3 Governance in the rail industry |
11. Network Rail does not pay dividends to shareholders.
It is a company which has 100 members at present including the
Department and 26 'industry members'. The
industry members are drawn from Network Rail's trading partners,
principally the train operating companies. The other company members
are members of the public.
The Government indemnifies Network Rail's debts which reduces
the pressure from lenders on it to increase efficiency.
Network Rail is also the monopoly provider of railway infrastructure
in Great Britain.
12. The Regulator told us that having a single
infrastructure provider presents regulatory difficulties, in particular
that international benchmarking is needed to challenge Network
Rail's costs. The
Department and the Regulator are currently co-sponsoring a study
to look at the reasons why it is, within the complex arrangements
existing in Great Britain, that railways elsewhere in Europe can
do a similar job at substantially lower cost.
In evidence the Permanent Secretary said that he was not sure
whether those parties currently comprising the British railway
network are optimally organised or whether their incentives are
13. Network Rail has a unique structure and position
within the rail industry. It provides the plans on which the Regulator
bases his determination of what infrastructure works Network Rail
should carry out and at what cost.
Network Rail receives a subsidy from the Department (£15.3
billion for the five years to March 2014) and the Department indemnifies
Network Rail's debts, yet its accounts are not audited by the
Comptroller and Auditor General and he does not have authority
to conduct value for money examinations of Network Rail.
14. In his evidence to the Committee the Permanent
Secretary queried the Comptroller and Auditor General's finding
that the Department's expectation that it would spend close to
the £1.2 billion originally allowed for support to train
operators, while planned capacity increases fell short of those
originally envisaged, represented a risk to value for money. The
Permanent Secretary told us that the planned capacity figures
cited in the report were predicated on expenditure of only £900
million. Spending the remaining £300 million in line with
the Department's expectation would have given further extra capacity
above the levels cited in the report.
15. The Accounting Officer was unable to tell
us why he had not clarified this matter with the NAO prior to
publication on the 2 June 2010 or why the matter had not been
raised with the NAO until the week before the Committee hearing.
Having failed to scrutinise the draft report adequately at the
appropriate time and raised the matter so late, it was not feasible
for the NAO to investigate the Department's new assertions prior
to the hearing.
22 Qq 64-70 and 96-97 Back
C&AG's Report, paras 2.13-2.14 Back
Qq 40-41 Back
Q 41 Back
Qq 71 and 88 Back
Q 104 Back
C&AG's Report, para 2.1 Back
Qq 31, 70, 81, 87-88, 91-92, 98-103 and 108 Back
Qq 2-7 and 15 Back
Qq 8-10 Back