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01.09.13

Investing in Britain’s future – hit or miss for rail infrastructure?

Source: Rail Technology Magazine Aug/Sept 2013

Mark Cowlard, head of rail at infrastructure consultancy EC Harris, discusses the impact of the Government’s spending policies on transport. 

The Chancellor teased us with the ‘greatest investment in rail since the Victorian era’ during his June Spending Review. Hopes were dashed less than 24 hours later in Danny Alexander’s explanation speech, ‘Investing in Britain’s Future’, where we learned of continued support for projects already announced, rather than a plan for further accelerating economic growth through infrastructure delivery investment. 

The positive news on Crossrail 2 has been welcomed by the rail industry, but the secured funding of £2m will only enable the production of an initial feasibility study. The Mayor of London will need to find funding for 50% of this programme. With a current initial estimate of £12bn, investors will need to be assured of the UK transport sector’s ability to deliver on time and to budget. The rail industry’s performance on programmes such as Crossrail, Thameslink and HS2 will need to become industry exemplars. 

Championing HS2 – a hit for infrastructure 

The debate around HS2 is set to intensify even further with the news that HS2 has the ‘green light’. Whilst providing long-term financial certainty, this has been achieved by a total funding envelope of £50.1bn including cost contingency, an increase of almost £10bn on previous estimates. This significant increase will put further strain on an investment case already under pressure with rising costs. The private sector must support the Government in getting early certainty of expected outturn cost. 

We remain of the view that HS2 is needed but the Government must get much better at explaining why to critics. The arguments for HS2 are largely capacity and ‘access to market’ driven, not about shaving off journey times. Government must get its messaging right or it risks losing the argument about the wider benefits of HS2. It also needs to consider an integrated transport strategy, connecting the whole of the UK, and connections beyond to the global market. 

Is electrification enough? 

Other than confirming much of the detail from the last spending review, the ‘new’ announcements included £115m to electrify the Gospel Oak to Barking railway line, a study to examine electrifying the branch line from Oxenholme to Windermere, and an ‘in principle’ agreement to devolve part of the West Anglia rail franchise to the Mayor of London. 

Electrification isn’t ‘game changing’ in terms of stimulating economic growth, and re-drawing the franchise map is also of questionable value. The West Anglia rail network is not just a railway for suburban London – it functions as a vital distribution corridor for journeys to and from much further afield, areas where the Mayor has no political locus. It is vital that the needs of London and the needs of the regions are balanced proportionately.

George Osborne announced a reduction in the resource budget for transport of 9%, a challenging number. Danny Alexander followed this by outlining a strategy that is entirely consistent with EC Harris’ recent contribution to Sir John Armitt’s infrastructure review. 

In particular, ‘Investing in Britain’s Future’ said: “…the Government will introduce a new presumption that significant economic infrastructure projects and programmes should be undertaken by specialist delivery units with commercial expertise, reflecting private sector best practice.”

Furthermore; “Lord Deighton will now work with these departments to determine how this new delivery model should be implemented in practice on a case by case basis. This work will include: drawing on the Brown Review of the franchise programme and the work of Lord Deighton to improve delivery of significant infrastructure projects, the Department of Transport will bolster its commercial capability in rail franchising.” 

Return to a Strategic Rail Authority? 

It would seem that the Government is considering spinning off at least the franchising function of the Department for Transport into a separate delivery unit, staffed by commercially experienced and qualified personnel. Whilst the Government will no doubt reject any comparison with the former Strategic Rail Authority or OPRAF that preceded it, one can’t help but draw the obvious comparison. At EC Harris, we believe that franchising, along with many other commercially sensitive processes and projects, should not be managed by a central Government department that might not be equipped to make risk-based commercial judgements.

Therefore we welcome this direction of travel. We will offer our advice and support to the Government as it develops this important initiative.

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