McNulty Rail Review

Recommendations for leadership from the top: The Department for Transport (DfT) to develop a clearer definition of the roles of Government and industry, with Government focused primarily on setting the overall vision for the industry, the direction of rail policy, the objectives for the industry, the level of funding available, and leading on franchising procurement. The industry to accept greater responsibility for strategic planning and the delivery of outcomes in line with Government's policies and objectives, particularly on cost reduction. The industry to establish a Rail Delivery Group, consisting of the most senior people from NR and the TOC-owning groups, freight and other stakeholders, to lead a substantial programme of change – focused particularly on cost reduction, changing the industry culture, encouraging more integrated whole-system approaches where necessary, and improving the speed and effectiveness of cross-industry bodies. Mechanisms for establishing a dialogue at industry level with the trade unions should also be explored. On some critical issues, it may also be necessary for the Secretary of State to give a lead.

Recommendations for clearer objectives: Government to provide greater clarity about what Government policy is, how different strands of policy are harmonised, and make clearer the links between the different levels of policy, objectives, strategies and implementation. The High Level Output Specification (HLOS)/Statement of Funds Available (SoFA) process to include specific cost objectives and a greater degree of longer term planning. There should be a move away from "predict and provide" to "predict, manage and provide", with a much greater focus on making better use of existing system capacity. The DfT to work with industry to develop a comprehensive analysis of how subsidy is used, i.e. where subsidy is used and what it is buying; the DfT should then assess how this use of subsidy contributes to Government's policy objectives.

Recommendations for devolved decision-making: Less prescriptive franchises to allow TOCs more freedom to respond to the market. Decentralisation and devolution within Network Rail. A greater degree of local decision-making by PTEs, and/or local authorities, brought more closely together with budget responsibility and accountability.

Recommendations for changes to structures and interfaces: Devolution and decentralisation within NR. Introduce diverse ownership of some infrastructure management concessions. Closer alignment of route-level infrastructure management with TOCs, at one or other of the following levels: minimum – cost and revenue sharing, and joint targets; or intermediate – joint ventures or alliances; or maximum – full vertical integration though a concession of infrastructure management and train operations combined. The Study recommends having at least two joint ventures/alliances in place by 2013/14 and at least one vertically-integrated pilot in place by about the same time. The DfT and the ORR should drive this process of closer alignment in all new franchise procurements and for new Control Periods for NR.

Recommendations for more effective incentives: Reform of franchising, along the lines already announced by Government with much stronger incentives for TOCs to reduce costs, and to co-operate more effectively with NR. Closer alignment of NR and TOC incentives through the structural changes indicated above. In relation to NR: comparative regulation of route-level units; introducing a degree of independent ownership of infrastructure management concessions; consider directing all subsidy for NR through track access charges; develop improved corporate governance and a better focused management incentive programme; and assess the potential, after industry structures stabilise, for unsupported debt and/or private investment. Improved incentives for efficient enhancements. Improving incentives and clarifying responsibilities for the efficient management of existing capacity. Greater transparency of the industry's finances and cost performance.

Recommendations for regulation: Move towards the industry having a single regulator, the ORR, with a new focus on whole-system outputs and with the necessary resources, skills and standing to support an expanded role. The DfT to undertake a full review of fares policy and structures, aiming to move towards a system that is seen to be less complex and more equitable, and which also aids the management of peak demand and the more efficient matching of demand with capacity. The Study's recommendations envisage some re-balancing of fares but no increase overall. The DfT to work with industry to accelerate Smartcards, other retail technologies and introducing other retail locations. The DfT, in liaison with the industry, to overhaul the Ticketing and Settlement Agreement which prescribes such matters as ticket office opening hours, providing other enabling pre-conditions are met.

Recommendations on asset management, programme and project management, and supply chain management focus on stronger partnership working from inception through to the supply chain, identifying the optimum approaches to maintain, renew or enhance the railway, followed by delivery of the necessary engineering work or equipment in the most efficient manner. This will require: industry wide adoption of modern, best-practice frameworks to encourage whole-system, whole-life approaches, focusing particularly on considering all available options fully before fixing on the solutions; making best use of the new objectives, incentives, structures and interfaces to achieve improved trade offs between infrastructure, rolling stock and operations; better selection of the optimum maintenance approaches, informed by better understanding of assets and better asset condition information to reduce maintenance and renewals effort; better visibility of forward plans and less volatile workloads to encourage long term investment by suppliers in whole life solutions and cost reduction approaches; earlier involvement of suppliers and contractors, and much wider use of partnering approaches, to incentivise all parties to reduce the cost of delivering rail services.

Recommendations on safety, standards and innovation: Clearer safety leadership at industry level to drive further improvement in the rail safety culture. Establishment of a Rail Systems Agency (RSA) to lead the industry in achieving technical excellence in standards management, technical integration, and driving innovation.

Recommendations on HR management: Review of many aspects of staffing and working practices. The need for pay restraint in relation to both staff and senior management. The need for improved training and people development. Review of overheads and administration.

Recommendations on information systems: Improved oversight and management of cross-industry information systems.

Recommendations on rolling stock: Increased standardisation and more effective procurement of rolling stock, plus establishing strategic partnerships with the ROSCOs.

Recommendations on lower-cost regional railways: Piloting more differentiated approaches for both infrastructure and operations which can maintain standards of safety, but which can reduce the costs of less intensively used networks.

Recommendations (driving implementation): A small independent team for change programme management to work closely with the Rail Delivery Group, and to report direct to the Secretary of State against an agreed implementation plan.