Network Rail CEO Mark Carne discusses the Shaw Report
In response to a feature in Railway Technology on the impact of the Shaw Report, Network Rail chief executive Mark Carne talks to Julian Turner about decentralisation, greater regional devolution for Great Britain’s railways, the future sale of non-core assets and NR’s £40bn Railway Upgrade Plan.
Mark Carne has been chief executive of Network Rail since September2013. Previously, he worked as executive vice president for Royal Dutch Shell in the Middle East and North Africa, executive VP and managing director for BG Group in Europe and Central Asia, and spent 21 years at Shell.
Julian Turner: Seven months on from the release of the Shaw Report, what is your reaction to it?
Mark Carne: I welcomed Nicola’s report and I’m pleased that she concluded that the reforms we are introducing are the right ones. Network Rail’s devolved business model will put decisions on the routes, closer to the passengers and train companies. I also endorse her desire to see more private finance for the railways. Private money and funding from the people who will ultimately benefit from railway improvements is a sensible way to deliver a bigger and better railway for the nation.
We’re working with the Department for Transport (DfT) on the recommendations and look forward to a future that I genuinely believe is bright for the railways and its growing number of passengers.
JT: PricewaterhouseCoopers described the report as “perhaps the biggest shake up of Network Rail since privatisation”. What are the implications for NR and Great Britain’s rail network?
MC: We expect passenger numbers to double over the next 25 years, driven by an increasing population, urbanisation and an ever more congested road network. Such growth poses a huge challenge because our railways are, in many places, already full at peak times and too often passengers are left standing on crowded trains. It also impacts train performance, with one failure impacting tens, or even hundreds, of trains.
NR’s response to the Shaw Report focuses on the changes required to ensure the railway is at the heart of creating a stronger, more vibrant economy with more jobs and more housing, rather than becoming a congested brake on economic opportunity. Moving from a centralised to a devolved structure is a big change but it’s the right one to enable the company to better deliver and rise to the challenges that lie ahead; further devolution, technological transformation and financial reform.
JT: The report says railways lack local flexibility and autonomy to address operator and customer needs, and that NR’s structures do not give “sufficient focus on financial discipline”. Do you agree?
MC: Further devolution of responsibilities to routes and financial reform are two of the broad changes we’ve identified. The pressures of long-term underinvestment and the current congestion many passengers face highlight challenges for the whole industry. We believe in devolution to route businesses that focus on delivering outstanding performance and innovating with customers.
JT: How does NR plan to deliver on key report recommendations such as a route for the North?
MC: NR launched an in-depth review, which found that the disadvantages of creating a route for the North (cost, disruption caused by this significant organisational change) outweighed the benefits.
Instead, the review concluded that day-to-day operational routes should remain and be overlaid by a new Northern investment organisation headed by a single point of contact for key regional funders and stakeholders, and for the strategy, planning and delivery of investment across the North.
As for putting freight shippers at the heart of infrastructure management, NR created a 'virtual route' to better meet the needs of freight customers and the sector. The route team also has responsibility for national passenger operators, primarily CrossCountry, across multiple routes.
In terms of skills and diversity, women now represent 25% of our board and executive committee. We have a good proportion of women in our Accelerated Leaders Programme, and are growing our gender and ethnicity diversity in our early entrant programmes, particularly our graduate initiative.
NR’s diversity and inclusion strategy, Spaces and Places for Everyone, is highly regarded across the rail and engineering sectors, and we also have an award-winning, industry-acclaimed diversity and inclusion team running a number of diversity awareness programmes across the business. We know that there is more to do, but the transformation in the last two years is something to celebrate.
JT: Will deeper route devolution supported by independent regulation enable NR to mirror a regional regulated utility model − similar to that of the water industry − and is this desirable?
MC: Too many people feel that NR remains centralised, slow, inward focused and bureaucratic − we are changing, but we must act faster. We must accelerate the devolution within our company to route businesses that can be closer to train and freight operating companies, take decisions faster and can innovate more effectively, meeting the needs of our individual customers.
Improving the way NR works needs to be supported by strong regulation with clear accountabilities between the Office of Rail and Road, DfT and NR − and clearly aligned incentives between industry parties. Further devolution will support increasing analysis and benchmarking of NR’s performance at a route level while recognising that routes each form part of the whole rail system.
JT: The Shaw Report suggests that NR looks for alternative financing and that profitable lines could be managed as long-term concessions. Is this feasible and what alternative financing is available?
MC: Financial reform is one of three broad changes set out in NR’s response to the Shaw Report scoping document, which will help the rail industry rise to the challenges ahead, alongside further devolution to route businesses and accelerated technological transformation to deliver the capacity needed to cater for future demand.
Our approach is all about financial discipline, with a renewed focus on our core activities while being open and innovative about new sources of finance to fund our growing railway.
NR’s job is to help support Britain’s economic growth by providing the railway that Britain needs, today and in the future. While no decisions have yet been made, if there are investors or others with expertise in key areas who can help us do that, then we should look to embrace those opportunities.
JT: How do you respond to claims by rail unions that the sale of NR assets, local devolution and increased private investment could lead to further fragmentation and ‘back-door privatisation’?
MC: Historically, the railway has suffered from massive long-term underinvestment. We’ve made no secret of the fact that we want to raise £1.8bn to help fund NR’s five-year, £40bn Railway Upgrade Plan for the five-year period up to 31 March 2019.
The number of passengers on Britain’s railways is growing faster than anywhere in Europe, but the network is also the most congested – so investment is needed to build capacity for more trains.
Non-core assets being considered for sale include commercial estate (including railway arches), freight estate, light maintenance depots, car parks − mainly non-station − and roadside advertising. These are assets which we could sell without affecting the day to day operation of a safe and reliable network. At this point in time we are considering all options and no firm decisions have been made.
JT: Are you confident that NR can effectively implement the Shaw Report’s recommendations while also delivering major projects such as CP5, the asset sale programme and the digital railway?
MC: We’re absolutely focused on delivering the Railway Upgrade Plan, which will deliver a bigger, better railway with longer, faster trains – and more of them − plus more reliable infrastructure and better facilities for passengers, especially at stations.