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Railways: Network Rail

Volume 703: debated on Monday 21 July 2008

My Lords, Network Rail is a private sector company limited by guarantee. Changes to Network Rail’s corporate governance are matters for its board and members, not for the Government. The independent Office of Rail Regulation is currently consulting on changes to Network Rail’s licence, aimed at strengthening the company’s accountability. This includes a review of Network Rail’s governance arrangements.

My Lords, does my noble friend not agree that the targets and governance of Network Rail cannot be right when on the one hand the executives get huge bonuses while on the other passengers suffer so much misery and inconvenience? Is my noble friend aware of the Co-operative blueprint The People’s Rail, that at its annual general meeting last week members of Network Rail called for a review, and that even today the House of Commons Select Committee has published a report calling for more effective governance and scrutiny of the company? Surely it is time that the Government joined the growing groundswell to give the British people real power over Network Rail.

My Lords, I am certainly aware of the outcome of the annual general meeting the other week and I congratulate my noble friend Lord Berkeley on his strenuous efforts at it. There will be a review of the governance of Network Rail, and Iain Couch has welcomed the opportunity to participate in and co-operate with it. The Office of Rail Regulation is reviewing the way the licence works, looking in particular at executive remuneration bonuses. I am well aware of the issues. My noble friend has made some interesting and useful points.

My Lords, we are where we are, but does the Minister agree that, while Network Rail is a private company, it has members rather than shareholders? What we might do straightaway is review the membership to make it more all-encompassing so that it can put right some of Network Rail’s defects.

My Lords, I welcome the noble Lord’s conversion to reviewing governance issues. Of course it was his party that left us with the mess of rail privatisation all those years ago, and we are still paying the price. The People’s Rail is a useful and valuable contribution to what will no doubt be a broadening debate, and it seems that the party opposite may at last be moving in the right direction.

My Lords, the members of Network Rail have now voted to conduct an imminent review of the company’s governance structure. Does the Minister agree that this should be concluded very speedily and that the Government should not intervene in the affairs of the company in this instance, as they have done whenever the company’s shortcomings have been raised in the past?

My Lords, I have read the terms of my noble friend Lord Berkeley’s motion, which I understand was carried unamended. It suggests that the review group should submit its findings and recommendations to members by December this year. It is not the role of the Government to interfere in this review; it should be conducted independently. I agree with the noble Lord that that is the right way to proceed.

My Lords, does the Minister not agree that it is time we looked at this situation again? There were many arguments with the then Prime Minister about nationalisation of the railway industry. The fact is that Britain is one of the very few countries in the world whose railway system is not state-owned.

My Lords, we are where we are. Rail nationalisation and the review of the governance structure are two separate issues. The Government’s role is to ensure that we have the right level of investment—we have been increasing it over the past decade—and that we improve the range and quality of services. That is exactly where our commitment has been, and we are now reaping the benefit of that investment as the number of people travelling by rail—40 per cent up on 10 years ago—demonstrates.

My Lords, following on from his previous answer, does my noble friend agree that the principal criterion against which the governance of Network Rail should be judged is whether it is capable of delivering the investment in infrastructure which the growing demand for rail travel is making necessary; and whether, at the same time, it is capable of convincing the Government that that investment needs support? Does he further agree that, whatever the shortcomings of Network Rail are today, it is a whole heap better than Railtrack, which preceded it?

My Lords, I entirely agree with my noble friend’s last suggestion. His earlier two points will be an important part of the debate. The noble Lord is on the right track.

My Lords, how does the pay of the Chief of the Defence Staff compare with that of the chief executive of Network Rail?

My Lords, I am not going to get drawn into a debate over the relative merits of leading members of the military and the chief executive of Network Rail. That is quite the wrong way to proceed.

My Lords, does my noble friend not accept that it is bizarre for a Minister to say, in effect, that the governance of Network Rail is nothing to do with us, when billions of pounds of taxpayers’ money are directed to that organisation? There is something wrong with the governance of Network Rail when, despite the dislocation, particularly to the West Coast Main Line, every weekend and right through the forthcoming holiday season, its chief executive and some of its directors are paid bonuses that, frankly, many of us feel are obscene.

My Lords, the noble Lord is absolutely right to express his robust views on this subject. It is right that the Office of Rail Regulation should be looking at the licence arrangements. We have to observe a proper distance between government and governance issues. It would be a profound mistake for us to attempt to micromanage at all times.

My Lords, surely there is a problem in that it is public money, as my noble friend said; there are no shareholders to vote out the directors; and the Government set this thing up. Are they totally immune to any criticism or change?

My Lords, of course they are not. The Office of Rail Regulation does a very good job, and a review is being conducted. We should await its outcome.