Network Rail

George Freeman Excerpts

Thursday 2nd February 2012 Westminster Hall

[Mrs Main]

I thank my hon. Friend for his intervention. The passengers are compensated to an extent, but it is a very limited form of compensation. Believe me: First Capital Connect was paying out tons of it as of 2010. As my hon. Friend will hear me go on to say, it is our money paying the fines. That is ridiculous. I hope that freedom of information requests will be allowed. It seems that that is within the Minister’s gift.

Network Rail is not audited by the National Audit Office. It is audited by PricewaterhouseCoopers, but that is simply to check whether the accounts are in order. It is not audited on the basis of value for money. The National Audit Office remarked that the Department’s

“understanding of the relationship between cost and value was weakest in rail”.

It also says that a

“lack of transparency on Network Rail’s costs is consistent with our past reports on the Department and the Office of Rail Regulation.”

That has been highlighted for a significant period; there is a long-standing concern about a lack of transparency on costs. Can the Minister tell us today whether we can expect Network Rail to be subject to auditing by the National Audit Office? I ask that because I would like clarification. The National Audit Office is saying that it cannot gain an understanding of the position because Network Rail’s own figures are vague. Will the Minister clarify that we can strengthen the role of the National Audit Office?

The Public Accounts Committee has been especially damning of Network Rail’s accountability. In a 2011 report, it said:

“Network Rail has no accountability to shareholders, nor does the National Audit Office have full access, so Network Rail is not directly accountable to Parliament.”

It went on to say that it

“unfortunately won’t be able to give a clear opinion on the whole-of-Government accounts

until Network Rail’s status changes. That could well be the crux of the debate: how we change the status of Network Rail. Does the Minister accept the need to change the status of Network Rail? Does he share the concerns of the Committee that Network Rail is not accountable to anyone, particularly its paymasters in Parliament?

The Office of Rail Regulation is not holding Network Rail to account in any meaningful way. Anyone who watched the “Panorama” documentary last month will have seen Cathryn Ross, director of railway markets and economics for ORR, giving her responses. She confirmed that ORR has to be given the information by Network Rail in order to regulate it. However, as we have seen with the National Audit Office, getting any detailed information out of Network Rail is well nigh impossible. When pressed, she appeared totally unable to detail in any meaningful way any scrutiny that had been carried out on behalf of the regulator. Does the Minister find it unsatisfactory that ORR must rely on information supplied by Network Rail in order to act?

Only this week, Network Rail has been found guilty of serious failings that led to the tragic deaths of two teenagers—Olivia Bazlinton and Charlotte Thompson. There were not only failings in health and safety, but suggestions of a cover-up within Network Rail at the highest levels, aimed at concealing its mistakes. The families said in the media that they felt “lied to”, so can we really rely on Network Rail to give accurate information to anyone, even ORR?

The rail regulator is looking to expand its role. Given its mixed record on regulating Network Rail alone, its expansion is highly questionable. Michael Roberts, chief executive of the Association of Train Operating Companies, said in December:

“Train companies recognise they need to be held to account but plans to expand the ORR’s role to include more oversight of operators must be rigorously tested. The regulator needs to continue focusing on doing a better job of holding Network Rail to account, particularly on performance and cost-efficiency, before taking on new responsibilities.”

The Public Accounts Committee said in relation to ORR’s performance that

“we do not believe that the Regulator exerted sufficient pressure on Network Rail to improve its efficiency, and that there is an absence of effective sanctions for under-performance in the system...We doubt whether the Regulator is able to exert sufficient pressure on Network Rail’s performance”.

It has also said:

“The Office of Rail Regulation does not have a grip on Network Rail’s efficiency and appeared remarkably relaxed about the continuing gap in performance between Network Rail and international comparators.”

Those are hugely damning observations; they are damning in so many different areas. They question the ability of ORR to deliver on any meaningful level. Should the Government be allowing ORR to expand its role when it so obviously cannot do the role that it already has? Does the Minster share those concerns? Will he consider ways to improve the rigour of ORR’s role?

Network Rail can be financially punished by ORR through fines. However, Network Rail is financially supported by the Government. As my hon. Friend the Member for North Thanet (Sir Roger Gale) pointed out, fines go to the Government from Network Rail, which receives Government money. That is a ludicrous circle. Highly paid executives are paying for failures with public money.

ORR can also impose enforcement orders on Network Rail if it misses its targets, which it does on numerous occasions. That may sound impressive, but it amounts to Network Rail having simply to suggest plans to meet targets. We have spoken about the current targets. There is already an admission that Network Rail is highly unlikely to meet the new targets. That is disgraceful. The organisation is a toothless tiger. That has to change.

The “members” of Network Rail, the stakeholders, are also meant to hold Network Rail to account, but they, too, rely on Network Rail’s own disclosure of the figures to do that. We keep coming back to the fact that no one can hold Network Rail to account unless Network Rail wishes to hang itself with its own figures. It simply chooses not to do so, or puts them in such a way that it is impossible for anyone to hold it to account.

The question that must be asked, and the real point of the debate, is this. What incentive is there for Network Rail to improve? I argue that, under the current system, there is none. Does the Minister believe that he can put in place mechanisms to oblige Network Rail to deliver significant improvements? I hope that today he will be able to outline some of those for us.

We have the highest track-access charges in Europe. Those costs are inevitably passed on to the travelling public. Sir Roy McNulty said in his report that running the rail network here was 30% more expensive than in comparable European countries. I admit that I do not know how that figure was arrived at, but I have not noticed anyone saying that it is inaccurate or giving a different figure. Does the Minister agree with the 30% figure, and what can his Department do to make Network Rail bring down its track access costs and other costs? On reading the details surrounding that figure, it could as easily be higher as well as lower.

The scale of the problem that faces Network Rail, which it recognises but chooses not to deal with, is illustrated by the fact that it employs 600 delay attribution staff. If anyone has talked to their own train operating company, they know how important it is to be able to attribute blame for a fault because it makes a difference as to who pays the bill. If the delay in operations is Network Rail’s fault, the fines are paid by Network Rail. If it is the fault of the train operating company, it goes on the performance data of the TOC and it has to pay the fine. As Members can imagine, the squabble can be pretty unedifying. Network Rail spends its entire time, and our taxpayers’ money, divvying up the blame and fee penalties among the train operating companies, and then using taxpayers’ money to pay the fines for any delays.

You could not make this up, Mr Amess. I am amazed that we have all decided to accept this appalling situation for such a long period of time. Network Rail has presided over a litany of high-profile failures. Some have resulted in criminal prosecutions. I do not wish to go into too much detail here, because the hon. Members representing those areas may be present in the Chamber. However, the Virgin train derailment near the Cumbrian village of Grayrigg was one such incident. Such failures are causing deaths and significant injuries, and Network Rail’s declining performance has put it in breach of its licence. Despite being “the experts”—as I said earlier, Network Rail’s expert opinion is heavily relied on—Network Rail has presided over a system in which rail freight delays are 32% worse than the end-of-target year. Long distance punctuality stands at 87%, which is well below the target of the Office of Rail Regulation. Delays have risen, which proves that the network has become less resilient to disruptions. That is important. Some workers have said to me, “I don’t want to lose my job, but I have serious concerns about the work that is being done by Network Rail on maintenance and oversight of engineers.” That is a serious issue. People within the industry feel that they must keep their mouths shut about the things that they can see not being done correctly. Network Rail does not give the travelling public any confidence that its rail service is as safe as it should be.

[George Freeman (Mid Norfolk) (Con)]

My hon. Friend is making a very powerful case, which many of us sympathise with; my constituents certainly will, too. She says that we need to consider new models. Does she agree that we should be really bold and radical in tackling this problem, which is a legacy of some of the mistakes of privatisation compounded massively by a botched renationalisation under the previous Government? In my own region of East Anglia, rail has a crucial role to play in driving a rebalanced economy, innovation and investment. Does she think it might be sensible for us to consider—possibly in areas such as East Anglia—putting track and train operating company back together, thereby creating a regional rail company that has full integration, a long-term franchise and the ability to invest and plan for future services?

[Mrs Main]

That is an extremely valuable contribution. This debate is not simply about reading out a list of failures and then going away and allowing the situation to continue. If we were to do that, we would be failing the public again and again. Indeed, some of those tragedies that have occurred may happen again somewhere else. We must be radical. I do not wish to take up too much time at the beginning of this debate saying what we should be doing. My hon. Friend is absolutely right though. There are innovative methods. One thought is to have 10 regional areas operating on a system of alliancing. That is a phrase that I had not heard before, but it means having a deeper and more meaningful relationship with the train operating companies. Such a system relies on companies having longer franchises. Many ideas should be considered. None the less, significant issues need to be tackled. We are left with a structure that is patently not fit for purpose. I would like us to say that we will not accept a tinkering around the edges with this. I do not want us to say, “We will just remove one chief executive and stick another one in.” If we do that, we are basically left with all the same people, in the same place, presiding over yet another set of failures. Radicalisation is the only way forward. I am sure that we will hear different suggestions from hon. Members today. We need to sweep out the Augean stables of Network Rail. There are no two ways about it; we are talking about not tinkering but a fundamental change.

I wish to give other colleagues a chance to speak. As I have said, the list is long and damning. Network Rail has been fined for so many project overruns. On “Panorama”, we heard about the major investment in Reading. It is impossible to find out what the project was supposed to cost in the first place to know how much it has overrun.

Chiltern Railways wanted to have a station built. Network Rail estimated the cost at £13.2 million. Chiltern managed to build it itself for £5.2 million. One has to ask how Network Rail carries out its costings. One has to ask whether there is money washing about in the organisation in what can only be described as a negligent way. There are people who should stand before the Government to justify how they are spending our money, because it seems to be highly questionable.

I want to give other colleagues a chance to speak. As I have said, the list is long and damning, and I am sure that Members will add to it. I hope that we will explore all of the issues, including the way forward, because we need a way forward. I look forward to hearing answers to some of the questions that I have posed to the Minister.

--- Later in debate ---

[Kelvin Hopkins]

Indeed, and without any proper accountability. As the hon. Lady has said, there is no means to control it.

The bullying culture in the organisation was appalling. Anyone who stood out against, challenged or criticised it, or said that things could not be done, was sorted out by a head of human resources, who has, I think, recently been paid off with a substantial sum, rather than sacked. For years he was protected by senior management. On several occasions he sacked people and, when threatened with a tribunal, settled out of court, eventually. Just to pay off staff whom he had sacked cost many millions of pounds. Eventually he was paid off to go elsewhere. He was symbolic of a culture that was about control and bullying, and making sure that individuals looked after themselves within the organisation.

[George Freeman]

I did not want to interrupt the flow of the hon. Gentleman’s interesting description, but he appears to be giving the impression that we should simply return to the days of old—of British Rail and an integrated national system. Many of us in the Chamber will remember British Rail, which was hardly a paragon of efficiency, investment or good service. Is that indeed what he suggests?

[Kelvin Hopkins]

Indeed, I shall come to that shortly. In fact, British Rail was starved of money and did a remarkably good job in the circumstances. Those are not my words. That is how it was put by Tom Winsor, the former rail regulator, who said that British Rail worked miracles on a pittance, and that when it was handed over to the privateers it was “in good order”. A Catalyst report some years later made comparisons between British Rail and continental railways and found that British Rail’s productivity was the highest of all the European railways. That is not true of our railways now, but it was then. However, British Rail was starved of money because there were several Governments, and a Transport Department, that did not believe in railways. They thought that they were dying and did just enough to keep British Rail alive.