The Monitor Blue Skies Running the railways

The Office for Rail Regulation (ORR) carries out the key task of overseeing Network Rail’s management of Britain’s railway network.

Because Network Rail runs a monopoly, the ORR sets and enforces the financial framework within which the company operates. This involves ensuring it receives sufficient funding to run the network, as well as checking that funds are spent efficiently.

A significant part of this work is ensuring that the right incentives are in place to reward Network Rail for meeting the targets that the ORR sets. But the watchdog can also penalise the company for significant failures.

In addition to this, from April 1 this year the ORR also takes over responsibility for rail safety regulation from the Health and Safety Executive, becoming the combined economic and safety regulator for the whole rail network.

Chris Bolt, chairman of the ORR, says the main challenge for the industry as a whole is dealing with growth in demand against a backdrop of continuing concerns over performance and costs.

But Network Rail is delivering the goods, he tells Blue Skies, performing well and exceeding some of its efficiency targets. “What we are seeing is that now the peak of spending has actually passed, there is increasing efficiency in Network Rail. We set them a target of 31 per cent improvement in efficiency in the current five-year price control period and they are well on course to meet that,” Bolt says.

He stresses there is no room for complacency, and warns that coping with rising demand poses a challenge at current funding levels.

“With the pressure of demand from passengers and train users there is very little headroom in overall funding for investment to increase the capacity of the network. So unless we can keep getting increased efficiency, the chances of the government being prepared to put money into rail enhancement schemes are going to be limited,” he says.

But the relationship between the government and Network Rail should become easier following the passage of the 2005 Railways Act. Under the legislation, Bolt says, the process has been made much clearer, with ministers having a greater role in strategic planning.

“What essentially happens is that the secretary of state and the Scottish ministers tell us what in high-level terms they want the railways to deliver and how much public money they are willing to put in to support rail services.

“Our job is to make sure the rail industry, and particularly Network Rail, delivers those outputs as efficiently as possible and hopefully within the funding which ministers say is available. We have quite extensive arrangements for monitoring all of that and we have enforcement powers if they don’t deliver.”

But he stresses that the new arrangements do not threaten the impartiality of the ORR as an independent regulator. Bolt says the Railways Act is designed to establish a relatively formal and transparent role for ministers, and that helps to protect the independence of the ORR.

“We also operate under statutory duties,” Bolt adds. “And although they include taking into account the funds available from the secretary of state, our broader public interest duties include promoting increased efficiency and protecting the interests of users.”