In December 2013, the Office for National Statistics (ONS) announced that, due to a change in European reporting rules, Network Rail Limited with all of its subsidiaries would be reclassified as a central government body. That decision takes effect today (1 September 2014), and Network Rail is now a public sector arm’s-length body of the Department for Transport.
The government has approached its response to the ONS decision in partnership with Network Rail, with an emphasis firmly on the preservation of Network Rail’s ability to continue to manage its business with appropriate commercial freedom, within effective regulatory and control frameworks appropriate for a company in the public sector.
Today, I am publishing a framework agreement between the Department for Transport and Network Rail which sets out how both bodies will interact in terms of corporate governance and financial management. By working closely with Network Rail, my department has delivered a framework that provides appropriate accountability to Parliament and the taxpayer while preserving Network Rail’s operational independence. This both keeps clear Network Rail’s accountability for its performance and maintains the regulatory process managed by ORR to give industry the confidence to plan for the long term.
Given that Network Rail is now part of the public sector and government’s accounts, I will fulfil an enhanced role in overseeing the company. The framework agreement sets out how I and my officials will take on new responsibilities:
- I will appoint future Chairs of Network Rail and approve or be consulted on other key governance changes
- I will approve Network Rail’s remuneration policy and pay for executive directors
These changes have been reflected in ‘Network Rail’s articles of association’ and agreed by Network Rail Members on 29 August 2014.
My department will also ensure that Network Rail complies with Parliamentary reporting requirements, Managing public money and other relevant public sector-wide rules.
I am also publishing a memorandum of understanding between the Department for Transport and the Scottish ministers, setting out how they will be involved in future decisions on Network Rail’s governance and financial management, and a loan facility agreement entered into between me and Network Rail Infrastructure Limited.
Copies of both documents have been placed in the libraries of both Houses of Parliament.