Statutory Guidance to the Rail Regulator
from The Secretary of State for Transport
Section 4(5)(a) of the Railways Act 1993 ("the
1993 Act"), as amended by section 224 of the Transport Act
2000 ("the 2000 Act"), imposes on the Rail Regulator
a duty to have regard to any general guidance given to him by
the Secretary of State about railways services or other matters
relating to railways. This document sets out such guidance in
relation to working with the other railways regulatory bodiesthe
Strategic Rail Authority (SRA) and the Health and Safety Executive
(HSE)to a common agenda.
The Rail Regulator, the SRA and the HSE are
the three pillars of railway regulation in Great Britain. The
Secretary of State looks to these three regulators to work together
to ensure that the railways are run safely in the public interest,
through effective and accountable regulation.
The Rail Regulator provides economic regulation
of the monopoly and dominant elements of the rail industry, including
determining the level of charges levied by the infrastructure
manager (currently Railtrack) and regulating its stewardship of
the national rail network. He is independent of Government.
The SRA is the strategic, planning, and co-ordinating
body for the rail industry and the guardian of the interests of
rail passengers. It acts as purchaser of train services and railway
infrastructure. It also has various legal agreements with Network
Rail, including the provision of standby credit facilities and
the funding of certain additional costs, which will become effective
if that company successfully completes the acquisition of Railtrack.
The SRA's task is to provide a clear strategic direction for rail
transport in Britain; promote rail passenger and freight transport;
and encourage private investment in the rail industry.
The Health and Safety Commission (HSC) is the
single, independent safety regulator for railways in Great Britain
and the HSE is its operational arm. In carrying out his functions
the Rail Regulator should ensure that the HSE is fully consulted
whenever railway safety may be an issue, and he should be guided
by the advice of HSC/HSE on all health and safety issues.
Working to a common agenda
It is particularly important that the Rail Regulator
works closely with the SRA and HSE to strengthen and support the
railway. He and they will need to maintain close working relationships,
while recognising the boundaries among their respective responsibilities.
He should freely share information with them except where statutory
protections or commercial confidentiality require otherwise. In
particular he should share information at an early stage on anything
that may be material to forward financial planning by the SRA.
The Rail Regulator should be mindful that Directions and Guidance
issued to the SRA on 11 April 2002 and subsequently updated on
26 September 2002 by the Secretary of State require it, among
other things, to publish an overall strategy in January of each
year. The purpose of this strategy is to address the objectives
set for the SRA in those Directions and Guidance, which relate
to the operation of the railway and are intended to contribute
to the achievement of the targets set out in the 10 year plan.
The SRA may also publish separate strategies which relate to individual
issues and which contribute to the overall strategy. The Rail
Regulator should seek to ensure that, so far as possible, in exercising
his functions he does not prejudice the achievement of these strategies,
and particularly the overall strategy, published by the SRA.
If in facilitating the furtherance of the SRA's
strategies the Regulator considers that clarification or a further
strategic statement is desirable to properly discharge his functions,
he should make a request to the SRA. Where the Authority agrees
to such a request, the Rail Regulator should allow the Authority
a reasonable opportunity to produce the guidance in time for him
to take it into account in reaching his final decision.
The Rail Regulator should also be mindful that
the Secretary of State's Directions and Guidance require the SRA
to summarise, as part of its overall strategy, the resources which
are available to it and the basis on which priorities for the
use of these resources are determined. In addition, they suggest
that the Authority should describe in the overall strategy how
it intends to maximise net benefits from the funds available to
the Authority. The SRA is also required by virtue of its financial
framework to obtain the consent of the Secretary of State before
entering into any commitment or publishing any strategy that requires
additional resources beyond those which have been allocated to
The Regulator should also be mindful that by
virtue of its financial framework and of section 207(4) of the
Transport Act 2000, the SRA is required to secure value for money
from its expenditure. The financial framework also includes detailed
provisions relating to the SRA's finances which the Regulator
should have regard to in his exercising of his functions. The
SRA is required to adhere to the terms on which standby credit
facilities may be called upon by Network Rail and to undertake
detailed monitoring to ensure continued compliance.
The Rail Regulator should take care to ensure
that he does not cause the SRA as a result of the costs passed
through from operators or otherwise to:
(i) incur additional expenditure beyond its
(ii) incur expenditure which does not secure
value for money; or
(iii) incur expenditure which impairs its
ability to maximise net benefits from the funds available to it.
If, in recognition of his statutory duties,
the Rail Regulator considers that it is necessary to exercise
his functions in a particular way which he believes might result
in any of those eventualities, he should first discuss this with
the SRA and allow it to make representations on the matter. In
doing so, he should also allow the SRA the opportunity to consider
whether it would wish to amend its strategies or seek consent
from the Secretary of State for additional expenditure.
It is particularly important that the Rail Regulator
should be mindful of SRA strategies and financial position in
the context of any review of access charges under Schedule 4A
of the 1993 Act. The Directions and Guidance require the SRA to
consider at the start of any access charge review whether the
elements of its overall strategy that address the resources available
and the basis for the prioritisation of the use of those resources
are fully up to date and, if not, inform the Regulator of any
changes that it considers are necessary. The Rail Regulator should
have particular regard to the relevant section of the overall
strategy or, if relevant, to the changes notified to him by the
SRA in carrying out his review.
Furthermore, if, in recognition of his statutory
duties (eg his duty under section 4(5)(b) of the 1993 Act to act
in a manner which he considers will not render it unduly difficult
for persons who are holders of network licences to finance any
activities or proposed activities of theirs in relation to which
he has functions by virtue of Part I of the Act), the Rail Regulator
is aware that the conclusions of the review might cause the SRA
to incur (regardless of any potential savings elsewhere in the
Authority's budget) expenditure which is not provided for in its
strategy, expenditure beyond the resources allocated to it, or
expenditure which either does not secure value for money or risks
impairing its ability to maximise net benefits from available
resources, he should inform the SRA of this and allow it to make
representations on the matter in advance of the publication of
those conclusions. The Rail Regulator should then consider in
the light of those representations whether changes are needed
to his conclusions prior to their publication. In doing so, he
should also allow the SRA the opportunity to consider whether
it would wish to amend its strategies or seek consent from the
Secretary of State for additional expenditure.
In order to facilitate discussions with the
SRA in relation to all of the financial matters set out above
(and access charge review related matters generally) the Rail
Regulator should seek to agree with the SRA a framework for assessing
the impact of his decisions on the value for money and net benefits
generated from SRA funds.
The Rail Regulator should also bear in mind
that railway assets, especially rolling stock and infrastructure,
typically take time to deliver and have a life span measured in
decades. Equally, the strategic development of the railway will
be affected by demographic, social and other changes taking place
over the longer term. The Rail Regulator should always have regard
to these long-term factors.
26 September 2002