A consultation fit for Britain's future?: The Rail Reform Bill

The primary focus of the Rail Reform Bill (the Bill) will be to establish GBR – currently it is operating in a shadow form. Since the Labour government won the General Election in 2024, there have been notable shifts in the purpose of GBR. Instead of being a "guiding mind" it will now be a "directing mind". The government is also to be given greater powers of direction over GBR's activities and – seemingly – more power to influence the day-to-day railway. The role of the Office of Rail and Road is to be drastically curtailed. The overall purpose though remains to consolidate and improve railway services under a single body and to create a unified, efficient, and end user-focused railway system which meets the needs and expectations of those who rely on it.

The Consultation goes on to further express a commitment to rail freight, a clear role for devolved governments, empowering local communities and giving fair access to the private sector. These all seem like noble aims: giving something to everyone. But "everyone's" needs are different and there is very little on how competing needs will be addressed. And whilst the Consultation acknowledges the need to make "informed trade offs" this means there will be losers, and who those losers will be is not clear.

At only 52 pages – and 40 once you remove the cover pages, foreword and instructions on how to respond – the Consultation is light on detail and heavy on hyperbole. To be fair, the purpose of the legislation is to facilitate the framework for reform in the Bill and not to provide all of the detail of how the future railway will work at this stage. The aims of GBR seem reasonable. However, there is a danger that in supporting those aims without the important detail, it will be too late to influence that detail when it is finally published.

Well-intentioned vision but without checks and balances

Does the Consultation set out a sensible basis for the future railway? Our overarching thoughts are:

• Rail reform is needed and has been a long time coming. Moving towards a railway which has better aligned incentives, with everyone delivering in the same direction for the benefit of the end user, and less day-to-day micromanagement from government, can only be a good thing. The proposed objectives for the future railway are clear, positive, and do seem to be aligned with the desired outcomes.
• Fundamental reform is envisioned: many of the concepts underpinning the railway today will disappear altogether. We agree that the Bill can only establish the frameworks within which reform can take place, and cannot at this stage provide every aspect of detail. However, there is a remarkable lack of detail at this stage and our concern is that respondees to the Consultation may be agreeing or disagreeing to something they – understandably – do not know the full implications of.
• GBR will become a behemoth, drawing in Network Rail, functions from the Department for Transport and nationalised train operators. The Consultation proposes to give GBR significant powers to deliver its expanded role and will have the right to make key decisions affecting the railway, including who is granted access and at what price. With all of those roles in one place, GBR will become a megalopoly and checks and balances will be needed to ensure that GBR does not abuse its power. How GBR will be held accountable is not clear from the Consultation, as it refers to the Chair and Board doing so, and those persons reporting into the Secretary of State. The role of the GBR Board and the Secretary of State in holding GBR to account will be set out in the Bill and it would be helpful to understand more about those measures to better consider whether this will make GBR truly accountable.
• Connected with the above, it is unfortunate that the ORR's intended role is very significantly curtailed (considering safety and efficiency for the most part, with residual roles hearing appeals – the basis of which will be narrower than now – and considering GBR's business plans) and whilst a limited role remains, there will not be a powerful regulator to referee the actions of the new megalopoly.
• We are very concerned, therefore, that operators not inside the GBR family: freight, open access, and devolved services (such as Merseyrail and TfL concessions) could become second class users of the railway. Without appropriate checks and balances in place, GBR could simply favour its own services and make decisions which are then difficult to challenge.
• We have no doubt that everyone working on rail reform wants to do the best for the railway. The proposed approach though relies on behaviours and whilst those may currently be well-intentioned, there will be few limitations on poor behaviours were individuals to change over time. It is concerning that the proposals rely on the right people being in key roles, and whilst that may work in the short term, unintended consequences could emerge down the line.
• Having a more powerful voice for the passenger is definitely a good idea as sometimes the voice of the passenger can be lost in decision making. Ensuring that voice is properly empowered is essential to placing the passenger's voice at the heart of the industry, where it needs to sit with other users of the railway.

With those overarching points in mind, we explore more of the Consultation below.

GBR aims

The Consultation clearly links the role of the railway into the Government's wider agenda for growth, devolution, and to reduce the overall taxpayer subsidy for the railway. Rail reform is, at its core, political and is a policy which is polling well. Highlighting key issues affecting the railway – such as the erosion of trust, low satisfaction, poor reliability, perception of poor value for money and industrial action, the Consultation promises to deliver a railway which passengers can trust and which is affordable (presumably for the taxpayer rather than the farepayer). Notably, the focus of the Consultation is very much the passenger market, potentially as this is where polling does best, with only a few nods to freight.

The Consultation sets out six objectives, all of which seem entirely reasonable, for the future railway:

• Reliable – allowing people to have confidence in their journey;
• Affordable – prices being kept (wherever possible) at a point that works for both taxpayers and passengers;
• Efficient – journeys will be straightforward as possible from booking to travel;
• Quality – giving passengers the service experience they have a right to expect;
• Accessible – ensuring the railway is available for everyone to use;
• Safe – people are not worrying about their safety on the railway, including accidents and crime.

Key aspirations for the railway are to implement a streamlined regulatory framework that removes unnecessary burdens and conflicting incentives. This involves simplifying existing interfaces by consolidating some or all of the activities of Network Rail, the DfT Operator, the Rail Delivery Group, parts of the DfT, and 14 Train Operating Companies into a single organisation. We do hope that the aim to "strip away the layers of bureaucracy" is realised throughout those organisations which will form GBR, including Network Rail itself.

The Consultation advocates GBR adopting a whole-system approach across track and train, allowing it to make investment decisions on a whole-life basis, focussing on the best outcomes for railway users and the taxpayer. This can only be a good thing. GBR intends to be an informed, expert, client, engaging with the supply chain and seeking to change incumbent behaviours in favour of a more collaborative approach. Again, this seems to be highly positive and to be welcomed.

There are proposals to continue using licensing to establish standards, transparency, and consistency, with GBR being subject to a simplified licence enforced independently by the ORR. The licence will be specific and focused on the "minimum viable set of conditions" required for safety, performance (including reliability and cancellations), efficiency, and passenger experience. A simplified licence could be a good thing, provided that the right aspects are captured in that simplified licence so it is clear what rules GBR will have to play by. It is not clear to us at this stage what enforcement powers the ORR will actually have over that licence, which seems to be a key check on GBR's behaviours. Whilst the detail of the licence quite appropriately is for another day, to us the ORR role should be more prominent in the Consultation.

What sits in and out of GBR?

GBR is intended to be a "directing mind", but the Consultation is also clear that the Secretary of State will also be setting long-term strategy, the government's vision for the railway and its desired outcomes, to give GBR a clear set of objectives. The Secretary of State will also have the power to issue directions and guidance to shape how GBR carries out its functions, allowing intervention where appropriate, although the Consultation indicates the intent is to use such powers "sparingly". The Secretary of State will also appoint the Chair of GBR.

So what we really have here is two directing minds for the railway. To be fair, the plan is that GBR will direct day-to-day operation and be operationally independent without government interference, which should give GBR a high degree of autonomy. It is also appropriate that the Secretary of State has a role to play as representing the elected government and able to balance competing priorities. The Scottish Ministers will continue to set the strategy for Scotland. In Wales, the Secretary of State will be responsible for setting the strategy but will have a duty to consult the Welsh Ministers.

GBR will be responsible for all of the infrastructure, including operating, maintaining and renewing most track, stations and depots, and will be responsible for setting timetables and fares. GBR is expected to bring together information, staffing and key decisions in one place, integrating track and train. It will be created out of Network Rail and will be required to make best use of the network. Interestingly, infrastructure which currently sits outside of Network Rail – such as High Speed 1 (operated by London St. Pancras Highspeed), the Core Valley Lines, and the Crossrail Central Operating Section – is envisaged to continue to be regulated in a similar manner to today, with a duty of cooperation with those infrastructure managers imposed on GBR. Whilst the future operating and funding model has not yet been confirmed, we assume the same approach will be taken for High Speed 2 as well.

The Consultation expresses a commitment to rail freight, a clear role for devolved governments, empowering local communities and giving fair access to the private sector. Of course, we have recently seen the Secretary of State's views on open access operators become very clear through the letter written to the ORR and the lack of support for recent open access applications. Whilst we accept the need for taxpayer support for the railway to feature in the balance – as it already does – open access operations have historically sharpened the attention of the wider railway to drive up customer service standards. Increased open access can only be a good thing where the wider railway is consolidating to provide options to the customer, ensuring GBR does not become complacent and delivers for passengers.

What sits outside of GBR – and doesn't feature prominently in the Consultation – is rolling stock. There appears to be no current plans to bring a significant cost driver in the industry within GBR and therefore the private sector/privately financed rolling stock market is likely to continue. Practically, we can understand the reluctance to bring rolling stock within the GBR model as the costs of doing so would likely be prohibitively expensive. The rolling stock market has been an excellent example of private investment into the railway and we hope that political intervention in the market will loosen so that competitions and awards of well-needed new orders can progress – something that is likely to benefit both the supply chain and passengers.

Optimising use of the rail network

The Consultation tries to draw parallels between existing legislation and the problems of the railway seen today: particularly fragmented decision making and inefficiencies. Whilst we agree that there is some fragmentation, and plenty of inefficiency, it is important to remember that the purpose of the existing model is to promote competition on the railway and allow others to use capacity where it is available. As a result, decisions on who would be granted capacity, and how much they would be charged for it, were to be taken separately from train operations. This is because if train operators could control these essential functions, they could block other users from getting access, to the detriment of the customer and resulting in sub-optimal use of the network.

The UK led the way across Europe in moving to the separation model, and Europe is only slowly moving to the same model, as the UK is heading back in the opposite direction. As the open access example already mentioned shows, there is already evidence that moving to GBR is likely to prejudice competition on the railway, particularly where GBR will protect its own services. Is competition for competition's sake a good thing? There isn't an easy answer: on the one hand, to date open access has driven up standards and given customers options, but there is undoubtedly an impact on taxpayer-funded services. This is notwithstanding the ORR's "not primarily abstractive" test for granting access includes considering the generation of new revenue. Open access may not be a good thing if it leads to revenue abstraction, increases in costs, squeezes limited capacity and/or increases uncertainty for operators and passengers.

We mention "efficiency", which is a theme permeating the whole of the Consultation, and is one of the core objectives of the new model. Of course, the efficiencies to be gained are not only by the integration of track and train, but of "track" and "train" working hard to find efficiencies within their own organisations. The industry also needs to have clear objectives and goals internally for implementation of the new reforms to be effective. This seems to us to be a key consideration for rail reform to be successful.

Simpler and better framework?

We do not agree that the current legislative framework is the source of all of the industry's ills, as the Consultation seems to suggest. That said, we do acknowledge that there is plenty of scope for simplification provided that in doing so, the rights of all existing and potential future users of the network are respected. This includes fair treatment, particularly for those train operations which are not directed by GBR itself, such as freight, open access and other non-GBR operations (including concessions procured by devolved authorities). Interestingly, GBR will not be legally required to establish internal regulated contracts, payments or charges for its own services (though it will allocate cost).

The Consultation proposes a new access framework and indicates GBR will take access and charging decisions in the public interest, including whole-system benefits, government priorities, and goals of devolved authorities. The Consultation indicates that GBR will be required to be transparent, accountable and ensure fair treatment for all operators wishing to access the network, with a duty to promote rail freight. There are a lot of requirements here and it is not clear what weight should be given to any one or more of those requirements, particularly when making access and charging choices where capacity is limited.

GBR will also use the long-term strategy set by the Secretary of State, along with any guidance and directions that the Secretary of State issues on access/use of the railways. The government will also use safeguards to ensure that freight operators receive fair access to the network. Safeguards is an important word here, because elsewhere the Consultation is proposing to remove existing safeguards, such as removing the requirement for the ORR to approve access to track/stations/depots. How this will work where access is being refused to an essential facility such as a depot is not clear. All of these roles will now sit within GBR, including the terms of access, form of access rights and the charges. Whilst an appeal to the ORR is still contemplated, akin to the existing position, this seems an area where more checks and balances are needed, as effectively GBR will be marking its own homework. This seems undesirable, particularly for non-GBR users of the railway.

The Consultation is seeking feedback from the industry on what requirements should be included in legislation (including engineering access, access to facilities, performance and compensation for non-GBR operators, provision of information, dispute resolution, capacity allocation and charging) and what should sit outside. We think this is a key opportunity to set out essential principles in the Bill, whilst recognising that there will be a level of detail to follow.

Capacity allocation and charging

Importantly, the Consultation is clear that the Bill will not impact existing contractual rights for non-GBR operators to access specific routes set out in operators' existing track access contracts. That provides protection in the short term. GBR will still sell long-term access rights to the infrastructure, but going forward GBR is expected to take a more proactive approach to managing major train service changes through a consultative programme. This will involve collaboration with the industry, devolved governments and other stakeholders to create long-term Usage Plans. Whilst this will allocate rights, a measure of flexibility is also expected, but the detail of what this means is not in the Consultation, and does not seem as developed as it might be. In summary, the future capacity allocation process seems unclear and trying to deliver lots of aspirations with little detail underpinning any of those aspirations at this stage.

A new access charging framework is also proposed, although the government intends to respect the ORR's final decision on access charges for Control Period 7, which runs from 1 April 2024 to 31 March 2029. GBR operators will not pay charges, as GBR will be directly exposed to the cost of operating its own services. This makes sense, and is akin to the stations operating model today where the station facility operator charges access to other operators, but not to its own services. GBR, rather than the ORR, will consult on the setting and recalibration of charges, with stability for at least five years and cost apportionment being required so that GBR can determine the cost of operating its own services.

We have some concerns that this could be a way of exposing non-GBR operators to the fixed costs of operating the network, whereas at present they typically will only pay the directly incurred costs of their services operating. This could increase costs at the non-GBR operators and make services unviable, although there are warm words in the Consultation suggesting this may not be the intention.

Financial framework

Linked with capacity allocation and charging is the financial framework for the industry. Replacing the current periodic review process, a new funding process is proposed in the Consultation. This is intended to help GBR make integrated decisions and enable it to deliver its business plans and the strategies of railway funders. Like the current system, five-year settlements are envisaged with the ORR having a role in assessing business plans and settlement viability. One of the advantages of the current five-year system is to help the supply chain plan and give better certainty of opportunity. It is therefore a positive for the supply chain that this will remain. To optimise collaboration between GBR and the supply chain, greater transparency on pipelines and timings would also be welcomed alongside retaining the five-yearly process.

The new process, for the period commencing on 1 April 2029, will still commence with the Secretary of State issuing a High-Level Output Specification (HLOS) and Statement of Funds Available (SoFA). GBR will then be required to create a business plan for the next five years which the ORR will assess, to ensure its viability and ensure it aligns with the HLOS and SoFA. Much like present, the process is expected to take about 2 years. The Secretary of State would then be required to sign off the business plan at the end of the process, to ensure that GBR will deliver its established strategic aims, with the ORR having a role in monitoring and reporting on major changes to the business plan in-life. A similar process would apply in Scotland for the Scottish Ministers. In Wales, the Welsh Ministers will be consulted by the Secretary of State in the creation of the HLOS for England and Wales, and Mayoral Strategic Authorities will also be involved in the process in some way.

ORR reform

The Consultation indicates "For GBR to have the space and authority to take access decisions on the best use of its network, the ORR's current role must change." ORR reform is, in our view, a significant area of concern as these words appear to suggest GBR should have untrammelled power. That said, an appeals process will remain. This will be in a more limited number of areas including decisions made by GBR in planning and managing railway use, including the GBR Code, access contract terms, and charging decisions.

The ORR will evaluate whether GBR has acted rationally, fairly, and in line with legal duties, non-discrimination obligations, the GBR Access and Use Policy (AUP), and contractual obligations. The ORR will be able to recommend, or in a narrower class of cases direct, remedies, and will be required to consult on draft decisions and remedies. GBR will usually need to reconsider decisions based on ORR findings. In exceptional cases, such as decisions that are completely inconsistent with GBR's duties, unsupported by evidence, or intentionally discriminatory, the ORR may direct GBR to change a decision, provided it does not overturn established or contracted access allocation.

The ORR's decision will therefore be constrained by the framework within which it sits (which will be narrower than at present) and does not fully check or balance decisions GBR may make. The ORR's power to protect non-GBR operators will therefore be significantly constrained compared with the current system.

Passenger watchdog

Another proposed measure is creating a new passenger watchdog. "Passengers need a strong, independent voice speaking on their behalf and championing their interests" is what the Consultation says. Here is where more detail would be helpful, as currently the proposals make the new watchdog more of a poodle than a rottweiler. This is an area where the Consultation acknowledges that more work is needed and thinking is in development.

The proposal is to establish a new body, called for the purposes of this piece the “Passenger Standards Authority” (PSA), although the actual name, roles and functions will be confirmed in due course. Key roles will include advocating for passengers, driving up standards in all key decisions and responding to consultations on GBR policies, strategies and business. Both GBR and the Secretary of State will be required to have regard (a low threshold) to the views of the PSA. There seems to be little ambition to give the PSA any teeth, so how it would perform its role is something for the next level of detail.

The PSA may take over some of the regulatory roles from a de-scoped ORR: such as complaints process and Accessible Travel Policies. The PSA's duties would sit alongside Transport Focus's existing legislative duties. Consideration is also being given to the creation of a one stop shop for passengers – for advice, unresolved complaints and transparent monitoring and reporting.

There are a few options on the table in terms of how the PSA will be established, either as a statutory advisor or a statutory advisor with regulatory functions. The former is advisory, with the power to request information, monitor delivery of commitments and moderate unresolved passenger complaints. The latter would include functions delivered by the ORR such as passenger assistance, information, complaints and consumer law. Our view is having a strong, empowered, passenger rights advocate will deliver better outcomes, but the current proposals are not as strong as they might be. Keeping regulatory functions in one place with the ORR seems to better deliver the simplification sought as part of rail reform.

Rail Ombudsman

Under either approach, the Consultation sees the PSA taking over responsibility for the functions of the Rail Ombudsman. The Rail Ombudsman moderates unresolved customer complaints about train operators, providing alternative dispute resolution services. Options being considered including transferring sponsorship of the Rail Ombudsman to the PSA, or giving the PSA powers to equivalent to that of the Ombudsman via the Bill. The latter is acknowledged by the Consultation to be more complex, but if the intention is that the PSA will be the champion for the consumer, it seems appropriate to adopt this route.

Fares, ticketing and retailing

GBR has already recently announced that it intends to set up its own, centralised, ticket retailing platform for the industry, whilst allowing privately-owned ticket retailing to continue. Consideration is being given to a licensing system for the retailing market, and who will be responsible for that function, as well as where expertise will sit to deliver the role effectively and avoiding the obvious conflict of interest that GBR presents. Ensuring passengers have confidence in the fares being purchased means there must also be confidence in the integrity of the system, and that may mean that GBR needs to operate this essential function separately.

Fares simplification is a key aspiration of GBR. In terms of the fares themselves, GBR will become responsible for setting fares and collecting revenue (but non-GBR passenger operators will still be able to set the fares for services they operate) and principles will be set out in legislation, as well as the retention of existing discounting schemes. GBR will also take over functions currently performed by the Rail Delivery Group, such as managing centralised systems. The Secretary of State will have oversight for the affordability of the railway. This is likely to include setting limits on how much GBR can increase fares by over the course of a five-year period, together with how much discretion GBR will have in setting fares.

Devolution

The section of the Consultation on devolution is promising but confused. It is promising because it advocates for the role of devolved authorities in specifying and integrating local transport services. This has been a huge success in a number of areas throughout the country mentioned in the Consultation: driving up standards and transport usage. It is confused because it seemingly seeks to do everything for everyone and not take into account trade offs between devolved authorities, between GBR as guiding/directing mind and devolved authorities as political mind, and between competing service aspirations.

The Consultation's proposal is to give devolved governments and Mayoral Strategic Authorities a statutory role in governing, managing, planning and developing the rail network, ensuring local priorities are factored into the GBR decision making process and ensuring relationships between GBR and those governments and authorities. Whilst lacking in detail, the intention is that devolved leaders will be consulted on GBR activities, can scrutinise GBR performance and forms part of wider governmental devolution plans. A process is also proposed where a devolved authority will be given a right to request further devolution where that authority believes it could more effectively run rail services and/or assets, although this will sit outside of the Bill. This is a smorgasbord of ideas, and there is unlikely to be a one size fits all approach, but the practicalities of what devolution looks like are not clear, and this is another area where more information would be helpful.

Conclusion

Some of the themes emerging from the Consultation are ones which attendees at our recent series of top table dinners foreshadowed in our own mini consultations – over excellent food and wine – in December 2024 and January 2025. At those sessions, Alex Hynes and Robin Gisby, respectively, shared their views, and you can find our top ten takeaways from those dinners here and here.

The need for rail reform is not disputed, and it is good to see the Consultation published at long last. The Consultation sets out an ambitious, but unfinished, plan to transform the UK's railway system and after many years of waiting, it is perhaps a bit disappointing that thinking has not been better progressed and lacks a lot of detail. We accept that only a certain level of detail is needed for a Bill, but the output of the Bill is the future framework of the railway, and it is therefore important to understand that next level of detail to be able to meaningfully contribute to discussions.

In the absence of that detail, we can only work with what we have provided. There are some positives here: the commitment to GBR is one that has wide political support and better alignment between track and train so that all industry parties are driving towards the same, aligned, outcomes, can only be positive for the end user. The possibility of simplification, streamlining governance, and ensuring the passenger voice is more clearly heard, are also positives. Removing bureaucracy will definitely be welcome.

However, we are concerned that GBR will have too much power, and that power will be unchecked. That risks poor outcomes for non-GBR users of the railway, who make up a significant proportion of the railway services operated on the network. Those users make valuable contributions to the railway and must not be forgotten, so their interests must also be appropriately protected and the proposals set out in the Consultation do not do this. The success of reform will be in the eyes of the end-user and whilst the Consultation is well-intentioned, there is still some way to go before we can be confident about what will be delivered.

There are also still a lot of unanswered questions, which will hopefully be answered after 15 April, but the Consultation provides intriguing foundations and hope for a better future for the railway sector.

The Consultation runs for eight weeks until 15 April 2025. There appears to be a genuine willingness to listen to the industry's views and we would encourage anyone with an interest in the future of Britain's railway to share those views. Do get in touch if you need support in responding.