income it requires to do so. Franchise
agreements will be revised as necessary when they come up for
renewal. When these are complete ONS will need to examine the
relevant contracts in case there are any implications for National
The Department for Transport have committed
to keep ONS informed of progress and to provide the information
we require. In turn ONS will ensure that the Treasury Committee
is informed of any classification implications should these arise.
For completeness, the Committee might also wish
to note that the 2005 Act establishes the new Rail Passengers'
Council (RPC). The changes from the previous RPC relate only to
the identity of the public sector bodies making the appointments.
Regardless, all appointments remain public sector appointments
making the new RPC a public sector body.
I enclose recent correspondence between ONS
and Department for Transport concerning the Railways Act and other
changes stemming from the White Paper. Finally I also attach a
note, which newer members of the Committee in particular might
find useful, on why Network Rail is classified as a private sector
I am copying this letter and attachments to
David Rowlands, Permanent Secretary in the Department for Transport.
29 November 2005