At the Rail Freight Group, of which I am Chair, we have often spoke about Network Rail’s growing risk aversion and there have recently been vociferous comments about its corporate structure and the role and powers of its members.
Whatever the status of the company — private, public or somewhere in the middle — there is a democratic deficit to its governance. The Board effectively appoints the 100+ members (of course there is an independent committee and chair, but they are appointed by the Board as well) and members have little power beyond appointing auditors and approving the appointment of non-executive directors. They ask questions; receive briefings, but all under NR control.
Compare this with the Department of Health guidelines on Foundation Trusts, which require a two tier governance structure. The lower one is the trust’s board of directors, but the higher level one is designed to give democratic accountability to the trust’s work.
As well as being independently elected, the Board of Governors has greater powers than NR members; it selects and appoints the chairman and non-executives through a nominations committee, it approves the chief executive and is involved in development of an annual plan. In short, the elected members are expected to compete in a proper election and thereafter not only represent the interests of their constituents but also ensure the trust is accountable.
If this model were applied to Network Rail, the constituents might include passenger and freight train operators, customers, contractors, trades unions, local authorities as well as regional representatives. It could also spawn a remuneration committee to ensure staff were reimbursed in a manner commensurate with the company’s performance.
A board of governors on these lines, with perhaps 40 people elected by the constituents rather than 118 appointed by Network Rail, would reduce the democratic deficit and increase accountability without causing a major upset in the railway structure. It would have views on Network Rail’s business plan and whether it was giving value for money to its customers, on its long term plans for renewals or enhancements, and on its general management performance.
Now is the time to start this process: things may be better than in the dying days of Railtrack but they are not perfect. We should seek improvements to the democratic deficit that is clearly Network Rail at the moment. One day there will be a serious crisis — there always is. An elected structure comprising all the stakeholders of our railway should be a much stronger entity to ride a storm and help the company.
The Office of Rail Regulation is ‘guardian’ of this structure as, being in the private sector; the Department for Transport will have nothing to do with it apart from contribute some funding if the ORR says it is justified. We will be opening discussion on this soon and hope others will join us.
• Labour peer Lord Tony Berkeley is Chair of the Rail Freight Group and will be among the speakers at the Social Enterprise and the Railways conference. For further information contact Tim Pearce, by email: [email protected] or phone: 079 7042 1590.