Archive for July, 2014


£53.1 million Network Rail fine

Tuesday, July 8 2014

Good governance… or Smoke and Mirrors?


Network Rail was fined £4 million after the Grayrigg derailment.
Photo Lawrence Clift. Licence CC BY-SA 3.0.

The papers today are all carrying the story that the Office of Rail Regulation (ORR to its friends) have fined Network Rail a whopping £53.1 million for causing trains to run late. At the same time the Treasury has kindly agreed to recycle some of the fine to improve WiFi access on commuter trains. So surely that’s a Good Thing isn’t it?

Well possibly not? Over the years Network Rail has been collected a large number of fines. Here are some examples of fines imposed by during the period 2011 – 2013:

In May 2011, St Albans Crown Court imposed a fine of £3 million on Network Rail following a prosecution brought by the ORR relating to the Potters Bar derailment in May 2002 which led to the death of 7 people and injuries to 76.

In March 2012, following another prosecution brought by ORR, Network Rail was fined £1 million pounds at Chelmsford Crown Court for contributing to the deaths of two schoolgirls who were killed by a train while trying to cross the railway line at a level crossing at Elsenham station in Essex in December 2005.

In April 2012, Network Rail was fined £4m for safety failings leading to the 2007 Grayrigg derailment that resulted in the death of 1 passenger and injuries to 86. There were similarities to the Potter’s Bar accident in that in both cases the condition of the facing point that caused each accident could not be satisfactorily accounted for.

In April 2013, Network Rail was fined £450,000 by Birmingham Crown Court when a driver was killed after her car she was in was hit by a train at Moreton-on-Lugg, Herefordshire, in January 2010.

At the end of these court cases representatives of the victims’ families regularly made the point that the railway executives responsible for the decisions (or lack of appropriate decisions) that caused the incidents are totally unaffected by such fines.

Network Rail is a not-for-profit company with its Directors appointed by the government. Though it has ‘members’ to perform a governance role akin to that usually performed by shareholders, in practice this mechanism is very weak.

Network Rail is financed from three sources: government grants, borrowings and track access charges. The ‘fines’ are simply cuts to the money that would be paid by the Treasury to support the railways. The shortfall is made up by extra borrowing with the tax payer picking up the bill for the extra interest charges. So in effect the people being fined are not Network Rail executives, but you and me.

Though these fines may reassure certain members of the public ‘that something is being done’, there is no evidence that the fines are helping to create a safer railway or to make the trains run on time. While solutions have been proposed by the train operating companies, so far their suggestions have been steadfastly ignored by the Department for Transport.

In February 2012 – a time of financial austerity brought on by the financial crisis – the Chairman of Network Rail, Sir David Higgins announced that he and his executive team were giving up the 60% bonuses that were due to them that year, but by July the same year Network Rail announced that senior executive pay would be topped up by a £2 million bonus scheme..

Surely there must be a better way to manage Britain’s railways?