The Shadow SRA was established in 1999 following the election of the Labour government in 1997 in an attempt to increase public interest regulation of the fragmented railway network following the privatisation of British Rail.[2] It incorporated the former Conservative government's Director of Passenger Rail Franchising. Its main function was awarding and ensuring compliance with passenger rail franchises – contracts between the state and private sector operators under which the operators committed to provide certain levels of service in return for public subsidies; some franchises were cash-positive, which meant that the operator paid the SRA for the right to provide the services. The SRA's other functions were concerned with the financial support of other unviable services, such as the giving of grants to support marginal rail freight services and the building of freight facilities.
The SRA was placed on a formal legal basis by the Transport Act 2000 and came into existence on 1 February 2001.
The government wanted the SRA to take a more interventionist role with Railtrack and its successor Network Rail, but never gave it the legal powers to do so. Those powers rested with - and were jealously guarded by - the Rail Regulator, who frequently clashed with the SRA when he believed that it was over-reaching its jurisdiction.
The SRA's first chairman was Sir Alastair Morton, from February 1999 until October 2001. Its first chief executive was Mike Grant. Its second chairman (and also chief executive) was Richard Bowker, who served between October 2001 and September 2004. Its third chairman was David Quarmby, and third chief executive Nick Newton, from September 2004 to abolition.
