One of the most absurd fictions shared by government and opposition in the UK is that Network Rail is a private sector company. As such Ministers fear to interfere with it, and the PAC under Mrs Hodge refuses to examine its spending habits. We have to rely on the Office of Rail Regulation to avoid capture and provide some small voice for the taxpayer.
Network Rail is as much a part of the public sector as the current Royal Mail or the NHS. It has no private shareholders. The members of the company limited by guarantee are selected by the management, who also select each other in most cases. It is the result of the state under Labour acquiring the privatised Railtrack.
You can see just how much part of the public sector it is if you look at the financing. The massive £30bn debt is effectively government guaranteed. 62% of the revenues of the company comes in the form of a government grant. The 27% that comes as payments from train companies using the network also comes from sources heavily influenced by the state, in some cases run by the state, and subsidised by the state. I have set out before some of the financial losses made by the company on its financial transactions.
The Office of Rail regulator thinks there is substantial scope for improvement in financial and operational management. In their report on the 2011-12 performance they said
“It is critically important that the rail industry delivers significant improvements in value for money. …compared to 2008-9…UK rail industry costs could be reduced by between £2.5bn and £3.5bn per annum by 2018-19” (70% of that applies to Network Rail)
They went on to express “serious concerns about aspects of Network Rail’s asset management” and concerns about the percentage of trains not running on time owing to faults of the network operator.
In the last year they reported on Network Rail did cut its costs. They need to do much more, both to reduce costs and to improve the quality of work and the responsiveness of the business to change.