Posted 21st September 2010 | 5 Comments

ATOC sets out plans for radical Network Rail reforms

TRAIN operators have made a determined bid to take control of the rail network.

The Association of Train Operating Companies is proposing a progressive breakup and privatisation of Network Rail, accompanied by a transfer of many responsibilities, including train regulation and most network upgrades, to private sector train operators.

The proposals are set out in a briefing document published today, and take into account possible reforms in both the short and longer term.

ATOC claims its ideas could save as much as £500 million during the current Network Rail control period, which ends in 2014.

Key points are the creation of regional NR units with their own budgets, and only a minimal national organisation remaining to ensure consistency of such matters as technical standards and timetable production.

Station leases would be strengthened, accompanied by longer franchises, and ATOC also envisages a transfer of major stations to operator management.

The document says: ‘There is strong evidence that train operators, with lower overheads and shorter chains of command, can maintain, renew and enhance stations at lower cost than Network Rail. ATOC estimates these savings would amount to £250-500 million over the five years of CP4. To enable this to happen, TOCs should be granted fully repairing and insuring, long term leases at stations; and Network Rail would be able to step back from its operational property responsibility and act purely as a ground landlord.’

Meanwhile, Network Rail’s remaining property interests would be transferred to a new, separate company. ATOC says the creation of this company, plus the almost independent regional units, would pave the way for reprivatisation over time.

ATOC also has a sharp word to say about the real effectiveness of recent infrastructure projects, saying: ‘Enhancements to the network account for a significant element of Network Rail’s expenditure. Generally, the input to enhancement schemes that train operators can make is quite limited. This can lead to subsequent problems, ranging from a clash between infrastructure design and operating practice through to construction of a scheme that delivers little passenger or revenue benefit.

‘There are a number of examples of this from the West Coast Route Modernisation, including the layouts at Stockport and Nuneaton, and the resignalling at Norton Bridge.’

It suggests that future network upgrades, with the possible exception of very large projects such as the Thameslink Programme, could be achieved through investment by train operators, who would be encouraged to do so by the award of much longer franchises.

The document explains: ‘The TOC would take the lead on scoping, financing and managing the enhancement, with its local Network Rail business unit acting as a delivery partner to agree implementation details.’

A further transfer of power to operators is implied in a suggestion that payments of grants directly to Network Rail from the DfT should cease, with all government funding channelled through train operators, whose track access charges would become more variable.

ATOC also wants its members to have more clout if Network Rail lets them down, saying: ‘The regulatory regime should strengthen the position of the operator as customer under the track access agreement. It should be backed by increased variable access charges (to better align the economic impact on train and track of fluctuations in demand), gain share arrangements (both on costs and revenue) and, in extremis, the ability of the operator to withhold payment for significant failure by the supplier.’

The structure of rail regulation and the role of the ORR would also be adapted to fit the new circumstances. ATOC suggests that: ‘ORR would be able to concentrate more strongly on the strategic aspects of regulation, rather than on the detail of Network Rail’s spending. Separate price controls might be applied over time to each business unit, just as is the case currently between England & Wales and Scotland, and eventually each business unit could have a RAB and capital structure consistent with its own circumstances. ORR would continue to administer the track access regime, particularly in ensuring that all passenger and freight operators were treated fairly on routes where they compete, either for customers or for access.’

The Association accepts that more than one model might be appropriate in different areas, and says that forthcoming franchise awards, which include c2c and West Coast, would give an opportunity to put at least some of its proposals into practice, for the ultimate benefit of the passenger.

Reader Comments:

Views expressed in submitted comments are that of the author, and not necessarily shared by Railnews.

  • Mike B, New Jersey, USA

    Integrated railway ownership is the cornerstone of what makes railways profitable and efficient in North America. The operators of the line are in the best position to know what they need in terms of infrastructure, maintenance and operating practices. Integrated ownership would allow for innovation and better competition against other modes of transportation. This is not to say that public agencies couldn't continue to own rail lines or that the operation of said lines couldn't be contracted to other operating companies. However the ultimate responsibility for the capitol expenditures and planning would lie with a single integrated owner.

  • Greg Tingey, London, England

    BUT ....
    NR is going to be taken out ans shot amyway, and quite frankly, good riddance.
    So, what we do need is to make sure that the new structure WORKS, and is affordable.
    "Vertical Integration" is the way to go, predumably with the freight companies getting a decent slice of the interest cake, so that they are not frozen out ....

  • Paul, London, UK

    Everyone who thinks whiter than white TOC's act in the best interests of customers, stick their hands up ? Of course not. This will lead to private regional monopolies and extraction of investment cash as increased profits to shareholders, as that is what the TOC's are solely interested in.

    In any case this smacks of a lack of understanding in economics. Breaking NR into regional companies will only increase costs due to the lack of leverage on volume and duplicity of central functions.

  • Watcherzero, Wigan

    Fine, breaking up NR into regional funding blocks and letting the operators bid for funds to perform their own upgrades while a national standard setting role is retained sounds alright, however this doesnt address how it would handle day to day maintenance whichunder EU rules must be seperate from operators.

  • Bill Dickson, Millom, UK

    Whilst it seems reasonable that ATOC should be promoting the interests of its members, it seems from their website that they do not represent all of the freight companies nor the many charter companies. If such a regime as they suggest were to come to fruition, Atoc must ensure that TOCS do not control infrastructure investment to the detriment of other (perhaps small) stakeholders.