Where next for rail regulation?

Published on 24/10/2011 0 comments

It has been nearly 6 months since Sir Roy McNulty set out his ambitious plans for the future of the rail industry.  During that time, there has been speculation over how the industry will respond to these recommendations and, in particular, the overall challenge of delivering 30% efficiency savings by 2019.  Already visible steps include the establishment of the Rail Delivery Group and Network Rail's publication of its own Initial Industry Plan.

But what of regulation?  McNulty was clear in his recommendations that a single industry regulator is required.  This single body would take on a regulatory role in relation to aspects of the franchises and perhaps even fares.  McNulty thinks that this would facilitate more output based regulation as well as create greater opportunities for cross-industry thinking.  Government would be left to focus on its 'core' role - that of setting the overall policy direction for the sector and to make associated, often politically sensitive, trade-offs.

For the regulator, taking on additional responsibilities, such as regulating cross-industry outcomes including performance and journey time, that are currently included within franchise agreements, represents a significant change, even in a static environment. 

But this change to the regulator's roles and responsibilities is being recommended against the back-drop of proposed fundamental changes to the structure of the industry (indeed it is these changes that are driving the need for the single regulator).  These changes will, in themselves, require the regulator to adapt its role. For example, greater alignment of route infrastructure management with the TOCs will require the regulator to take an even more active role in ensuring that the interests of other operators, including freight, are protected.       
And certain of McNulty's recommendations will affect the way in which regulation happens.  Proposed concessioning, and potentially separate ownership, of route based infrastructure, will facilitate more comparative regulation.  But such concessioning will also require an even deeper understanding of where efficiencies can be achieved, how these can be achieved and over what time period.

The regulator will be taking steps to ensure that it understands what its role looks like in the new world and what changes it needs to make to ensure that it is well positioned to carry out that new role. 

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