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Shaw Report calls for culture change on the railways

17 Mar 16 Contractors have breathed a sigh of relief that a government-commissioned report into the future structure of UK railways has come up with no radical proposals.

Returning Network Rail to the private sector has been ruled out, although an element of reintegration of track management and train operations is advocated. The report also calls for a culture change across the industry.

The government asked Nicola Shaw, chief executive of High Speed 1, to advise on Network Rail as part of its 2015 summer budget.

Her report, published on 16th March 2016, makes seven recommendations that it suggests will address some of the problems that the railway faces.

The problems cited in the report include:

- There is a lack of local flexibility and autonomy in what has become a very large and complex system with a monopoly provider of rail infrastructure at its heart.”

- The railway needs to function as an interoperable system, and it needs to be planned and developed to meet national as well as local economic and social needs.”

- Arrangements for Network Rail’s financial control, incentives, accountability and governance are no longer fit for purpose.

- Network Rail's culture needs to change if it is going to become a truly customer-focused organisation.

The report dismisses privatisation of the whole company, and instead focuses on solutions that may be appropriate for certain parts of Network Rail as well as for specific enhancement projects.

The recommendations

These are the seven recommendations made by the Shaw Report:

Recommendation 1:  Place the needs of passengers and freight shippers at the heart of rail infrastructure management. Train operators should drive this customer focus into Network Rail through scorecards and agreed action plans, recognising the are sharing use of the network with others and operating within a national (and international) system.

Recommendation 2:  Focus on the customer through deeper route devolution, supported by independent regulation. Building on the current Network Rail move to greater devolution to its routes, there should be a step-change in the degree of autonomy of these routes to deliver more flexibly and responsively for their customers, passengers and freight shippers.  This change should be supported by regulation by the independent Office of Road and Rail (ORR).

Recommendation 3:  Create a route for the North. This new route will work closely with the customers there and in particular the new regional government body, Transport for the North. Network Rail should also work closely with other integrated transport authorities, city regions, and London, as funding and delivery models evolve. HS2 will remain a separate organisation but be able to draw on the system operator for access planning and timetabling in particular.

Recommendation 4:  Clarify the government’s role in the railway and Network Rail. In particular, the roles of the Department for Transport (DfT) – as funder, client and owner of Network Rail – should be considered and clarified. As the body responsible for transport in England and Wales, the DfT should also develop a visible longer-term strategy for rail travel, coordinating as appropriate with the governments of Scotland and Wales.

Recommendation 5:  Plan the railway based on customer, passenger and freight needs. Enhancement planning should be generated from passenger and freight shipper requirements. Routes should be given the freedom to build up their plans based on these needs and recognising the role of the railway in the wider transport, economic and social objectives of the area.

Recommendation 6:  Explore new ways of paying for the growth in passengers and freight on the railway. Further options for involving private sector finance – for example, from letting a concession, or involving suppliers in technological investment – should be explored to release Government capital, encourage innovation, and speed up delivery of improvements for passengers. Routes also be required and empowered to find local sources of funding and financing, including from those (such as local businesses or housing developers, for example) who stand to benefit from new or additional rail capacity.

Recommendation 7:  Develop industry-wide plans to develop skills and improve diversity. People are one of the railway’s greatest assets. But the industry as a whole needs to support and grow the pool of skilled and talented people working in the railway better and encourage more diversity

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Industry reaction

The Civil Engineering Contractors Association (CECA) said that it had feared that Network Rail might face a long period of overhaul, blocking or delaying vital work, but these fears have now been allayed.

In its response to consultation, CECA had backed the need for reform of Network Rail, but warned that a fundamental overhaul could delay delivery of essential activity.

While the Shaw Report report does call for Network Rail to sustain efforts to devolve greater responsibility to routes, while seeking new forms of funding for investment, it stops short of a more root-and-branch revamp.

CECA chief executive Alasdair Reisner said: “It is clear that there is a need to ensure that Network Rail looks at all opportunities to deliver outstanding results for its customers. The Shaw Review was set up to establish why its current funding and operational model was failing to achieve this.

“Our members want to support these efforts, but with previous experience of major restructuring to industry customers leading to a slowdown of work, had concerns that any change at Network Rail must be managed sensitively to ensure that the current programme of investment is not pushed off course.

“We welcome today’s report, which should deliver the vital reform needed, while allowing existing programmes of work to continue.

“We are also pleased to see Shaw call for greater efforts to plan skills for the sector. This was another area where our members wanted a better approach, and we look forward to working with other industry stakeholders to achieve this, following the government’s response to the report later this year.”

The Freight Transport Association (FTA) said that some of the recommendations in Nicola Shaw's report raised serious issues for long distance freight services.

 In particular, the suggestion that Network Rail's routes should have more autonomy and some could be hived off as long-term concessions.

The FTA said that it backs moves to improve efficiency and responsiveness by the infrastructure provider in the operation, maintenance and renewal of infrastructure. However, it had concerns about the potential implications of such major structural change.

FTA rail freight policy manager Chris MacRae said: "FTA believes a strong central system operator (SO) is essential for access planning and pathing across the network, plus high-level control to manage diversions at times of line closure. Without this, rail freight operating companies (FOCs) will have to negotiate for paths with each and every route and attempt to stitch together an end-to-end service for the customer – the scope for delay, cost and inability to grow rail freight is all too apparent."

Mr MacRae continued: “The outcome of the Shaw Report must be a strong central system operator (SO), avoiding a situation where the UK's key supply chains are endangered.  For example, container trains from the main British gateway ports of Felixstowe and Southampton to the West Midlands Distribution Centres, North of England and Scotland, or aggregates traffic from Leicestershire and the Mendips to the rest of Britain, and Anglo-Scottish intermodal trains carrying consumer goods."

The Chartered Institute of Logistics & Transport (CILT) voiced enthusiastic support for all the recommendations, especially for the emphasis placed on putting passengers’ and freight shippers’ needs at the heart of rail infrastructure management. The Institute supports the proposed balance between deeper route devolution and the retention of core system authority functions at the centre; and agreed there is a need for greater clarity on the role of government and of other organisations participating within the complex railway industry structure.

CILT head of policy Daniel Parker-Klein said: “We fully support the objective to improve the efficiency and responsiveness of Network Rail and the further devolution of accountability to operate, maintain and renew infrastructure to Routes should be an effective way of achieving this. It is, however, essential that implementation of the new structure protects the interests of cross boundary services and their customers.

“The ability to run across all Routes in a coordinated manner is a significant issue for passenger service operation and is crucial for freight. We welcome the proposals for a 'virtual' Freight Route and a Freight CEO to provide a focus for freight customers and operators.

“CILT supports the return to a more customer-focused financing model for Network Rail, with revenues flowing through train operators, as this should promote the benefits usually associated with normal market incentives, notwithstanding that the franchise regime is currently sustained by public funding. We agree with the analysis in the report on the relative merits of possible future funding and financing options and the overall cautious conclusions.”

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