Network Rail feels the lash of new regulator

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Britain's new rail regulator, Chris Bolt, has launched an attack on Network Rail, raising questions over its board and the company's unusual structure.

The comments are contained in an industry report on how to implement Alistair Darling's White Paper on reforming the railways.

The regulator's remarks have raised eyebrows in the rail industry, as the Secretary of State for Transport has expressed no concerns about Network Rail's structure or operation.

Mr Bolt has raised two issues. First, he is concerned about whether Network Rail's membership structure can properly hold the company to account. The 100 members "do not have a personal financial incentive" to require Network Rail to increase its profits, he said.

Second, he has questioned whether the bonus incentives on Network Rail's board "are aligned with the output requirements" on the company.

Mr Bolt has asked people in the rail industry for their comments and he will publish his conclusions in January.

His remarks have angered John Armitt, the chief executive of Network Rail. "Network Rail is monitored in a way that no plc is," he said. "As a company we are held to account by the rail regulator. He has teams of people inside this organisation to report on what they see going on.

"We meet with our members more than most plcs would meet with their shareholders. And anyone who attended the AGM in Cardiff would have seen questioning comparable to any listed company. I challenge anyone to come up with something that is going to be sensible and significantly better."

A spokesman for the Office of Rail Regulation said that Mr Bolt had raised the questions in response to comments made by Network Rail immediately after the publication of the White Paper. In a press release published on 15 July, Network Rail said: "With the new responsibilities it will acquire as a result of the White Paper, changes will be needed to the company's corporate governance structure."