Rail Regulator

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The Rail Regulator was a statutory office—created with effect from 1 December 1993 by section 1 of the Railways Act 1993—or the independent economic regulation of the British railway industry.

The office was abolished from July 4 2004—using powers under the Railways and Transport Safety Act 2003—when (in line with constitutional changes made to other economic regulatory authorities) the single-person regulator model was replaced by a nine-member corporate board called the Office of Rail Regulation.

Under the Railways Act 2005, the Office of Rail Regulation was later given safety jurisdiction in addition to economic regulatory functions.

[edit] Regulators

The first Rail Regulator was John Swift QC, who held office from December 1 1993 until November 30 1998. Appointed by the Conservative Secretary of State for Transport, John MacGregor MP, Swift had little hope of being reappointed for a second five-year term by the new Labour party Secretary of State for the Environment, Transport and Regional Affairs and Deputy Prime Minister John Prescott MP. Prescott had announced—at the Labour Party conference in September 1998—that he intended to have a "spring clean of the regulators".

Because Nolan rules on the making of public appointments take months, Prescott appointed Chris Bolt, Swift's chief economic adviser, as regulator on an interim basis from December 1 1998 on a seven-month contract, to allow him to go through the process for a full-term appointment.

Prescott's choice for regulator was Tom Winsor, a lawyer and partner in a leading City of London law firm who had shown his impatience with the poor performance of Railtrack, the owner and operator of the national railway infrastructure. Winsor held office from July 5 1999 until July 4 2004, the most turbulent years of British railway history.

[edit] Jurisdiction

The Rail Regulator was the most powerful player in the privatised British railway industry. His jurisdiction was wide—too wide for the liking of many politicians, including the first three Labour Secretaries of State for Transport—John Prescott MP, Stephen Byers MP and Alistair Darling MP—and the chairman of the House of Commons Select Committee on Transport Gwyneth Dunwoody MP.

That jurisdiction comprised:

  • power to determine the financial framework of the railway industry, setting price controls for access to the national network of railway facilities (principally track and stations), through the power to determine the efficiency and activity levels necessary for the competent operation, maintenance, renewal and enhancement of the railway system
  • determining the fair and efficient allocation of capacity of railway facilities, including ordering compulsory third party access, and setting standard terms for access contracts
  • issue, modification, compliance monitoring and enforcement of operating licences for railway assets
  • development of industry-wide codes (particularly the network code) dealing with timetable development, changes to rolling stock and the network itself, the handling of operational disruption, transfer of access rights, local accountability, information provision and environmental protection
  • acting as competition authority for the railways under the Competition Act 1998
  • acting as appellate body for certain regulatory and legal disputes, including in certain cases of the establishment, amendment and abolition of safety standards.

[edit] Independence

Although appointed by a government minister, the Rail Regulator was independent of government. This was because, to encourage and maintain private investment in the railway industry, it was essential that decisions by the regulator were taken on objective economic criteria, free of undue political influence or considerations.

The independence of the Rail Regulator was established by virtue of:

  • the absence of any ability of the Secretary of State for Transport to give him directions or orders as to what he should or should not do
  • the absence of any right of appeal to the Secretary of State for Transport in relation to the actions of the Rail Regulator
  • the absence of the right of the Secretary of State for Transport to remove the Rail Regulator from office, except on grounds of incapacity or misbehaviour (the same grounds as apply to judges of the High Court).

In October 2001, the independence of the Rail Regulator was threatened when the Secretary of State for Transport—Stephen Byers—took steps which led to the placing of Railtrack into railway administration. Although successfully resisted, on July 15 2004 the government announced a legislative intention to restrict the jurisdiction of the Office of Rail Regulation. The legislation—the Railways Act 2005—was passed in April of the following year.

During the final Parliamentary stages of the passage of the Railways Act 2005, the Government sustained a defeat in the House of Lords over an amendment which would have protected passenger and train operators against a diminution of infrastructure quality or performance—or being held rigidly to their contracts for the provision of railway services which assumed no such diminution—if the Secretary of State for Transport restricted funds available to Network Rail. However, the amendment was reversed the same day in the House of Commons with a much weaker provision substituted for it. The House of Lords did not insist on their original amendment, and the legislation was passed without the protections which the train operators needed. Critics regarded this as an unjustified interference in an inter-dependent contractual matrix, contrary to the legitimate expectations of private investors in the railway.