Network Rail, the owner of Britain's rail tracks and stations, should be split into regional units that could ultimately be sold off to raise money for the Treasury, according to proposals drawn up by the train operators.
The Association of Train Operating Companies (ATOC) makes the radical suggestions in a submission to a wide-ranging review of the rail industry by Sir Roy McNulty, the former chairman of the Civil Aviation Authority. In a five-step programme designed to whittle down the £5bn annual taxpayer subsidy for the rail industry, ATOC said that the railways could become cheaper and more passenger-friendly if greater power were handed to train operators, alongside devolution of Network Rail.
Citing the £2bn auction of the High Speed 1 route between London and the Channel tunnel, ATOC said there was a case for changing the structure of the rail network and then selling off its parts: "There is a clear precedent for the sale of a geographically based unit in the current process to sell HS1. There are many precedents in other utility sectors of national monopolies being commercialised and broken into standalone regional companies."
The regional units could be integrated with train operators, with Scotland and Merseyside among the candidates for vertical integration, ATOC added. Network Rail splits its operations into nine regions, including Scotland, Anglia, the west coast line and the Great Western route.
ATOC said that reform should begin with Network Rail devolving power by boosting the role of route directors area managers, in effect who would oversee specific lines in co-operation with train operators. Train companies would have considerable influence over route directors by having the right to withhold track access fees, which are worth about £1.6bn a year to Network Rail.
Further steps would see the combination of track and train operation, or vertical integration, on certain lines. Under that scenario, rail operations on Merseyside or in Scotland could be represented by one company in charge of signals, engineering work and train operation. Ultimately those units could be sold off, ATOC said.
Michael Roberts, ATOC's chief executive, warned that looming changes at the Department for Transport, which could lose about 600 staff as part of the government's comprehensive spending review, should not hinder industry reform.
"It is critical that the department, in all of the changes it has to go through, treats rail industry reform as a priority," Roberts said, adding that the reform process should not focus only on lower costs, but should include proposals that will increase ticket sales, such as faster speeds on certain routes.
A spokesperson for Network Rail acknowledged that industry costs still need to be reduced. The company, whose finances are underpinned by annual government grants and state-backed debt, is committed to shaving £5bn from its costs over the next five years.
"Network Rail fully supports better alignment and co-operation between the company and train operators. Change is needed and Network Rail will play its part in making it happen, while continuing to drive costs out of its business," said the spokesman.
However, some industry sources have cautioned that fundamental reform of the industry, such as a regional breakup, might not make a meaningful dent in costs while distracting managers and executives. Network Rail is scheduled to spend £30bn on Britain's tracks and stations between 2009 and 2014.
A spokesperson for the DfT said the transport secretary, Philip Hammond, would consider the proposals. "We welcome this contribution from ATOC and will consider it alongside Sir Roy McNulty's study into how the UK can increase efficiency and improve value for money within its rail network."
