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Legislation must be an enabling framework for success

Legislation must be an enabling framework for success

Rail Partners - Legislation must be an enabling framework for success
05 August 2022
Robert Girgis, deputy director of policy

In May last year, the Plan for Rail set out an ambitious plan to transform the railway. Yesterday saw the legislative consultation close, which the Department for Transport had conducted to seek views on how exactly that vision will be delivered, and Rail Partners has published its response here.

The legislative elements of the White Paper itself were relatively few – much can be done without the need for new law. The only big ticket items needing a new statutory basis were the creation of a guiding mind – Great British Railways (GBR) – and the subsequent transfer of contracting powers from the DfT to GBR. The design of the new contracts themselves does not need legislation. But is the proposed legislation leaving too many questions unanswered?

The White Paper, the leadership of GBRTT, and both ministers and officials at DFT have all been consistent in saying that they think the private sector has an important role to play in rail in the future, which of course we welcome. But, to get the best of the private sector, this requires more than simply the transfer of the power to let Passenger Service Contracts to GBR. The functions and duties that the legislation will create for GBR, will determine the culture and framework within which all actors in the new system will play their roles. How GBR is tasked, its freedom to act, its relationships with other industry players, and its accountabilities, all matter if we are serious about stabilising the sector, controlling cost, and driving up revenue – while ultimately delivering better outcomes for customers.

And in this regard the legislative consultation suggests a huge amount will be left to be determined later – through the GBR licence and secondary legislation. There is a positive commitment to enshrine a duty to promote rail freight in statute but we would like to see more detail, especially regarding the passenger side, pinned down on the face of the bill.

Through the coming legislation, GBR must be created as an enabler for better outcomes, rather than a specifier of inputs - as a responsive and informed client and as a strategic anchor to the railway system as a whole. Without GBR’s functions and duties being included in primary legislation, and without a specific duty to promote private sector innovation and investment, it is unclear how a commercial spirit and mindset are being baked in, or how structures will be built which encourage GBR to look outwards to the vast experience and knowledge operators bring to the table. The risk is that, by leaving too much unspecified, the lack of inbuilt statutory checks and balances create the room down the line for inadvertent over centralisation and a prescriptive client, rather than one designed to ask how operators can help solve shared problems.

In our response to the consultation, we have therefore set out three key things that the legislation must do if it is to achieve the ambitions in the 'Plan for Rail'.

First, it should empower private sector operators to deliver for customers.

If the operational and commercial expertise of operators is to be effectively harnessed, they must be provided with the incentives, and the right levers to respond to those incentives, to enhance the customer experience and reduce costs to the taxpayer – as envisaged in the White Paper. That detail will be determined in the new contracts but we believe a duty to promote private sector innovation and investment should be part of GBR’s license and that should be specified in the bill when it is published. We would also want to see a specific requirement for a freight growth target to be given legislative force (with the scale of ambition then determined later).

Secondly, legislation should provide the regulator with the power to hold GBR to account effectively.

The Office of Rail and Road (ORR) must have the ability to challenge GBR on decisions and delivery, to ensure it is performing in the interest of passengers, freight users and taxpayers as well as the operators who deliver for them. In addition to having the right legislative powers, ORR must be a confident regulator to exercise its independent role effectively and ensure that it has the right capabilities to do so. This would include ORR being able to approve and where appropriate direct access applications, and to require recovery plans for GBR if things go wrong.

Lastly, the legislation should ensure GBR is sufficiently arms-length from Government to deliver.

A key pillar of reform was to create clear accountabilities and end the micromanagement of recent years, and GBR must be arms-length to deliver that. An unconstrained power for the Secretary of State to intervene with GBR on any issue at any time, which the white paper and legislative consultation propose, does not inspire confidence that micromanagement will end. Instead, strong independent regulation should be enough to provide comfort that GBR will be held to account to deliver on Government’s objectives.

A good example of how the system needs to work as a whole – GBR, ORR, and private operators – is in regard to open access. In the 'Plan for Rail' it states “New open access operators will be considered where capacity allows”. The legislative consultation proposes “widening the competition duty of the regulator” which on first reading seems aligned. The implication being ‘widening’ in the sense strengthening of the role of the regulator in this regard and further opportunity for competition to get the best from the private sector in partnership with GBR. Under closer scrutiny, however, what is being proposed is ‘widening’ in the sense of diluting the powers of the ORR to encourage further competition, by making it consider other factors in parallel. If enacted, this is likely to make it impossible for new open access operators to enter the market and would also have potential implications for freight.

So, this consultation marks an important step in the ultimate delivery of reform. Developing the detail isn’t easy and we welcome the consultation providing the opportunity to input. There is collective will to make it work, but we must ensure that we are creating structures that engender the flexibility and commercially driven culture to enable the sector to thrive – with all the benefits to customers and taxpayers which that will bring with it.

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