Classifying Network Rail
How has ONS classified Network Rail
Network Rail is classified as a private non-financial corporation in National Accounts.
Network Rail is a Company Limited by Guarantee (CLG). CLG's have members instead of shareholders. Control of the CLG in normal operating conditions is with its directors and members. The majority of the members are drawn from the private sector. The members appoint the directors.
Control of general corporate policy thus rests with the private sector directors and members, leading to classification as a private sector institution.
Network Rail was initially classified as a public corporation and hence part of the public sector. This decision reflected government involvement in setting it up and initial involvement in setting the mechanism for directors' incentive pay. It was reclassified to the private sector once certain criteria had been met, for example Network Rail’s members had ratification votes of the Board of Directors.
Central government has reserve powers that can be used to take control in the event of Network Rail's financial failure. Their use would trigger immediate reclassification to the public sector.
The government support for Network Rail in the form of investment grants continues to be classified in the same manner that occurred when the grants were made to Railtrack.
The Office for National Statistics (ONS) also considered the National Accounts classification of government support for Network Rail's borrowing. ONS received advice from the Department for Transport that this support is a contingent liability of government, later verified by the National Audit Office, and classified it as such in the National Accounts.
In the departmental accounts audited by the National Audit Office, the size of the contingent liabilities are stated. These are reported to parliament and published annually.
Source: Office for National Statistics
Note:
ONS has produced a detailed article explaining these decisions.
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Documentation for Network Rail Classifications