Future of rail, July 2004

Statement to Parliament by the Transport Secretary, Alistair Darling, on the future of Britain's railways. Delivered: 15 July 2004.

With your permission Mr Speaker I should like to make a statement following the conclusion of the rail review which I announced on 19th January.

The railways provide an essential public service and underpin future economic growth. As the economy grows, demand for travel is increasing. Last year the railways carried over a billion passengers for the first time since the 1960's. So it's essential we put in place the right organisation to run the railways providing passengers with reliable and efficient services.

This week's spending review has confirmed we will be able to make record investment in rail.

Mr Speaker, with increased investment and with Network Rail now working in the public interest, it is right we now put the railways on a stable long-term footing and tackle the remaining flaws left over from privatisation. The proposals I am announcing today streamline the structure and organisation of the railway. They provide a single point of accountability for performance; allow closer working between track and train and provide for greater local and devolved decision making. Together these proposals will make sure that Britain's railways are run in the public interest - for the benefit of its passengers and freight customers.

I am publishing a White Paper today setting out these proposals in detail, copies are available in the vote office in the usual way. Let me set out the key changes I propose.

First. The Government will take charge of setting the overall strategy for the railways. It must be for Ministers, accountable to Parliament and the electorate, to set the national strategy for the railways. It will set high level objectives, including the levels of performance. It is for the Government to decide how much money it is able to spend and to be held to account for those decisions.

It follows therefore that Strategic Rail Authority will be wound up and the majority of its functions, including all its financial obligations, transferred to the Secretary of State. The Department for Transport will take responsibility for awarding train operating company franchises. The Department will be restructured to reflect its new responsibilities.

And, as I said in January, the Government remains committed to maintaining strong, independent economic regulation for rail. Which will remain with the Office of Rail Regulation, which will protect the rights of investors and railway customers and will decide how much income Network Rail needs to deliver the Government's strategy. It will ensure Government pays the proper price for what it buys.

Second, operational responsibility. Many of today's problems stem from the fact that at the moment no one organisation is in charge of running the railway on a day to day basis. In future responsibility overall responsibility for the network will pass to Network Rail. The Government will set out what services Network Rail is to deliver, and Network Rail will take on new responsibilities, including leading industry planning, setting timetables and directing service recovery.

Mr Speaker, too often under the present system companies have been able to pass the buck for poor performance. So in future, Network Rail will be responsible for ensuring that the network delivers a reliable service through an agreement with Government. And it will be accountable to passengers and freight users for performance of the network.

In consultation with its members, Network Rail intends to bring forward proposals to change its management and governance to reflect its new responsibilities.

Third. The new structure will bring operation of track and train closer together, allowing far closer working between Network Rail and the train companies. This will replace the current, sometimes confrontational, relationship with one based on joint working.

The number of franchises will be reduced, and new arrangements put in place to allow for closer working between track and train operations - the importance of which the architects of privatisation failed to understand.

Experience has already shown - setting up joint control centres for example - that joint working results in improved performance. And by providing for more efficient operation of the railway, these proposals will cut down costs.

Under the new structure I propose, there will be far greater clarity as to the responsibilities of track and train companies. Train operators will be able to concentrate on improving customer service and increasing passengers on the services they run.

And when train operators' contracts are awarded, past performance will be taken into account as well as key issues such as their proposals on costs and service improvements. And the contracts will ensure that Government can take operators off the railway if they repeatedly fail to deliver.

Controlling costs is essential. The White Paper makes it clear that the industry must do a lot more. We are spending record amounts to improve rail. But farepayers, freight customers and taxpayers rightly expect this money to be well spent.

Mr Speaker, my fourth key reform gives increased powers to the Scottish Executive, the Welsh Assembly Government, the London Mayor as well as more local decision making in England, particularly the Passenger Transport Executives. Many decisions affecting the amount of money spent on the railway should be taken at a local level. But the current arrangements often do not allow local and regional bodies to play a full part in decisions affecting their area.

As I said in January, local transport decisions are best taken by people who know what's needed locally. They should be able to make informed decisions as to what works best and what they are willing to pay for. So let me set out what I propose.

In Scotland we will give the Scottish Executive responsibility for planning, specifying and managing services that operate under the existing franchise. As the level of service specified will impact on the rail infrastructure, it is right that, subject to agreement about the transfer of resources to the Scottish Executive, the Scottish Executive should specify the network they require and finance it. So, although the infrastructure will be owned and managed by Network Rail, with these proposals the Scottish Executive will decide what they want and how to pay for it.

In Wales, the Government will devolve additional responsibilities to the Welsh Assembly Government, recognising the different patterns of service there. The Welsh Assembly Government will specify services and fares for local services within and bordering Wales. And they will be responsible for funding these services. There will also be scope for the Welsh Assembly Government to specify and fund additional work on infrastructure if they so wish.

In London, we propose to extend the Mayor's responsibilities for rail services within the GLA boundary.

In the short term, we will work with the Mayor to rationalise fares and ticketing across the different types of public transport in London, giving a better deal for farepayers. We will also work to identify options for giving the Mayor an increased role for services that lie for the most part within the GLA boundary.

And in the future we propose to enable the Mayor to buy additional services or to propose savings to services. We want to explore all the options including the possibility of extending this to services beyond the GLA boundary. But this must be subject to consultation with train operating companies as well as neighbouring regional and local bodies before reaching a conclusion. Many London commuter services run well outside the GLA boundary and we need to ensure the rights and interests of rail passengers outside London are protected.

Mr Speaker, the White Paper also acknowledges the valuable role of community railway lines, which we aim to put on a better financial footing following the Strategic Rail Authority's recent consultation.

Passenger Transport Executives already manage transport provision in some of the main metropolitan areas of England. I propose that in future they will be able to buy additional services and to transfer funding between rail and other transport modes.

So we will reform the funding arrangements and legislation for PTEs to provide more flexibility to make choices between rail and other forms of transport - bus and light rail for example.

Mr Speaker, these proposals amount to a significant devolution of powers across the country which will benefit the travelling public.

My fifth proposal covers a critical issue - safety. The Health and Safety Executive and Commission have done a great deal to improve safety, and over the years much has been achieved. However we believe that it is essential to provide a very clear railway focus to safety.

The Government intends to simplify the safety regulatory structure of the railways. As part of that we will therefore transfer responsibility for railway safety to the Office of Rail Regulation, which is independent of both Government and the industry. Safety is an essential part of railway operation. It should be in with the bricks. And it needs a clear industry focus to make sure that safety is an integral part of operations. Our proposals will achieve that.

Mr Speaker, there are a number of other measures covered in the White Paper. Including a better deal for freight operators. Rail carries 45% more freight than in 1995, and we want to see more of that. The White Paper makes proposals to encourage the continuing growth of freight, including giving freight operators more certainty about long-term access to the main freight routes.

And, the White Paper also includes proposals for a long-term strategy for the use of rolling stock to help the industry plan ahead more effectively. We need to get better value from rolling stock. The original leases were set at privatisation. The renewal of these leases in the same form would be poor value. So as passenger franchises are replaced, we will deal with these problems and drive a better deal for the public.

The White Paper also supports proposals for reform from the Rail Passenger Council Chair as part of the review. So we will create a more independent national structure for the RPC. Giving passengers a stronger voice but maintaining a regional presence.

Mr Speaker, in the light of the changes I propose, Richard Bowker the Chair and Chief Executive Officer of the Strategic Rail Authority will be standing down and will leave his post in September. For the past two and a half years he has shown outstanding leadership and relentless determination to improve the railways. He has made a substantial contribution to the railways and leaves with my strong support and good wishes

I will be appointing David Quarmby, who is currently Deputy Chair, to serve as Chair of the SRA until it is closed, probably in the second half of next year. The Board will appoint a Chief Executive to serve for the same time.

The SRA staff have achieved a great deal. I intend to build on the experience and the good work of the SRA and its staff as we restructure the railways. In the meantime it's critical everyone in the industry focuses on driving up performance and improve costs.

We will work with the industry to the make changes as quickly as possible. With the Office of Rail Regulation, we will take forward changes to the arrangements for Network Rail and the train operators as soon as we can. Other changes I propose such as in relation to the HSE, Strategic Rail Authority and devolved decision making will require primary legislation which we will introduce as soon as possible.

Mr Speaker, at a time when the railways are carrying more people than they have done in the last forty years, it is essential we have a more customer-focused and passenger-friendly railway. I am streamlining the structure of the railway in order to improve standards and make rail more attractive for passengers.

The proposals I am announcing today create a railway to serve passengers and freight with:

• Government will set the national strategy for the railways;
• Network Rail will be responsible for operating the network;
• track and train companies will work closely together

We are putting the organisation of the railways on a stable long-term footing backed by increased funding. We have set out a clear direction for Britain's railway backed by the money they need.

I commend this statement to the House.

Delivered: 15 July 2005