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Rail Professional opinion Katie Silvester, editor

Will new leaders find key to cutting costs?

A report by the National Audit Office on the Office of Rail Regulation’s monitoring of Network Rail’s efficiency has found that lack of financial transparency is hampering the regulator from determining what Network Rail’s unit costs are (see page 8). Though the report is broadly supportive of the ORR’s work, the NAO has

recommended the Network Rail’s licence is amended to require more input from the ORR when management performance bonuses are agreed. This follows ORR CEO Bill Emery’s letter to Network Rail’s remuneration committee in 2009 suggesting that the company’s performance had been ‘mixed’ and recommending that bonuses paid out reflected that. His comments were largely ignored. The report comes as a new CEO prepares to take over from Bill Emery (see pages

36-37) at the ORR. Richard Price will have his work cut out in his first few months, assuming the ORR intends to act on the findings of the report. One controversial area he may want to look at is whether it is appropriate for the regulator to continue to fine Network Rail – millions of pounds in some cases – when it fails to meet its licence conditions. Relatively small fines when it comes to health and safety breaches would seem appropriate, as someone needs to be seen to pay if lives have been lost, or put in danger. But the £14m fine for the Rugby engineering overrun in 2008 was widely

condemned at the time by, among others, Passenger Focus and the Liberal Democrats. There is little logic in fining Network Rail millions of pounds, when the ORR’s job is meant to be to help Network Rail save money. Fines simply take public money that had been put aside for the railway and hand it back to the Treasury, while railway improvement schemes get turned down for lack of cash. Plans for a second station in Cambridge, for example, currently hang in the balance, but £14m would have paid for two thirds of that facility. One solution would be for fines to be much smaller, but to be taken from directors’ bonuses. A complaint of the NAO’s report is that there are weaker incentives for Network Rail to perform well than that of other regulated industries, as the company lacks the financial discipline usually instilled by shareholders. Some years, directors bonuses have seemed unrelated to the company’s performance, though the remuneration scheme is currently being overhauled. The other important ‘new boy’ in all this, of course, is David Higgins – the new CEO

of Network Rail. Naturally, he is going to come under huge pressure to cut costs. He has already committed to an experiment with devolution. But the regional split,

which the Association of Train Operators has been pressing for, may not be the cost saver that its supporters believe. Many of the railway’s cost increases since privatisation seem to be generated at the interfaces between the different companies that run the railways: Tocs pay track access to Network Rail; Network Rail pays Tocs compensation during possessions; and so on. Then there is much duplication of roles at, for example, major stations where Network Rail has its own station manager and each of the Tocs using that station have their own managers. Under British Rail, these interfaces didn’t exist, as it was a single organisation. Can it really be the case that splitting Network Rail along regional lines will reduce costs? Duplication could well increase as yet more interfaces are created between the different sections of Network Rail.

PAGE 4 MAY 2011

News in brief

‘Cost and politics’ hinder progress

Politics and cost are two of the biggest concerns facing the rail industry today, a seminar hosted by law firm Clyde & Co heard. Speaker Chris Bolt, the PPP Arbiter, said: ‘The issues faced by the industry today are not new. It is fair to say there hasn’t been any real progress or any experimentation since the Future of Rail White Paper in 2004.’

Ticket office staff cuts opposed by passengers

Passenger Focus has received more than 18,000 written submissions from passengers opposing London Midland’s plans to cut ticket office opening hours. Anthony Smith, Passenger Focus CEO, said: ‘Passengers were almost unanimous in their request for staff at the station, raising concerns about ticket machines and the need for staff for advice and assistance on ticket sales.’

Students get taste of railway engineering

Nottingham University hosted a taster event for potential future engineers, with a weekend residential course on railway engineering for 13- to 14-year- olds. Supported by several industry sponsors, the students tackled real-life problems faced by engineers.

Golfing for charity

This year’s Railway Benefit Fund charity golf day has broken records with more teams than ever signing up early, ahead of the event on Thursday 2 June at Hendon Golf Club, north-west London. Organiser David Allen said: ‘We’ve had a tremendous response.’ Team entry is £550, including sponsorship of a hole.

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