By Richard Johnstone | 17 December 2013
Network Rail, the state-owned operator of Britain's railways, is to be reclassified as a central government body, adding £30bn to the national debt, the Office for National Statistics has announced.
Following a review of the status of the firm, which has previously been classified as a private company, the ONS said the decision would ensure that ownership complies with forthcoming European System of National Accounts regulations. The new classification will be implemented from 1st September 2014, until when Network Rail will remain in the private sector.
The shift means that the company’s debt, which currently stands at around £30bn, will appear on the government’s balance sheet, increasing net debt that currently stands at more than £1.2 trillion.
Annual public sector borrowing is also likely to increase by around 0.2% of GDP on average as a result of the change.
Responding to the decision, Transport Secretary Patrick McLoughlin said it would not alter the government’s commitment to reduce the deficit.
The government has always been committed to the ‘transparent reporting of public liabilities’, he added. The change would also not affect the government’s investment plan for the railways as part of the industry’s £38bn five-year settlement from 2014, or have any impact on rail fares, performance, or safety, McLoughlin pledged.
‘I am committed to ensuring that Network Rail maintains the operational flexibility to continue to deliver a safe, punctual rail network and increased capacity for our busy railways and that it is able to attract a high calibre of staff, while still providing value for money and being accountable to parliament,’ he added.
‘My department will agree appropriate accounting and governance adjustments for Network Rail to ensure it can continue to deliver world class railway infrastructure when the company is reclassified for statistical purposes on 1 September 2014.’
In addition, the Department for Transport would continue to consider how to best secure the benefits of private investment in rail infrastructure, he said.
Responding to the change, Network Rail said the statistical decision would not alter the company's structure as a not-for-dividend company, limited by guarantee. ‘The business acts and operates today as it did yesterday, and its job of delivering a safe, reliable and improving railway for four million daily users continues,’ the statement added.
However, the firm accepted that some small changes would be necessary as the company becomes accountable to parliament for its finances.
‘At least initially, the company will continue to raise debt to fund its ongoing investment programme whilst the longer term funding options are considered,’ it added.
