Network Rail chief executive Mark Carne has said that the organisation needed to behave more as a private sector business and not as a “state regulated monopoly”.
Speaking at New Civil Engineer’s UK Rail conference, Carne said: “Our customers really felt that we were a state regulated monopoly. We may be a public funded organisation, but what I want is for us to behave as a private sector business. That is a really important change in the way in which the organisation works.”
His comments come in the wake of the Shaw report published earlier this year on the shape and financing of the public body. Despite some predicting radical proposals, the report stopped short of pushing for all out privatisation or large-scale break-up of the rail infrastructure owner and operator. However, it warned that the government owned company had become too big and unwieldy.
Carne acknowledged that Network Rail had to transform and said he was seeking lessons from the private sector.
“So what do we have to do differently?” He asked. “Firstly, private sector companies live and breathe their customers, they thrive on the basis of how their customers feel about them. So Network Rail has to care passionately about their customers.”
Railways drive economic benefit, but the funding streams for rail projects needed to be improved, he said. He explained that around 30% of the capital cost or railway projects could be justified by the direct income that flowed back into the railway. Further to that, around 30% to 40% was in the macro funding that comes from government. However, the remaining 30% to 40% could be generated from the economic value in the areas that are connected to the railway.
“I’m not saying that we aren’t going to need investment from the government, we are still going to need that, but we need to move the needle so that we attract much more investment from the private sector,” he said.
One such funding mechanism could come from housing developments.
Carne relayed a conversation he had had with a developer who was seeking an improvement to a section of railway to create a commuter connection, to ultimately increase the value of a new 1,000 home development.
“I said ’Ok, if you give me £2,000 of the incremental value of each of those houses that will be £20M and that will pay for the upgrade of the railway,” Carne explained.
“’That’s not the way it works,’ [the developer] said. ’I lobby you, you lobby government and then the government pays for the upgrade to the railways and I pocket the £20M.’”
This, said Carne, was the attitude he wanted to change.
“It’s about changing everyone’s expectations about how we fund the railways.”