Posted 14th March 2012 | 8 Comments
'Fragmented' rail industry under fire from MPs
NETWORK RAIL has come under fire from a Parliamentary Committee which says the hybrid status of the organisation makes it unaccountable, even though the Government has the final responsibility for its £25 billion debt.
The criticisms, from the House of Commons Public Accounts Committee, have come at the same time as Network Rail chief executive David Higgins was telling another Parliamentary committee that the industry is fragmented, and lacks leadership.
The MPs on the Public Accounts Committee have been examining the budgets and spending of the Department for Transport, and their report is particularly critical of the way that Network Rail is funded and held to account.
It said: 'Network Rail spends billions of pounds of public money each year. Its debt of over £25 billion is underwritten by the taxpayer and international accounting conventions show that it should be considered as part of the public sector.
'Yet the Department continues to hide behind the Office for National Statistics classification of Network Rail as a private company which keeps Network Rail's debt off the public balance sheet and its spending from direct NAO scrutiny.
'We also note that an additional £950 million borrowing through Network Rail formed part of the Government's plans in the Autumn Statement, further undermining the Department's argument that it is an "essentially private sector" company'.
The PAC also said that the DfT is at its 'weakest' when it is dealing with rail finances, and that despite the recommendations of last year's report on railway 'value for money' by Sir Roy McNulty, 'while contracts across Government were renegotiated as part of spending reduction plans, Network Rail's funding settlement to 2013-14 was left unchanged.
'The Department should put in place new oversight arrangements with the powers to interrogate information on Network Rail's efficiency and to make changes to its funding at short notice'.
Margaret Hodge, who chairs the Committee, added: "Rail budgets aren’t being reduced as much as other areas, yet passengers still face high fares. The Department needs to understand why the cost of rail travel is so high, and understand better what scope there is for further efficiencies.
"It is unacceptable that Network Rail is still not fully transparent or accountable to Parliament or the taxpayer. The Department hands Network Rail over £3 billion each year and underwrites debt of over £25 billion and yet maintains the fiction that this is a private sector company. The National Audit Office must be allowed full audit access as quickly as possible to this organisation which is essentially kept afloat through public funds."
In response to the PAC, a Network Rail spokesman said the company was already heavily scrutinised by the Office of Rail Regulation, but that it was working to increase transparency still further.
Meanwhile, as the PAC was publishing its findings, Network Rail chief executive David Higgins was telling another Commons Committee that the rail business is 'tough', 'fragmented' and 'lacking leadership'.
He told the Transport Select Committee that there was a 'huge challenge' in coping with increasing demand, warning that 'in the next ten years we have this capacity crunch'.
Sir David, who took over from Iain Coucher just over a year ago, has revealed that this year's executive bonuses are to be diverted to the level crossings safety budget.
The company has also said that its chairman Rick Haythornthwaite is set to be replaced by Professor Richard Parry-Jones, that it intends to appoint a non-executive public interest director to its board, and announced 'a series of changes to its membership structure designed to help its members hold the board to account'.
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