26.The Government’s review of the railways concluded that it would be necessary to wind up the Strategic Rail Authority. The reasons given were that it would improve efficiency, reduce bureaucracy and provide a clearer focus on leadership within the rail industry.
27.Section 1 provides for the abolition of the Strategic Rail Authority and for the reallocation of its functions, where they are not discontinued. The Strategic Rail Authority’s strategic functions and its financial obligations (see also Section 6) will become the responsibility of the Secretary of State for Transport, together with many of its operational functions, such as the letting and management of railway franchises. Other Strategic Rail Authority functions will be reallocated to third parties. In some cases this will not require legislative provision. The Secretary of State may make an order for the abolition of the SRA when he is satisfied (having consulted the SRA) that the liabilities of the SRA have been adequately provided for and that it is no longer necessary for the SRA to exist.
28.The intention is for the Scottish Executive and the NAW to take on increased responsibilities for passenger services and, in Scotland, infrastructure responsibilities. This section requires the Secretary of State to transfer the Strategic Rail Authority’s interest in the Scotrail franchise to the Scottish Ministers. The SRA interest in the franchise agreement with Arriva Trains Wales is intended to be transferred under this section to the Secretary of State and the NAW jointly. The SRA interest in all other franchise agreements is intended to be transferred to the Secretary of State.
29.The Rail Passengers’ Council, currently funded through the Strategic Rail Authority, will become a body corporate and will be funded by grant from the Department for Transport. Rail Passengers’ Committees will be disbanded and the newly constituted Rail Passengers’ Council will be the sole national consumer body for rail.
30.The section also provides for the transfer to the Secretary of State, and as appropriate the Scottish Ministers, the NAW and the Office of Rail Regulation of the Strategic Rail Authority’s property, rights and liabilities, including shares in its subsidiary companies, such as BRB (Residuary) Limited. Provision is also made for the transfer of property, rights and liabilities to the Rail Passengers' Council.
31.This section also gives the Secretary of State powers to make modifications of legislative provisions in relation to rail pensions that may be necessary or expedient as a consequence of the transfer of the SRA's functions or its abolition or as a consequence of a transfer scheme transferring its property rights or liabilities.
32.The provisions of Part III of the Transport Act 1980 and schedule 11 to 1993 Act, among other things, set out mechanisms under which the Department for Transport provides funding to the trustees of a number of older, partially unfunded pension schemes some of which were set up by the pre-nationalisation rail companies. The role of the SRA as sponsoring employer is likely to be transferred, on its abolition, to the Department for Transport under a transfer scheme to be made under section 1(2). The purpose of the order making power under subsection (8) is to enable consequential provision to be made in the light of that transfer of liabilities.
33.Further consideration needs to be given to the detail of the provision required. Currently, it is anticipated however that the Department for Transport will retain its existing statutory funding liabilities alongside liabilities, as sponsoring employer, which will be transferred to it from the SRA. Whatever provision is made will be designed to ensure that the existing position of beneficiaries of the relevant pension schemes and the funding of those schemes is unaffected.
34.Section 244 of the Transport Act 2000 had the effect of converting the British Railways Board's (BRB's) customary practice of providing indexation for cost of living increases for these older pension schemes into a binding obligation of the SRA. Consequential provision will be required to reflect the abolition of the SRA. It is likely this will be to transfer this obligation to the Department for Transport to reflect the expected transfer of employer obligations for these schemes to the Department. The intention again will be to ensure that the existing position of beneficiaries of the relevant schemes is unaffected by amendments made.
35.The affirmative resolution procedure will apply to any order made under subsection (8). The details of the affirmative procedure are described in section 55(4).
36.It is anticipated that the SRA will be wound up gradually, and the transfer of its functions is to be completed before it is abolished. The section includes provision to allow the Secretary of State to reduce the membership of the Strategic Rail Authority as part of the transitional period leading to abolition.
37.Section 2 brings into effect schedule 3, which concerns the transfer of safety functions under the Health and Safety at Work etc Act 1974 ("the 1974 Act") to the ORR.
38.This section amends the general duties of the ORR and the Secretary of State provided in s4 of the 1993 Act that apply to the exercise of their functions under that Act.
39.Sections 3(2), 3(8) (a) and 3(9) provide that the general duties do not apply to the safety functions being transferred to the ORR under Schedule 3, to which quite separate considerations apply. Thus the transferred safety functions are not subject to the balancing of the general duties applicable to other functions. This reflects the need to ensure that the transferred safety functions are not compromised in the pursuit of the ORR's other functions.
40.Section 3(3) provides an additional general duty to promote improvements in railway service performance in terms of reliability, punctuality and minimising overcrowding and journey times. It also removes the general duty to have regard to the SRA’s strategies given the abolition of that body.
41.Section 3(4) retains a duty for the ORR to take into account safety matters in the exercise of its general duties. This is distinct from the safety functions being transferred to the ORR under schedule 3.
42.Sections 3(5) and (6) modify s.4(3A) of the 1993 Act which applies the general duties (specified in s4(1) to (3) of the 1993 Act) to certain functions undertaken by the Secretary of State. Section 3(5) provides that these duties apply to network modification functions undertaken by the Secretary of State. Section 3(6) applies these duties to functions undertaken by the Scottish Ministers in relation to improving, providing or developing railway facilities, or network modification. It also applies the duties to functions undertaken by the NAW in relation to network modification.
43.Sections 3(8) and (9) modify s.4(5) of the 1993 Act which specifies further general duties applicable only to the Office of Rail Regulation. On non-safety function railway matters the ORR must have regard to general guidance from the Secretary of State and the funds he has available for the purposes of his railways functions. The ORR must also have regard to general guidance from the Scottish Ministers on Scottish railway matters with potentially different weighting where expenditure falls to the Scottish Ministers. It also must have regard to strategies and policies of the NAW on Welsh railway matters that the NAW notifies to it. Also the Secretary of State must consult NAW before giving general guidance to the ORR under section 4(5) of the 1993 Act. On matters relating to its safety functions (except enforcement functions), the ORR must have regard to general guidance from the Secretary of State only, under new section 4(5B) of the 1993 Act. Section 3(9) inserts an additional general duty, under new section 4(5C) of the 1993 Act, requiring the ORR, in considering anything affecting the interests of railway service users and providers, to have regard to the interests in securing value for money of those providing public money and of the general public.
44.Section 3(10) inserts new Section (7ZA) of section 4 of the 1993 Act. This Section concerns general guidance given to the ORR by the Secretary of State, including in relation to the ORR's new safety functions and by the Scottish Ministers in respect of railway matters relating to Scotland at Section 3(8)(b). It permits the Secretary of State and the Scottish Ministers to vary or revoke any advice given in respect of the purposes set out above, and places a requirement on the Secretary of State and the Scottish Ministers to publish any guidance which they may issue for those purposes in such a manner as they may consider appropriate.
45.Section 4, which introduces Schedule 4, amends Schedule 4A of the 1993 Act which provides a process by which the conclusions of an access charges review by the ORR are taken forward. Schedule 4 of the Act also establishes the process for the prior stage of conducting the review. This includes in particular how the Secretary of State and the Scottish Ministers make inputs at various stages of the review.
46.Section 5 gives the Scottish Ministers the power to formulate and publish strategies in respect of railways in Scotland and to revise them from time to time as they feel appropriate. They are not obliged to formulate or revise a strategy. However, where they do formulate or revise a strategy they must publish the strategy or revised strategy in a way which will bring it to the attention of those bodies likely to be affected by it.