6 Conclusion
Creating a vision for rail
74. We welcome the Government's recent confirmation
that there is a case for subsidising the railway, for environmental,
social and economic purposes.[113]
It makes a welcome contrast from the understandable focus on reducing
the subsidy, in the context of the UK's wider economic problems.
However, the Government must do much more to explain why the taxpayer
should subsidise rail and where that money is spent. At present,
the Government cannot demonstrate how the subsidy achieves the
purposes it has set out and nor can it explain what level of subsidy
it thinks is appropriate.
75. On our visit to the Netherlands, Germany and
Switzerland we saw different models for organising railways, each
based on state ownership and with a clearer sense of what the
railway was for. For example, in the city-state of Berlin there
was a concern that the population was in decline and migrating
towards the neighbouring state of Brandenburg, and a belief that
an integrated public transport system was a means to address this:
whereas in Switzerland there was a commitment to good links between
the principal cities and good timetable connections. In all three
countries there was much more focus on end-to-end journeys, with
integration with bus networks, bicycle hire and low carbon vehicle
hire.[114] These examples
show how the specification of rail services can be linked to the
wider purposes of the rail subsidy. We recommend that in developing
a new framework for rail franchising the Government focus more
on wider policy objectives, such as the promotion of sustainable
end-to-end journeys, the quality of the passenger experience,
or economic or social development, alongside the premium payments
offered by train operating firms.
76. If the savings identified in the McNulty report
do not materialise we cannot rule out radical structural reform
of the industry in future. It should be noted that these savings
do not take account of further spending which might be necessary
to cater for further increases in demand. The suggestion in the
McNulty report that the Government's "predict and provide"
approach to rail capacity might not be sustainable could provide
the context for difficult debates in the next decade about how
to cope with rising demand if extra capacity is unaffordable.[115]
77. Everyone agrees that the fragmentation of the
railway has generated costs which initiatives like alliances now
seek to minimise. Ironically, some of the reform proposals now
being pursued, including alliances and the decentralisation of
franchises, have the potential to make the railway still more
fragmented. David Higgins, Chief Executive of Network Rail, spoke
of the possibility of an "explosion of overheads".[116]
This is a key risk for the industry to manage. It remains to be
seen whether the Rail Delivery Group will have the motivation
and clout to do so.
DfT and the ORR
78. The current Government has tried to take a step
back from the management of the railway but has instead found
itself embroiled in a gigantic row about the West Coast Main Line
franchise plus a series of consultations and debates about quite
detailed aspects of rail. There is a degree of inevitability about
this. The Government does not formally own Network Rail, but guarantees
its enormous debts; the Chancellor of the Exchequer has used investment
in rail projects as a tool for boosting growth; and the Government
will always be responsible for keeping the railway running if
train operators or even the infrastructure manager pull out. More
than this, there is a presumption in Parliament and amongst the
wider public, that the Government is accountable for what happens
on the railway.
79. However, DfT is not an economic regulator and
the West Coast Main Line franchise episode suggests that the department
lacks commercial nous. We have suggested earlier that DfT should
consider delegating responsibility for awarding and managing franchises
to an arms-length body. There is also more scope to delegate work
to the Office of Rail Regulation so that it monitors and challenges
the efficiency of the whole industry, not just Network Rail. If
ORR takes on this role it will need to develop a thorough understanding
of the economics of the entire rail industry so that it can set
appropriate savings targets and apply pressure in the right places
to ensure that savings are made. In 2011 the Public Accounts Committee
published a damning report on the ORR, describing its relationship
with Network Rail as "too cosy" and concluding that
"it is disappointing that after 10 years' existence the Regulator
still does not properly understand the reasons for the gap [between
Network Rail's efficiency and that of the most efficient European
operators]".[117]
We asked Richard Price, ORR's chief executive, about these criticisms
and he defended the role ORR had played in reducing Network Rail's
costs in recent years.[118]
We support the notion of a single economic regulator for the
rail industry. It makes sense for the ORR to take on this role,
but in doing so it must show it has the capacity and credibility
to deliver savings across the board.
Our vision for rail
80. Our vision for rail in 2020 includes the following
elements:
- Clarity about the objectives
of subsidising rail and how these can be achieved
- A clear link between policy on rail and other
aspects of transport policy, for example a focus on sustainable
end-to-end journeys
- A strategic approach to policy-making by DfT
which does not sacrifice democratic accountability; assisted by
a strong industry regulator, and an effective industry leadership
- More transparency about the costs of rail, which
helps with scrutinising different approaches to organising rail
operations (eg alliances, different forms of franchises) and debates
about the costs of new services and infrastructure
- Passenger interests more clearly taken into account
in deciding questions of rail policy
- More modern, flexible fare and ticketing options
and a clear long-term policy on regulated fares
- No diminution in existing safety standards.
113 ROR 26B (letter from the Minister of State to the
Committee Chair, 26.Nov 12). Back
114
For comments on this issue in the UK context see ROR 22 (Campaign
for Better Transport) paragraph 1.3. Back
115
McNulty summary section 6.2.2. Back
116
Q69. Back
117
Public Accounts Committee, Forty-first Report, Session 2010-12,
Office of Rail Regulation: Regulating Network Rail's efficiency,
HC 1036, pp5-6. Back
118
Qq720-21. Back
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