Regulator challenges rail network costs
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13 February 2003 The Rail Regulator, Tom Winsor, has today published a major document tackling the assessment of Network Rail's expenditure and its financing and incentive framework. Mr Winsor said: "The fact that Network Rail is spending at rates considerably higher than were determined in the October 2000 periodic review does not mean that such spending is justified. There should be no assumption that access charges will rise. The most important issue I am tackling in this review is the need to ensure that excessive cost and inefficiency are driven out of the system. "To that end, my review includes a process of rigorous assessment and challenge of Network Rail's maintenance and renewal and other activity plans. It is tackling the quality of Network Rail's knowledge of the condition of its assets and its plans for their stewardship. The review is assessing the impact of the company's operational and engineering policies and standards, and the sufficiency of its approach to deciding whether to renew or continue to maintain assets. It is evaluating the company's strategies for the planning and management of its possessions and for dealing with its contractors and other parts of the supply chain. I am assessing the company's costs of compliance with new safety obligations and its opportunities for improving efficiency and reducing costs, both in the short-term and on a whole-life basis, and the ways in which these options affect outputs and, in turn, the performance of the network. "A critical part of getting costs under control is getting the financial and incentive framework right. I believe that setting a transparent and predictable incentive framework is the most cost-effective method of getting Network Rail to produce long-term reductions in expenditure and improvements in performance. If private sector financing is to be a significant source of investment in the railway industry, Network Rail's finances must be put on a stable, sound and sustainable footing. "Until Network Rail has got better control over the legacy it has inherited from Railtrack, the most appropriate thing to do may be to reduce the level of some activities on its infrastructure, consistently with the long-term sustainability of the network and the requirements of safety and performance. Work on the railway needs to be done to the right standards of competence and efficiency, so delivering value for the money which farepaying passengers, freight customers and other funders are putting in." The first consultation document on the interim review of access charges was published on 15 November 2002, and the Regulator intends to complete his review by December 2003. Notes for editors: 1. The interim review of track access charges: Second consultation paper: The incentive and financial framework published on 13 February 2003 is available from this website. 2. The interim review of track access charges: Initial consultation paper published on 15 November 2002 is available from this website. 3. The statement Network Rail: Interim review of access charges, published on 25 September 2002, is available from this website. 4. The documents are also available from Sue MacSwan, ORR Librarian, 1 Waterhouse Square, 138-142 Holborn, London EC1N 2TQ. Tel: 020 7282 2001; fax: 020 7282 2045. Press enquiries:
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