Posted 17th December 2013 | 14 Comments
Network Rail to become public sector body in 2014
Transport secretary Patrick McLoughlin said he remained 'committed to the railway'
NETWORK RAIL will become a public sector body during the coming year, following a reclassification of the company's status by the Office for National Statistics. The present company was set up in late 2001 to take over from Railtrack, but although NR had no shareholders it was said to be in the private sector.
The change in its status will place its current debt of some £30 billion into the public accounts for the first time. Network Rail said the change was a largely technical matter and would not affect its governance, structure or investment plans.
Network Rail will be now be formally classified as a 'central government body in the public sector', and the company admitted that some 'small changes' will be inevitable. There is also now a question mark over how the organisation will raise funding for future investment in the longer term.
Another point of some dispute is whether the change represents actual nationalisation. The dictionary definition of the word is 'government ownership', but the DfT has maintained that the term is inappropriate in this case, although it has not explained why.
Meanwhile, the Office for Budget Responsibility had said on 5 December that the change was likely to increase Public Sector Net Debt by about 2 per cent of GDP and Public Sector Net Borrowing by an average of 0.2 per cent of GDP.
The new status will be backdated to April 2004, and come into force on 1 September 2014.
In a statement to Parliament, transport secretary Patrick McLoughlin said: "I am committed to ensuring that Network Rail maintains the operational flexibility to continue to deliver a safe, punctual rail network and increased capacity for our busy railways and that it is able to attract a high calibre of staff, while still providing value for money and being accountable to Parliament.
My department will agree appropriate accounting and governance adjustments for Network Rail to ensure it can continue to deliver world class railway infrastructure when the company is reclassified."
A Network Rail spokesman said it would be 'business as usual'. A statement from the company explained: 'This reclassification is a statistical decision that does not alter the company's structure as a not-for-dividend company, limited by guarantee, with Members rather than shareholders. The business acts and operates today as it did yesterday, and its job of delivering a safe, reliable and improving railway for four million daily users continues.
'Network Rail and the DfT have also published today a Memorandum of Understanding that gives some more detail of how they will work together to ensure that the company's business continues as usual. The MoU also acknowledges that some small changes will be necessary as the company becomes accountable to Parliament for its finances. At least initially, the company will continue to raise debt to fund its ongoing investment programme whilst the longer term funding options are considered.
'Critically, for example, the company will retain the commercial freedom to work collaboratively with train operators and suppliers in delivering sustainable improvements in the railway under the well established regulatory framework that provides stability of funding through the five year regulatory review process.'
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