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Sir John Bourn, head of the National Audit Office, told Parliament today that the Office of the Rail Regulator (ORR) have made improvements to their regulation of the stewardship by Railtrack plc of the national railway network, but that much still needs to be done to provide a fully effective regulatory regime for the future. The ORR recognise the need for change. They are seeking to address it through a review currently underway to set the level of Railtrack’s charges to train operators for the period 2001-06 and by plans to amend Railtrack’s network licence.

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The National Audit Office examined the work of the ORR in regulating Railtrack’s maintenance and renewal of the network. Railtrack are spending more on maintenance and renewal, currently £1.7 billion a year, than forecast either when the prices they are currently allowed to charge train operators were set in 1995, or at the time of Railtrack’s privatisation in 1996. The report covers the period since the ORR were set up in 1994, and particularly since the privatisation of Railtrack. The present Rail Regulator, Mr Tom Winsor, took up post in July 1999.

The National Audit Office found, however, that the ORR have had difficulty in establishing how far Railtrack have discharged their obligation to maintain and renew the railway network properly. The ORR did not agree with Railtrack from the outset what work Railtrack would do in the period 1995-2001, or what would be achieved as a result of it, in terms, for example, of improved performance or asset condition. As a result, the ORR have been unable to measure what Railtrack have actually done against any agreed baseline. ORR have announced that they intend to set out with greater precision what improvements Railtrack will be expected to deliver over the period 2001-06.

The information available to the ORR on the condition of Railtrack’s assets remains incomplete. The ORR have found it difficult to establish whether Railtrack have carried out sufficient maintenance and renewal, and the concept of renewal that the ORR expected Railtrack to apply has lacked definition and been difficult to apply, making it unclear at times what standard of renewal train operators have paid for. The ORR are seeking to obtain improved information.

The National Audit Office also found that:

  • railtrack are responsible for nearly half of all delays to passenger trains – an average of around 70 seconds per train – and most of these delays are the result of maintenance and renewal problems. Since 1995-96 passenger train delays caused by Railtrack’s maintenance and renewal of the network have fallen by 26 per cent, despite a 27 per cent growth in passenger traffic. Because of the reduction in delays, Railtrack have received bonuses every year under their contracts with train operators, approved in 1995 by the ORR. In 1998-99 the bonuses totalled £25 million; and
  • following amendment of Railtrack’s licence by the ORR in 1997, Railtrack have set annual targets for reducing delays. Railtrack did not achieve the first such target, which was for a 7.5 per cent reduction in 1998-99 in passenger train delays from caused by them. The ORR told Railtrack that they must reduce delays in 1999-2000 by at least 12.7 per cent, and that if they miss this target the ORR will impose a financial penalty on them of £4 million per percentage point. Railtrack are appealing against the size of the proposed penalty.

The ORR recognise the need for change and are seeking to address it. The National Audit Office recommend that the ORR should:

  • set out more clearly what they expect Railtrack to deliver from maintenance and renewal;
  • set and keep to a timetable for removing deficiencies in their information on the condition of Railtrack’s assets;
  • ensure that the key elements of the monitoring information that the ORR receive from Railtrack are independently verified; and
  • continue to develop appropriate targets and clearly predictable incentives for Railtrack to improve their performance on punctuality, cancellations and track condition.

"The Rail Regulator needs to overcome the difficulties experienced up to now in monitoring Railtrack’s performance and setting effective incentives. I therefore welcome the action he is taking to secure that Railtrack maintain, renew and improve the national railway network on which the public and industry depend."

Sir John Bourn


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