The governance of Network Rail must change, writes Transport Select Committee Chair Louise Ellman MP

Network Rail is a vast improvement on its failed predecessor, the privatised Railtrack, which managed to distribute profits for its shareholders while it failed in its basic duty of maintaining the railways. It was finally taken into administration.

Under Network Rail – a company limited by guarantee that does not distribute its surpluses – punctuality and safety have improved dramatically and the West Coast mainline’s £9bn refurbishment has been completed.

Yet Network Rail is not popular with the travelling public. As the recent report from the Rail Regulator documents, too many people suffer delays or cancellations because of the company’s failure to maintain the lines adequately.

Last year, Network Rail faced a record fine of £14m because its over-runs left thousands of people stranded. It was given a final warning by the regulator.

Yet in that very same year the company saw fit to award its senior executives individual bonuses of over £350,000. More recently, the Office of the Rail Regulator expressed its disappointment that further bonuses had been awarded in 2009, despite continuing delays. Indeed, it is now a common feature of Bank Holidays that major sections of the railway are closed down.

When the Transport Select Committee looked at Network Rail’s performance (the report Delivering a Sustainable Railway – a 30 year strategy for the Railways) it identified inefficiencies in both maintenance and renewals. Network Rail promised improvements including conducting more work off-site, thus reducing the need for shutdowns. In reality, little has changed.

What can be done to improve this situation? After all, Network Rail is funded essentially by the public purse with a total of £15.3bn planned for the railways in the current spending period (2009-14) with £10bn of that allowed as a grant for the rail network.

The current governance of Network Rail must be changed. Its Board is theoretically accountable to Network Rail’s members but, as the Select Committee report stated:

“Members are appointed by an independent membership selection panel but the panel…is in turn appointed by the Board of Network Rail and a non-executive director from Network Rail sits on the panel. This creates a circular inter-dependence between Network Rail’s Board and the Membership Selection Panel.”

This is an extraordinary situation. Even Fred Goodwin could not choose his shareholders!

The members themselves commissioned PriceWaterhouseCoopers to review Network Rail’s structure. This confirmed the need for change.

The Co-op Party’s bold proposals for ‘The People’s Rail’ is one way forward. It promotes mutual ownership, giving individual passengers the right to membership. They would then elect representatives to a members’ council, holding the executive to account. Stakeholder members, such as train-operating companies and trades unions would continue to nominate members and the nations and regions of Great Britain would have rights of representation.

This is an imaginative proposal that addresses the challenge.

Rail’s increasing popularity for passengers and freight should be welcomed for both economic and environmental reasons. That means that public investment should be increased. But it also requires that the public gets value for money and feel that Network Rail is accountable to them.

It should, indeed, become ‘The People’s Rail.’

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