Network Rail

What is Network Rail?

Network Rail (NR) was set up in 2002 to replace Railtrack as the body responsible for Britain's rail network. It holds a monopoly over Britain's rail infrastructure, a major national asset, and as such is rigorously monitored to ensure accountability to the public interest. Its network operating licence was originally issued to Railtrack on March 31st 1994.

As a result NR is limited by guarantee, which means it operates as a private company without a profit-making function. Instead of shareholders, members drawn from the rail industry and the general public hold the board to account by reviewing its performance against pre-set targets. The Department for Transport (DfT) is also a member, providing it with substantial subsidies each year.

NR's primary purpose is the maintenance of Britain's rail infrastructure, which includes tracks, stations, bridges, tunnels and signalling assets. It does not control the rolling stock of passenger and freight trains but its structure is organised according to nine major routes to aid closer relations with train and freight companies. These are Scotland, North-Eastern, North-Western, Western, Midland and Continental, Anglia, Wessex, Sussex and Kent.

Background

After being set up on March 25th 2002 NR assumed control of responsibility for the rail network on October 3rd of that year. Initial assessments of its inheritance were bleak; more than one-fifth of trains were not running on time, while a March 28th 2003 report bemoaned the lack of investment seen in recent years.

Initial good progress saw a seven per cent reduction in delays by March 31st 2004, while the acquirement of funding worth £22 billion over a five-year period enabled it to begin improving the network. The government rewarded NR with new responsibilities in a July 2004 White Paper, handing over monitoring and train performance reporting duties from the abolished Strategic Rail Authority. In the same month NR doubled the number of its employees by taking maintenance in-house.

NR's progress continued to be monitored by the Office of Rail Regulation (ORR), whose quarterly monitoring documents saw improvements in safety risk, delay minutes and its 'public performance measure'. It began raising only partially-met concerns about infrastructure management issues causing problems from mid-2006, however, while the quarter to September 2007 noted the delivery of major schemes were becoming a "major challenge".

Controversies

The entire creation of Network Rail was controversial, declared 'privatisation in all but name' by Thatcherite critics. Labour's treatment of Railtrack and then NR appeared to vindicate the privatisation policy - even if, technically at least, the new organisation was not profit-driven.

As NR began the task of rejuvenating Britain's railways the demise of Railtrack was dragged through the headlines thanks to Stephen Byers "inadvertently" misleading MPs.

It took until October 2005 for Mr Byers to be cleared in the High Court of acting maliciously by refusing to bail Railtrack out in 2001. It was placed into administration because of financial difficulties mainly caused by the Hatfield crash of 2000. Railtrack shareholders had contended Mr Byers wilfully withheld funding from the company to force its collapse, an argument eventually dismissed in court.

Fines involving major failings have also plagued NR. It was hit by a £4 million fine in March 2007 over the fatal Paddington crash of 1999 in which 31 people died and £2.4 million in July 2007 after ORR found it had failed to plan for a resignalling scheme overrun.

Failings inconveniencing passengers hit the headlines at the beginning of 2008, when engineering works supposed to be completed before New Year's Eve over-ran to affect the first commutes of the New Year. Liberal Democrat transport spokesman Norman Baker called the delays a "fiasco" while the Conservatives called on NR to "get its act together". Network Rail was fined a record £14m following three days of delays and cancellations to January 3rd.

More recently in October 2010 the Office of Rail Regulation announced that Network Rail would face a £3m fine after it breached its licence by failing to run an effective and efficient timetabling process for the rail network. This followed the introduction of the integrated train planning system (ITPS) for the May 2010 timetable. ORR chief executive Bill Emery said: "Not for the first time, Network Rail has breached its licence for failing to give sufficient emphasis to the needs of its customers. This substantial penalty sends a very clear message that the company must quickly take steps to ensure its processes prioritise its customers."

Problems from the past also continue to haunt the company. On 10th November 2010 the ORR began criminal proceedings against Network Rail Infrastructure Limited and Jarvis Rail Limited for breaches of health and safety law which caused the Potters Bar derailment on 10th May 2002 in which seven people were killed and many more seriously injured. The infrastructure controller for the national rail network at the time was Railtrack plc (in administration) which was taken over by Network Rail Limited in October 2002. A maximum fine of £20,000 for each charge may be imposed by a magistrates court; however, if the case is committed to the Crown Court the maximum penalty is an unlimited fine.

Statistics

Network Rail was set the demanding task by its regulator of improving efficiency by 22% between 2009 and 2014. Last year we achieved 3.6%.

Today the company has achieved further savings of £200m in the first six months and is on track to achieve around £400m, or 9%, of savings in this financial year.

Total efficiency over the first two years of this control period is forecast to reach 12.5%. This has been achieved by delivering capital works for less, better asset management and reducing operating and maintenance costs reflected in headcount reductions of some 1,100 since March 2010.

Revenue increased in the period in line with the business plan.

Most of our turnover is indexed to RPI - the effective rate for the period was 0.3% and turnover increased accordingly.

Net debt of £23,973m remains at a sustainable level, up slightly from £23,838m at the last year end. Network Rail is confident that its debt is well managed and the company has a policy of appropriately hedging against market movements.

The company issued no bonds in the half year but is confident that its issuance programme will remain attractive to the market.

The valuation of the railway network rose to £38,540m at 30 September 2010 from £36,629m at 31 March 2010, reflecting the capital invested in the infrastructure over the six months.

Source: Network Rail Infrastructure Limited. Interim financial statements - six months ended 30 September 2010

Quotes

"Network Rail is one of the most important companies in the UK - an efficient railway underpins a modern economy - and therefore a challenge I could not turn down...My priority is to bring Network Rail and the industry closer so that together we can continue to improve service, efficiency and safety and add much needed capacity to a railway network that is nearly full."

David Higgins, Network Rail's new chief executive from February 2011, commenting on his appointment - 28th September 2010