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Tom Winsor delivered but the Government had to ask for extra time to raise the cash
Yes I know I said it would all be over by Christmas when the Straf Battalion that is the Informed Readership prepared for the big push on the Interim Review. But what I didn't take into account was the inability of the Department for Transport and the Strategic Rail Authority to keep up with the hot pace set by the Rail Regulator.
As reported in last month's News, Network Rail's revenue for the new Control Period (CP3) starting on 1 April has been determined. But, because the implied track access charges exceed the SRA's funding within the DfT's budget, the two organisations plus Network Rail have until 29 February to come up with alternative ways of footing the Regulator's immutable bill.
As an example of the Orwellian universe in which the SRA lives it is instructive to compare the differing interpretations placed on the delay. Tom Winsor called it ‘regrettable', which is pretty strong language in the public sector.
But a week after the Interim Review Final Conclusions were published SRA issued a statement that it ‘wished to join with other organisations that had welcomed their publication'. You could almost hear the crunch of gears as reverse was hastily selected. SRA's initial reaction to the Final Conclusions had been that, according to a spokesman, quoted in the Times, giving more money to Network Rail was like giving a bottle of whisky to an alcoholic.
But it got better. According to the statement, the decision of the Rail Regulator ‘to invite the finalisation of a financing plan, by no later than the end of February 2004, that makes use of prudent and effective borrowing by Network Rail' was ‘particularly' welcome.
‘Invite'? Still, as the great Frankie adjured us, we should not mock the afflicted.
Also welcomed by the SRA was the Regulator's ‘endorsement' of its West Coast Strategy, and his support for ‘all of its outputs'. And quite right too. The descoped 125mile/h WCRM is the least we should expect for all that expenditure.
But then the sweetness and light evaporated. The SRA reminded us that it had ‘consistently resisted' the Regulator's ‘belief' that the latter stages of the project should be deferred by 18/24 months.
This resistance was due to continue during January with the SRA reviewing options for the West Coast ‘in the light of the Regulator's determination'. This review will take into account franchise and infrastructure public sector funding limits. Pending its completion, Network Rail has agreed that there will be ‘no changes at all' to the agreed programme of WCRM works on the ground.
However, this immediate reaction was just a line in the sand. SRA will not make a formal statement on the Interim Review, and in particular the West Coast element, until March when the funding fudge should have set.
But Tom Winsor knows the importance of momentum. He is not going to wait for the SRA to regroup.
On 23 December he began the implementation of the final conclusions of the Interim Review by serving the necessary legal documents on Network Rail and the franchised train operators. Network Rail has until February 4 to accept the decision.
Of course Network Rail could require the Regulator to refer his determination to the Competition Commission. And while this would really liven things up, Mr Winsor ‘fully expects' that the Network Rail will acknowledge the ‘challenging but entirely achievable requirements' he is placing on it'.
Then it was time for the Regulator to turn pussycat. Purring, he pointed to the Government's ‘scrupulous adherence and respect for the independence and jurisdiction of my office' during the Interim Review. Not only that. There was also its ‘constructive engagement' in the many difficult issues which have had to be tackled.
Aah. But he still found it necessary to remind all concerned that the proposals to replace access charges with direct grants ‘are about how - not whether - this regulatory settlement will be financed'.
And despite the nearness of Christmas there was no chance of Tom Winsor playing football in no man's land. Turning to the SRA's ‘welcome' statement the Regulator said ‘I am aware that the SRA has consistently resisted rephasing of the outputs of the (WCRM) project. However, my decision has been made and is final'.
So if the SRA wants the Rugby remodelling and Trent Valley quadrupling to proceed to schedule, it will have to find additional funding.
Something else we should note is that the Regulator is intent on making the final conclusions final. In particular he doesn't want the borrowing fudge to be used to get various people off various hooks.
Thus, while he described the last minute approach by SRA and DfT to replace track access charges with direct grants as ‘regrettable', he was prepared to accommodate the request, subject to safeguards protecting Network Rail's income. And from the man who created PUG2 these are kryptonite safeguards
So, DfT and SRA will not be allowed to attach conditions to the payment of the grants. ‘Any such conditions could dilute Network Rail's focus on its contractual obligations to its customers and its network licence obligations'.
Next, there has to be certainty that the grants will be paid. A note to Network Rail saying ‘we'll see you alright – signed; Alistair and Richard', will not do.
When the fudge is finalised, the additional direct grants will be added to the sums already payable under the existing deed of grant which came into effect with the start of CP2 in April 2001. These changes must be implemented ‘swiftly'.
And finally, the TOCs track access agreements will include a new mechanism under which access charges will rise automatically in the event of any default of grant payment by the SRA. Not only that, this mechanism will also come into effect if any (the Regulator's own italics) conditions are retrospectively attached to payment of the grants.
What I find fascinating in all this is the support by DfT for the Regulator, including those civil service comfort letters which tell someone their powers at great length, but really mean carry on, you're doing a great job. And a recurring theme is that the Regulator is independent and the SRA must accept his determinations. But even more significant is the emphasis on the independence of Network Rail.
When it comes to the subject of the proposed direct grants DfT is quite clear. ‘The fact that income is received in the form of grant will not affect in any way the independence of Network Rail. The payment of grant does not create any obligation on the part of Network Rail to the SRA or any right on the part of the SRA to seek to direct of influence Network Rail'.
This raises interesting questions over the SRA's future role in schemes like the South Region Power Up-grade and the WCRM. Of which more below.
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