Rail Freight Group

Should Network Rail lead on franchising?

With the Williams Review team still heads down in the details of their considerations, there has been little expectation of seeing any conclusions this side of the summer recess. So, it was perhaps slightly surprising to see a recent article in The Times suggesting that Network Rail might become the franchising authority in a future railway structure, a concept also mentioned by Andrew Haines in a radio interview a few days later.

Press articles come and go, and it is not uncommon for options to be floated in such a way, ahead of any decisions being made. Yet Mr Haines is politically astute, and it seems unlikely he would speak in public without some sense of Government backing, and as such it seems likely that the option is being considered.

For the Department for Transport there is an easy appeal in the proposal. It meets the oft-spoken desire to move franchising away from ministers, yet retains control through Network Rail’s public status. By bringing track and train together it answers the challenge of accountability and delivers the ambition for greater alignment. And with Network Rail’s new devolved structure, it provides a mechanism for greater regional involvement without actually passing any control to the sub-regional transport bodies. What’s not to like!

Well, for those of us in the freight sector, the prospect of greater vertical integration has been raising eyebrows since the start of the Williams Review. Having a single party responsible for operating the infrastructure and delivering commercial returns on passenger operations raises significant questions over incentives and behaviours towards open access operators such as freight. Concerns are particularly focused around ensuring freight has continued access on the network, including for growth, as well as in day-to-day operations. These points are well understood, but so far, we have not seen any firm proposals to actually address this, including in governance and incentives, regulation and law.

Yet if vertical integration is coming in any case, basing the new operations around a government-owned Network Rail may actually be a more benevolent option than some others. It certainly compares well to the ‘Japanese model’ which was finding favour earlier in the year, with its full privatisation of track and train in a single concession. It also plays well to the Labour Party’s own ambitions, with one commentator referring to it as ‘nationalisation via the front door’! Yet there are other considerations too. The new structure of Network Rail has landed well across the industry, but it is in its infancy, and there is much to do to establish the new operational ethos across the business.Despite much progress there remains a significant technology gap to address, and efficiency is flatlining. There are also real concerns over how the national network will function with greater regional devolution, as significant parts of the system operator are expected to move into the regions. The governance structure for freight is unclear, and the framework for interregional co-ordination needs to be established quickly. We recognise that this is all work in progress, but it has to be addressed if the new regime is to deliver what it promises for operators and users. Is it therefore reasonable to expect Network Rail to also deliver franchising at the same time? Or would it be an unwelcome distraction for its new leaders and managers?

The oft-cited alternative to this proposal is of course a new arm’s-length body, ‘SRA #2’ if you like.

Views are equally mixed on such a model, but is there a proposal which takes the best of both? Could a new authority be a holding company both for Network Rail, in more or less its current guise, and also for a franchising function which could focus on commercial outcomes and private investment? Such a body could also take responsibility for ensuring cohesiveness of the national network, as well as explicitly looking after the needs of freight and other users, in effect acting as a supra-level system operator.

Combined with an effective legal and governance framework, and a strengthened regulator, a reasoned compromise between the conflicting needs of many parts of the industry could well be met.

We may have to wait until the autumn to see the details of Williams’ proposals, and to learn whether he considers that there should be a greater role for Network Rail. We must hope that he and his team are alert both to the possibilities and also the concerns and are looking to balance both in their proposals.

An opinion column of the Rail Freight Group,www.rfg.org.uk