The current structures of the railway industry are “set up for conflict” between train operators and Network Rail, the company’s new chief executive has said.
David Higgins told the Transport Select Committee that the company’s plans to regionalise its structure into nine geographical businesses – starting with Scotland and Wessex regions – would change this, providing “tailor made solutions for different routes”.
He told the committee that the new route based business would be led by a route managing director, and would “need to be much more aligned from a business point of view with the train and freight operating companies that they work with”.
He said: “There are tailor made solutions for different routes, where our customers can give us information that we don’t have, and we can amend our management of the route for the benefit for all. We need to be more localised in the decision making.”
He said that the initial work to set up these businesses would take 18 months, but confirmed that Network Rail would retain a central planning function, with area delivery plans being decided following central plans for the next regulatory control period, starting in 2014, and route utilisation strategies. “Some of the big decisions will never change, but some of the smaller local decisions will get freed up,” he said.
Higgins also backed High Speed 2, saying that the existing West Coast mainline will be full up in six to 10 years.
In his opening remarks to the committee, he said that there needs to be recognition “that we are reaching the stage on some of our routes where the ability to squeeze extra capacity is becoming limited”.
He added: “Long term investment is needed to create both reserve capacity and to cope with future growth. Crossrail, Thameslink, High Speed 2, the Northern Hub, electrification and the overhaul our signalling system are all essential to meet the expectations of the public and of industry.”
He said that Network Rail “must make it our top priority to complete the Northern Hub”, a £530M plan to increase rail capacity by 40% across the north of England. He said that the plan was an “essential” part of Network Rail’s plans for its next regulatory period, as it would provide a return on the investment of 4:1.
He also said that Network Rail would need to control costs – “in short we need to do more for less”.
Value for money in the railways is currently the subject of a Department for Transport review, led by Sir Roy McNulty, and Higgins said: “Network Rail receives a large amount of public subsidy. I believe it is absolutely right that we invest more in our rail infrastructure to create the modern railway this country needs. With that comes the responsibility to drive a culture of cost efficiency that looks to squeeze every penny of value for the taxpayer. We are stewards of public funds and we should never forget that.”
Under questioning for the committee, he said that comparisons with European railways, which show Network Rail to be between 30-40% less efficient, needed to ensure “that the European railways are doing the same thing” as Network Rail. He highlighted that continental railways can often close stations and lines for longer periods of time than Network Rail does to undertake maintenance or upgrade work.