Network Rail

Douglas Carswell Excerpts

Tuesday 13th January 2015 Westminster Hall

[Mark Reckless]

The hon. Gentleman makes a good point, which comes back to how these people are held accountable and whether that is through the withholding of a bonus or some other form of discipline, such as a reduction in salary. I do not know whether we are talking about fines, perhaps on a regulatory basis, or whether he is suggesting that it should be on a criminal basis—that would be very strong for such a management role. What I think my constituents and his want is accountability, and we simply do not have that with the current structure.

From 1 September 2014, we have had a new agreement between the Department and Network Rail, but there is, I believe at least, a lack of clarity about what difference that agreement is making in how Network Rail is held to account. Why do we still have these 46 public members and a similar number of industry members, ostensibly playing a part akin to shareholders in this organisation? There was a vote back in, I believe, November 2009. Thirty-six of those members—I do not know whether turkeys voting for Christmas is a fair comparison here—voted to decrease their numbers, but 36 voted against that, and that has remained the situation ever since, despite the Government saying again in March 2012:

“We therefore welcome the governance proposals that Network Rail is announcing, including: reducing the number of members to a more sensible level, thereby improving the quality of decision-making.”

Has that happened?

In the same report, “Reforming our Railways: Putting the Customer First”, the Government said:

“Network Rail is a private-sector, not-for-dividend company, limited by guarantee…we believe the existing structure is capable of delivering the outcomes and the savings we need without disruptive and unnecessary organisational change... equity is a strong driver of efficiency and value for money.”

How in this unique, convoluted, labyrinthine governance structure does equity operate as a driver of efficiency? We have these industry members that the board reports to, to a degree. One might think it is useful perhaps to have that reporting line to the customer, but whenever those customers’ interests are involved, that member steps aside on the basis of there being a conflict of interest, so how can that governance structure work and is it really a sensible way for us to proceed?

In my constituency of Rochester and Strood, we have had the impact of the London Bridge changes. The disruption has affected some people. The sheer length of the closure of London Bridge station for Charing Cross-bound trains that we are currently dealing with is an enormous issue. We have to hold Network Rail to account for the costs that it applies, which are largely passed on in fares to the customer, but also for the length of time that these projects take. I would be interested to hear the Minister’s view. Could she tell us what she has done to ensure that that closure period is as short as possible and the costs are as low as possible? I just have an innate suspicion of an organisation that is not accountable, or at least not in a way that I can understand or in the way in which other organisations are.

The Minister will no doubt refer to the report, published yesterday by Dr Francis Paonessa, explaining away, defending and, to an extent, putting Network Rail’s side of the story in terms of the disruption that we saw immediately after Christmas, but that report is not addressed to anyone. I do not know: is it for the board of Network Rail, for its members, for the Secretary of State or for Parliament? It does not say. There is a foreword by Mark Carne and a whole series of explanations and, to some extent, excuses, but who ultimately holds Network Rail to account for that? Why is it being paid so much money? Why is that disruption allowed, and do we really believe that this labyrinthine governance structure and the costs that we see in this industry are the best we can do? I believe that this country can do it better, and it is time we got on with that and dealt with some of the governance issues at Network Rail and ensured that it works better.

[Douglas Carswell (Clacton) (UKIP)]

rose—

[Mr David Crausby (in the Chair)]

Mr Carswell, it is not in order for an additional Member to speak in a half-hour debate unless they have secured the agreement of both the sponsoring Member and the Minister. Has that advance agreement been secured?

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[Douglas Carswell (Clacton) (UKIP)]

I am most grateful, Mr Crausby. I think that we have a serious problem with Network Rail. Certainly, on the Clacton line, which affects my constituency, weekend works have overrun several times, which has been very disruptive to commuters trying to get to work on Monday mornings. We routinely have problems and failures on the line and we have seen a lot of weekend closures. That is not very helpful to a seaside town that depends on a lot of weekend seaside tourists coming to visit it. We have seen the problems affecting London stations over Christmas.

My main concern is not so much the rail operators, although I think that in the case of Abellio, they have been insufficiently robust in dealing with their supplier, Network Rail. My main concern is with Network Rail. It is to all intents and purposes a public body, which has recourse to public funds and socialised costs, yet it does not seem to be accountable to the public. It seems to have the structure of a public quango, but the bonuses of a bank. What is fundamentally missing is accountability.

Before Christmas, I wrote a letter to the Secretary of State for Transport, asking whether there were any plans to revisit the Network Rail’s governance structure, because it is not working the way it should and, when errors happen, they are not corrected the way they should be. I got a response that I think was probably drafted, if I can put this kindly, by a private secretary who did not understand the question. I then raised the issue on the Floor of the House last week, and I got a response from the Secretary of State that was perhaps dismissive, perhaps contemptuous, but he is not running a Whips Office any more; these are grown-up questions that demand proper, considered, grown-up answers.

There needs to be a rethink of this organisation’s governance structure. I would be interested to hear whether the Minister has given serious thought to how we might change the governance structure of Network Rail. My suggestion is that it should have greater accountability to Parliament. We could perhaps give a role to the Select Committee on Transport, which could confirm the appointment of senior management to this body. Perhaps this body might appear annually before the Select Committee to appeal for its budget. I do not claim to have all the answers. What I know is that the status quo is not working. There is a lack of accountability, and we need real reform. I would love to hear from the Minister how we can do that. How can we ensure that there is real accountability?

[Mark Reckless]

The Government said in March 2012 that Network Rail would invite other companies to compete against its core business. That contestability is perhaps one way to bring market disciplines to the operator. In the same document, the Government said that we could have vertical integration between operators. Perhaps in an area such as Kent, where Southeastern is the main operator, they could work more closely together or even become an alliance or a single body. I just wonder why that is not taken forward. Has my hon. Friend any insights?

[Douglas Carswell]

My hon. Friend’s suggestion is a good one. There are all sorts of models of accountability. There is the proposal for parliamentary accountability. There is the proposal for restructuring in the way that he suggests, which would provide greater accountability. My fear is that we may have spent longer this afternoon discussing new models of corporate governance in this Chamber than the Minister may have done in the Department over the years. I would like to hear from the Minister what specific thoughts she has about changes to Network Rail’s accountability and governance structure.

Network Rail is a corporatist organisation. It lacks accountability. People who try to do the right thing but who have to travel by rail, who have to buy season tickets and travel on the railway to get to work find that the fares go up but the level of service remains poor. Ordinary people feel an incredible sense of frustration that, for all that they do and all that they are forced to do, the people at the top of Network Rail do not seem to be held accountable for mistakes that their organisation makes. We often hear Ministers talking in this place about accountability to Parliament through the Minister. I suggest that that model of accountability is not working and we need a fundamentally different way to ensure that Network Rail is properly publicly accountable. I would love to hear what that is.

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[Douglas Carswell]

When I was a Conservative Member of Parliament, I was bound by the Whip, and of course the Minister and her boss in the Department for Transport were then running the Whips Office. It was therefore much more difficult for me to speak freely in the interest of my constituents, and I am grateful that I am now at liberty to do so.

[Claire Perry]

The hon. Gentleman suggests that he could not have asked questions about fares, services and station refurbishments, but he managed 42 mentions of the EU. It is rather depressing that his last comment on the railways dates from seven and a half years ago. Presumably, he could have spoken in that Parliament—no matter. I am delighted to welcome his nascent and new-found interest in the railways, which raises several questions. What is his party’s policy? The UK Independence party’s 2010 manifesto, of course, called for three high-speed lines, not two, with no mention of cost control. We will leave that point and move on.

I propose to make three sets of remarks this afternoon. I will first canter through Network Rail’s current governance structure and correct the hon. Member for Rochester and Strood, or at least answer some of his questions. Secondly, I will ask whether there is any evidence of governance failure. Lastly, I will review recent events, on which there are valid questions that we all need to ask.

In December 2013, as the hon. Gentleman knows, the Office for National Statistics made an independent decision to reclassify the Network Rail balance sheet from the private sector to the public sector, which changed nothing in terms of operational performance; it was an attempt to put public debt on the public balance sheet, which I strongly support. The reclassification does not change the industry structure or the day-to-day operations of the rail network, and it has no effect on fares, performance, punctuality, safety or timetables.

[Douglas Carswell]

Will the Minister give way?

[Claire Perry]

It would be helpful if I could make a little progress.

The reclassification rightly raises the question what the governance should look like, which is why the framework agreement was published in September 2014. The agreement specifically sets out what the relationship between Network Rail and the DFT looks like, and it tries to achieve two things. First, it tries to achieve a level of operational independence. All political parties, including the hon. Gentleman’s party I am sure, would say that Ministers should not be running trains and that there should be an element of independence and control. [Interruption.] The hon. Member for Clacton is chuntering away from a sedentary position, and I am trying to answer some of the questions. He is not particularly interested in railways, but perhaps he might be after today.

For many people, including the UK Independence party, it is not appropriate to have Ministers and, indeed, officials running the railway network; it is appropriate that Network Rail operates as an arm’s length body. However, it is important to deliver accountability and correct governance and structure. Under the new framework agreement, the Secretary of State for Transport, as a special board member, has levers by which to steer Network Rail, including the right to agree business plans and to approve Network Rail’s remuneration envelope.

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[Claire Perry]

Like me, the hon. Gentleman has a background in finance. He should therefore know that investors will always have considered that debt to have been effectively underwritten by the public sector, so the reclassification is simply a formalisation of what I suspect savvy investors have known for many a year.

There is no evidence that Network Rail’s governance structure is inappropriate or failing. However, I suspect that the hon. Gentleman’s new-found interest in its governance may be a result of the disruption after Christmas at several mainline stations and, more recently, at London Bridge station, which many people living in his constituency use on a daily basis. I am incredibly grateful to him for giving me the opportunity once again to state very clearly what passengers should expect.

The Secretary of State made it clear at the time that the disruption at King’s Cross and Paddington immediately after Christmas was totally unacceptable. In my view, the situation was inexcusable. Passengers deserve a reliable rail service, clear information and rapid help if things go wrong. I am sorry that, in this case, they did not get those things.

Across the industry, we have to be able to trust Network Rail’s ability to complete vital engineering works on time, and it is essential that the lessons that started to be spelled out in the report, which the hon. Gentleman slightly traduced, are learned. Work continues on finding the most appropriate time of year to do engineering works. I say again—this was said last week—that Network Rail carried out its busiest engineering programme ever over this holiday period. There were 2,000 work sites.

[Douglas Carswell]

The Minister says that the failures were inexcusable, but she is now excusing the failure. She says that she is sorry for what happened, so what is she actually going to change about Network Rail’s governance to ensure that it does not happen again?

[Claire Perry]

I appreciate the hon. Gentleman’s enthusiasm for railways, which marks a rapid change from his former portfolio of interests.