Select Committee on Transport, Local Government and the Regions Appendices to the Minutes of Evidence


Memorandum by The Railway Forum (TYP 9)

INTRODUCTION

  The Railway Forum, the industry-wide body with a membership drawn from all constituent parts of the railways has taken a close interest in Transport 2010: The 10 Year Plan since its inception in July 2000. We believe that it represents one of the key developments in the UK's policy, presenting a balanced and integrated policy for the first time in many decades. Nevertheless we believe that the White Paper did not adequately tackle the growth projections made for rail, the assumptions that underpin them and the targets that have been set as a result. Also the mechanisms by which the outcomes of the plan are to be achieved, specifically the mixture of both public and private finance that is proposed for the railways requires, in our view, more rigorous analysis.

ASSUMPTIONS

  The Railway Forum believes that some of the assumptions underpinning the 10 Year Plan figures require significant review. For rail in particular:

    —  The levels of growth assumed in the Plan are unambitious. Work commissioned by The Railway Forum shows that underlying demand is likely to be much higher than the basic 50/80 per cent figures for passenger and freight respectively, and could be as much as 91 per cent under certain assumptions such as the introduction of limited congestion charging and increase in capacity. The DTLR estimates are based upon an annual (passenger) growth rate of 4.2 per cent for the next 10 years, yet Railway Forum work shows that underlying growth is much faster. Indeed, prior to Hatfield growth was running at 6.3 per cent per year and shows, despite the very considerable problems we face, every prospect of reaching this level again. It should not be overlooked that the railways start from a very low base compared with our European neighbours. The 10 Year Plan's projections postulated, in broad terms, one journey in forty moving to rail in the next 10 years. We believe it to be closer to one in 20. Even then our railways will still be well behind the European average.

    —  Similarly, the nature of rail traffic growth within the Plan is assumed to be linear and one-dimensional—the figures do not incorporate any multi-modal effects. The growth projections are relatively simplistic as a result. The Railway Forum believes that there are significant growth externalities from integrated transport measures. Their potential impact upon passenger and freight traffic is not picked up in the 10 Year Plan's assumptions.

    —  The Railway Forum is of the opinion that the 10 year time horizon envisaged in the Plan is too short. Estimates made by the Forum show growth likely to continue well past 2010. Furthermore, the emphasis upon 2010 as an "end point" gives very little time for the rail industry to plan large-scale projects aimed at capacity increases. This approach could well result in short term and sub-optimal decisions. Major projects often require long planning cycles and if the demand for the future is to be achieved, we will need to begin planning now.

    —  The 10 Year Plan assumes that that there will be sufficient capacity and expertise within the rail industry to deliver its stated objectives. However, in the current climate—with specialist technical skills in short supply—there is a danger that the industry could be constrained in this respect. In addition, certainly in terms of capacity, there is a limit to the industry's ability to accommodate major structural change.

  In light of this, we believe that the assumptions underpinning the Plan require revisiting. They are of central importance to the outcomes the Plan envisages and only with a realistic set of assumptions can achievable objectives be set.

  In terms of remedial action therefore, we propose the following:

    —  Acceptance that underlying demand for rail is likely to be higher than previous estimates.

    —  Incorporation of congestion charging and multi-modal effects upon rail traffic growth and a subsequent revision of the figures.

    —  Extension of the time horizon for continuing rail traffic growth beyond 2010, ideally setting work in a 20 year planning timeframe.

    —  An indication of measures to buttress the skill base within the rail industry.

IMPLEMENTATION

  The Railway Forum has long believed that the mix of public and private finance contained within the 10 Year Plan is unbalanced. We support in principle the use of private finance and the use of public funds to lever the best deals from the private markets. However, we have the following comments in particular:

    —  The 10 Year Plan does not incorporate any realistic business model of the industry in support of the borrowing figures and, as such, we are not convinced that this structuring of railway finance is realistic.

    —  The sheer size of private borrowing contained within the figures for rail (£34 billion) is of concern. We are not convinced that this level of borrowing is sustainable, given an industry turnover of approximately £6-7 billion and a projected increase in fare revenue of at best £3 billion (from 50 per cent growth).

    —  The ratio of private to public investment in rail envisaged in the Plan is 2.3:1 compared with a figure of 0.2:1 for roads. This figure will only be sustained by robust Government support in the form of risk underwriting of major projects. The Forum's work in this area leads us to believe that there are a variety of mechanisms through which Government could successfully leverage private finance packages for rail investment. However, without explicit Government guarantees (that could take a number of forms), we feel it is unlikely that this level of private finance will be forthcoming. This is particularly important given the current situation regarding Railtrack and the possibility of an investment hiatus as a replacement network operator is found.

    —  The phasing of rail investment contained within the Plan needs to be revisited. Investment under the 10 Year Plan peaks during 2003-04 before falling away (particularly so for public funding after 2006). Ultimately, by 2011, total investment could be as little as 0.3 per cent of GDP—less than is spent today and a sum insufficient to ensure that capacity is increased and growth maintained. As a consequence, we believe that the sustainability of investment funding across the Plan's horizons needs to be fundamentally reassessed within a longer term, strategic framework.

    —  Much of the early rail investment spend in the Plan comprises a small number of large projects (e.g. Channel Tunnel Rail Link, West Coast Route Modernisation etc). The Railway Forum is concerned that there is some imbalance in the investment earmarked for major projects as compared to smaller network improvements. There are a number of ways to unlock capacity through small schemes and these should not be overlooked.

TARGETS

  The Railway Forum believes that there are a number of issues surrounding the targets for rail and those for congestion charging that require clarification. We have the following comments in relation to these:

    —  We believe that the two headline targets for growth on rail—a 50 per cent increase in passenger usage and an 80 per cent increase in freight—are not ambitious enough, given the underlying traffic growth trends noted above. Similarly, the 10 Year time horizon is too short for many of the schemes to be achieved.

    —  The structure of the two main targets for rail is such that they could be achieved (at least the target for passenger patronage) by focussing investment solely upon heavily used routes in the South East of England. Indeed, the recent Draft Directions and Guidance to the SRA and Policy on Passenger Rail Franchising emphasise the focus upon these two headline targets (along with meeting the "Passengers In Excess of Capacity" targets). It is quite possible, therefore, that regional schemes will be squeezed as a result. A regional approach to target setting could overcome this to some extent. However the Forum believes that any targets should be aimed at developing the rail network as a whole.

INTEGRATED TRANSPORT POLICY

  There are a number of issues relating to the balance of the Plan in terms of investment in social and environmental areas, particularly where much of this investment is unlikely to be privately funded. The Railway Forum is very concerned that there are a number of upcoming proposals to meet social, environmental and safety standards that cannot be adequately funded from the Plan.

    —  The Plan envisages bringing investment in advanced train protection and control systems arising from the Cullen and Uff Inquiries within its scope. This implies fitment of ERTMS to high-speed lines by 2008 and trains by 2010. This is likely to be an investment with little (if any) economic return and as such will require public funding. We are not convinced that ERTMS fitment can simply be added to the Plan without displacing other schemes contained in it as a result.

    —  Regarding wider social and environmental issues, the Plan makes no mention of a whole range of impending proposals including improved disability provision and European noise and interoperability legislation. Costs are very difficult to identify and there are, at present, a considerable number of variables. However The Railway Forum currently estimates that the combined cost of introducing the requirements of this legislation could be in the order of £8bn. Again, this investment will produce little discernable financial return and will most likely need public support.

    —  The recent European White Paper on Transport also contains proposals aimed at establishing the European Rail Safety Agency and developing European Interoperability standards. These proposals must be looked at in the light of the arguments we make above regarding cost. Safety is one consideration that must be weighed against a number of competing policy objectives, rather than one that overrides any other. In addition, any safety proposals must incorporate the emerging UK structure as laid down in the second Cullen report. If the 10 Year Plan truly does include the recommendations from the latter then the measures contained within the European White Paper will require careful scrutiny.

  Overall, The Railway Forum is concerned that there seems to have been insufficient analysis of these wider issues, particularly in the 10 Year Plan's objectives for a sustainable, integrated and safe transport system. There remain very large costs associated with measures to improve social inclusion and environmental and safety standards on rail. In this sense the issue of "efficient" investment raises the likelihood of public finance being required—private markets will not pay for "social" investment that generates no monetary return.

CONCLUSION

  In making this submission, we are conscious of the fact that the SRA's Strategic Plan is soon to be published and will, hopefully, provide the long-awaited detailed framework for the industry. However, we are also mindful of the fact that Government must set out a realistic vision of how rail should develop and, as such, we believe that the current 10 Year Plan needs to be fundamentally reassessed in the light of the points we have raised. We are therefore ready to provide further evidence if required by the Sub-Committee.



 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 27 May 2002