EVER since Alistair Darling became Secretary of State for Transport in May 2002 he has firmly ruled out fundamental restructuring as a cure for the two dominant problems facing Britain’s railways: a huge rise in infrastructure costs, and poor performance that sees one in five passenger trains late or cancelled. So his announcement on January 19 of a review of the structure in which nothing except outright renationalisation is ruled out marked an astonishing U-turn.

The review will be co-ordinated by the Strategic Rail Authority and completed by ’the summer’, when decisions on the new structure will be announced to coincide with the government’s periodic review of public spending. The latter should confirm the extent to which government will provide extra funding for the rail industry as a whole, having apparently bowed to the Rail Regulator’s decision last December that Network Rail must receive an extra £7bn during the five-year Control Period starting on April 1.

Ensuring that private investment continues to flow into the railway after the bruising episode in October 2001 when Darling’s predecessor Stephen Byers forced Railtrack into administration remains a vital component of this funding strategy, and Darling’s department moved swiftly to reassure investors that ’the government remains committed to the principle of independent economic regulation.’

There are several reasons why Darling’s announcement is welcome.

First, it acknowledges that the problems are structural and not simply the result of a collective failure by managers to try hard enough to make the railway work properly. He conceded that ’the way in which it was privatised has led to a fragmentation, excessive complication and dysfunctionality that have compounded the problems caused by decades of under-investment’.

Secondly, Darling not only acknowledges the need ’to put the railway on a sound financial footing, but at the same time to provide it with the right structure and organisation’. He has also publicly accepted that one important reason why costs have exploded and performance nose-dived since the Hatfield derailment in October 2000 is over-zealous regulation of safety, for which the Health & Safety Executive is largely responsible. ’There are now a plethora of industry standards, some of which are over cautious or are being applied in an over-cautious way’, he told MPs. ’Safety regulation needs to be focused on the real risks to passengers and employees and should not be an obstacle to providing reliable services. We need the right organisation to do that.’

Thirdly, there is a notable absence of any suggestion that costs should be brought down by curtailing or abandoning rail services. Rather, Darling envisages devolving decisions on local and regional services to Scotland, Wales and the Passenger Transport Executives in major cities, as has happened with some good results in Germany and France.

As to what structure will actually emerge six months from now, there is little to go on beyond Darling’s comment that ’there are too many organisations, some with overlapping responsibilities [which] gets in the way of effective decision-making and frequently leads to wrangling and disputes.’

But there does seem to be a divergence of view on vertical integration, with Darling’s Minister for Transport Kim Howells openly advocating ’re-integrating the rail system’ in a BBC programme on January 9. ’I’ve yet to see the logic of the decision to break the link between track and trains - it’s an impediment to better reliability and punctuality’, he insisted. ’There are ways of overcoming that, but they are going to mean some pretty big changes. I think we’re up for that.’