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Time to get ahead of the game

28 Feb 2016

With her review of Network Rail's structure and financing expected to be published in March, HS1 CEO Nicola Shaw outlined her thinking to the Railway Study Association in London.

Commissioned by the Treasury and the Department for Transport to look into the structure and financing of Network Rail, HS1 Chief Executive Nicola Shaw has identified the need for greater customer focus, local accountability and a stable structure among her core objectives for the UK rail sector.

Explaining her thinking to the Railway Study Association in London on February 4, Shaw said she had received 'more than 10 000 responses' to an initial 'scoping document' circulated last November. She summarised the key questions as: 'what does NR do, and how is it organised, funded and held to account?' Within that, it was essential to 'think about the customer, the political dimension, internal reforms and devolution, and the ongoing challenge of growth. What does all of that mean for the industry?'

Looking 'at a time frame of around 15 years', she said most forecasts envisaged further substantial growth. 'We need to find a way to get ahead of the game - to think about problems before they hit us.' Emphasising that 'the railway is a system, and it is really hard to unpick it', she said 'there are lots of things that we need to fix, to modernise. As an industry, we must jump forward in the use of technology.'

Suggesting that 'the whole structure of the industry is not set up for today', Shaw said she was 'looking for a structure that will last until 2030. In 1993 we planned for decline, or at best stasis. That absolutely did not happen. We need to organise for the future in a way that will deliver. We need a system that is driven for the customer, not by the government.'

Dismissing press speculation that 'she wants to privatise NR', Shaw admitted that a 'big concern' among those res­ponding was that 'a return to privatisation will worsen safety - the ghost of Railtrack and Hatfield looms large. In fact, we have the safest railway in Europe, and you can be assured that I will not take this lightly.'

In terms of structure, 'everyone had a different answer. To ensure legitimacy, we need to make the system work for most points of view.' Shaw pointed out that any new structure would have to be compliant with the EU's Fourth Railway Package.

'The only thing I have ruled out is vertical integration', she said. 'Separation has brought a real focus on each of the functions, and we have seen a level of growth that few other railways in the world could match.' Although the deep alliance between NR and Abellio in Scotland 'seems to be working well', Shaw was 'not sure that this model can easily be replicated elsewhere'.

She reported 'a large degree of industry support' for NR's policy of devolving more responsibility to its Route management teams and having a smaller core. 'The freight operators are least convinced, but have said they can work with it. But how many Routes, though? Scotland and Wales want control of their railway. The north wants its own Route, aligned to political devolution and the two new franchises.' But 'how much can one person manage? We cannot make people accountable if their job is not do-able.'

In terms of accountability, there needed to be 'a line of sight' between each Route and its train operators. Citing experience from HS1, she said 'the operators tell me every six months what matters to them, and we talk about how to deliver. Looking at things bottom-up helps to focus on what the customers are telling you.'

However, some form of 'system operator' would still be essential to provide cohesion across the national network. 'NR has its team responsible for long-term planning and timetabling, but not the signalling. It could be - would that be the right model?' Central control of operations would leave the Routes to focus on asset management, maintenance and renewals. Asked where the interface might lie, she admitted that

'I have at least two models in my head'.

People really matter

Shaw said she had been surprised by the emphasis on culture, skills and people. 'I have realised this is a really important part of the agenda. 'We need to create an environment which will attract people into the industry. That means ending the culture of confrontation.'

Turning to finance, Shaw confirmed that the government was 'quite concerned' about the size of Network Rail's debt, suggesting that the industry 'got into this position in part because of reclassification' as a public-sector body. Thus she had been in discussions with both Eurostat and the Office of National Statistics.

She emphasised the ongoing need for investment to cope with growth. Although private finance initiatives are 'out of favour', there were 'masses of ways' to fund projects, but it would be essential 'to create an environment which can make things happen'. Greater local accountability could help to unlock funding for smaller projects, she suggested.

Asked about the need to ensure value for money, as emphasised by the McNulty review, Shaw said 'I have sought to avoid putting hard numbers; I don't want to set the industry on a path, running after targets.' But she agreed that 'watching the pennies and the pounds is hugely important - and that includes efficiencies of scale.'

Someone commented 'when you reorganise, you bleed', and Shaw responded that 'there are only so many things we can do at once.' However, 'the government wants the railway to succeed. There is a lot of political support, and the willingness to contemplate alternatives is strong. But they are saying "we have given you the support, and we are not seeing the benefits". We all have to stick together to make it work.'

  • Currently Chief Executive Officer of HS1 Ltd, Nicola Shaw CBE was previously Managing Director of the UK Bus Division at FirstGroup. Before that she served as Director of Operations at the Strategic Rail Authority, having worked as a transport consultant with Bechtel and Halcrow Fox. She has also worked at the Office of the Rail Regulator, the World Bank and London Transport.