Select Committee on Treasury Minutes of Evidence

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 unchanged.

  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 Accounts classifications.

  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 body.

  I am copying this letter and attachments to David Rowlands, Permanent Secretary in the Department for Transport.

29 November 2005

previous page contents

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2006
Prepared 16 January 2006