RAIL 924 - We risk destroying value

I’ve warned repeatedly over the past few months that the £800 million or so a month which taxpayers have been shelling out since March to keep the railway functioning during the pandemic, guaranteed us an appointment with Treasury’s Grim Reaper.

Public sector net borrowing in the seven months from April to October 2020 was nearly £215 billion - a thumping £169.1bn more than the same period in 2019. Public borrowing in December 2020 alone was estimated at £34.1bn - £28.2bn more than the £5.9bn in  December 2019. Meanwhile,  tax revenues collapsed by tens of billions of pounds.  Government reckons that public borrowing could reach £372.2bn by March 2021. The financial pressures are immense - there’s no argument about that. 

Thus, in 2021 we have already seen heavy cuts to Boris Johnson’s ‘levelling up’ investment promises to the North, on the basis of which his Government was elected with an 80+ seat majority. Not only has Transport for the North’s core budget nearly halved (from £10m to £6m), but £100m agreed funding for contactless tickets was also cancelled and the scheme shelved. 

The DfT bluntly told TfN to use its £5m reserves to cover shortfalls. This is levelling down, not levelling up - the PM seems to have forgotten his comment thanking the northern Red Wall constituencies for ‘lending’ him their votes. TfN’s detailed plans for tackling decades-overdue transport upgrades  are now likely to stall. Who knows when they will restart?

What exasperates is that whatever Treasury or ministers say in public about value for taxpayers, the reality is that when push comes to shove, they deploy the axe, not a scalpel. Worse, their short-term cuts in spending always result in higher costs in the longer term and the destruction of taxpayer value.

It’s the same with HS2. Cutting Euston’s HS2 platforms will damage the network’s potential reliability and performance, and restrict its destinations. As reported in News (page 13), we now know that DfT has ordered HS2 to develop a revised Euston, with ten platforms (not 11) built in a single phase.

Government insists that this would neither prevent HS2 running its scheduled services, nor that the Eastern Arm is under threat. Codswallop. The problem here is all about the speed with which trains can be received, emptied, cleaned, reloaded, reversed and despatched. Provided the grade-separated station approach is retained (and it currently is) it is - just - possible to run 16 trains per hour on the ‘Y’ network. The slightest problem (delays, a late arrival) and HS2’s service will descend into chaos. Trains would rapidly queue at Euston, awaiting a platform. That 11th platform is a crucial ‘breathing space’ to protect the service when things go awry. HS2 won’t have morning and evening peaks - it’s ALL peak, all day. There will be no timetable ‘slack’ for catching up. 

Government’s own specification for HS2 is 18tph, so a recently reported comment from HS2/DfT that scaling back Euston will have “no impact whatsoever” on the wider scheme is a calculated and cynical untruth. 

I refuse to believe that it’s beyond our wit to build Euston in a single phase without sacrificing long-term value and ‘baking in’ an operating ceiling. Here’s another warning: the grade-separated approach enables the oper-ation of two extra trains per hour. How long before some civil servant says: “Well, if it’s only 2tph, we could save a couple of hundred million by having a flat approach…”? 

Ten more platforms will destroy the existing specification by allowing only 16tph. Scrap the grade-separated approach and that drops to 14tph - a limit forever. Taxpayer value is best served by building to deliver the most for the longest, not barely enough for a few years only.

Further, if we constrain HS2’s capacity to save a few quid now, we will not secure the benefits of the released capacity on the existing network. In a couple of decades we’ll have no choice but to spend gazillions more on enhancing capacity on the East and West Coast Main Lines - at a cost which will make the short-term savings of descoping Euston look like loose change. 

And where is the Public Accounts Committee, whose chairwoman Meg Hillier grandstands endlessly about taxpayer value? 

Likewise electrification. Building East West Rail as a non-electrified railway is madness on stilts. Yes, there’s higher capital expenditure up front, but electric railways are cheaper to run and maintain and they deliver everything that passengers want. 

Politicians often tell you passengers don’t care how trains are powered. Rubbish. Passengers are increasingly aware of the environmental impact of their trains and do care. But more widely, electric trains are smoother, lighter, accelerate faster, make much less noise and vibration so ride better, tend to have more room and more seats, and because they are far more reliable than diesel trains and fail less, there are far fewer service cancellations. 

Electric trains have much lower operating costs and are kinder to the track. If you are genuinely planning to put customers first while delivering optimal taxpayer value it’s blindingly obvious that there’s only one choice: elect-rification. The only reason you would ignore whole-life costs/value and choose not to electrify a new railway is to cut short-term spending - which, just like cutting HS2’s platforms, destroys long-term value. 

Buying new DMUs will soon be impossible, and Secretary of State for Transport Grant Shapps’ recent comment that “technnology will leapfrog electrification” is laughable. No, it won’t, on railways like this. Not ever.

Yes, there are some railways (Cornish branches, Fort William, Kyle of Lochalsh and Whitby, among many others) which will never be wired and for which hydrogen or battery power will be the answer. This is already understood. Indeed, Network Rail already has a comprehensive Traction Decarbonisation Network Strategy, drawn up under Paul McMahon, after Government asked for plans to get rid of diesel on the passenger railway by 2040. Scotland is aiming for 2035. The TDNS is a really good read. 

And according to that TDNS drawn up by NR (in the public sector, don’t forget), East West clearly qualifies for electrification. To do anything else is yet another example of short-term cost cutting which destroys asset value, makes it more expensive to operate, and makes a mockery of delivering taxpayer value. 

Still, that’s someone else’s problem, eh? Current Treasury officials and ministers will be long gone by then. And again, where is Meg Hillier and her Public Accounts Committee?

This is all exacerbated by the lack of coherent rail industry leadership to argue the case. Yet another reason why Britain desperately needs Network Rail to be rebooted as the railway’s new arm’s length delivery agency.

We need to get on with sensible investment decisions which deliver genuine value and treat the taxpayer with respect.