The 2012-13 Accounts for Network Rail make interesting reading. This public sector owned company escapes most comment and attention, because Ministers seem to think it is not their responsibility to tell us about its profits and losses or explain in any detail its peformance. It is a so called independent company, but one which in effect is taxpayer owned.
Taxpayers indirectly supply much of its income through the subsidies to the railways, routed into Network Rail via the access charges it places on operating companies. Most in the press seem to ignore what is a most interesting document, accounting for billions of public investment and cost.
Network Rail’s debts now stand at a large £30.3bn, an 11.3% increase over the last year. Operating costs rose by 9.5%, in part reflecting the big increase in capital. Capital expenditure ran at £5050 million for the year, an increase of 9.8%.
The current value of its large portfolio of derivative financial instrument liabilities is a negative £1208 million. Its current value of derivative assets is £673 million. Is this a good portfolio of assets and risks for taxpayers to own? Operating profits fell 5.5% in the year.
At a time when Ministers are planning further increases in rail expenditure, and are keen to promote more railway construction, they would be well advised to examine these accounts. They should be asking why costs went up so much last year, why profits fell, and how the balance sheet is constructed. They should be asking how much more of their planned future programme Network Rail could finance out of improved cashflow from improved financial performance. The debt build up is fast and large.
I am in favour of Network Rail improving its stations and facilities for travellers. I am also in favour of Network Rail financing more of this from property transactions bringing more railway property into more productive use, and harnessing private improvement, finance and development adjacent to the stations and tracks where there is land available.
On the day when the government is going to announce a reduced rate of increase in spending, proper demands for improved efficiency and effectiveness at NR would be a good idea as there is a lot of public money at risk here.