Good quality financial information is important for effective regulation as it helps to ensure that the interests of customers and funders are properly protected. Network Rail's regulatory financial statements are the primary sources of information about the company's financial performance. We recently consulted on how we should assess Network Rail's efficiency and financial performance in CP6. Following our consultation the conclusions document (see below) sets out our intended approach.
We received nine responses to the consultation. We would like to thank everyone who responded.
Our approach for assessing Network Rail's efficiency and wider financial performance in CP6
Published 31 January 2018
The priorities for our assessments in CP6 are to:
- drive the best outcomes for the users of the rail network through supporting better value for money;
- enhance comparisons of the performance of Network Rail's operating routes and to assist in future benchmarking;
- move to a more rounded assessment which draws out key messages about the drivers of performance, makes a clearer link between expenditure and delivery, and examines how efficiencies are being achieved;
- make more informed forward-looking assessments of the efficiencies that Network Rail will likely deliver across the control period;
- support Network Rail's internal performance measurement and staff incentives; and
- provide clear and informative messages about Network Rail's efficiency improvements, recognising that different audiences want different levels of technical detail.
To deliver our priorities, we intend to:
- move to a better understanding of the efficiency of Network Rail's routes by putting greater incentives on reviewing and reporting on how routes have delivered efficiency improvements;
- more assessment of cost drivers, unit costs and productivity measures over time and across routes. We set out suggested measures in the consultation, but importantly, want to work with Network Rail and stakeholders to identify the most useful measures for its business;
- make greater use of information from our safety role, for example, drawing on insights from safety reports where relevant; and
- that we will provide a forward-looking view of the efficiencies that Network Rail would likely achieve across CP6 as part of our annual reporting. This will include assessing the quality and progress of route's efficiency plans and monitoring leading indicators of delivery.
We will work with Network Rail and other stakeholders over the next few months to agree what specific information we should use to inform aspects of our assessments, in particular for productivity measures and leading indicators of performance. We will publish our finalised approach in regulatory accounting guidelines before the start of the control period.