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McLoughlin overrules officials who called Pacer replacement ‘poor value’

Transport minister Patrick McLoughlin used a ministerial direction to release the Invitations to Tender (ITT) for the Northern and TPE franchises, despite civil service assessments of the business case suggesting it is “poor value for money”. 

Philip Rutnam, permanent secretary at the Department for Transport, wrote in a letter to McLoughlin yesterday that the assessment of the business case “suggests it is poor value for money”. 

He added: “In particular the analysis gives an estimated benefit to cost ratio (BCR) for the proposal of 0.35 if a 30-year view of the likely impact is taken.” 

However, he warned that if the impact is assessed only over the life of the franchise the BCR is much poorer at, 0.12. 

Rutnam noted that the “fundamental reason” for the poor BCR is that there will be large costs from bringing forward the replacement of the Pacers to 2020. He also noted that the plans to introduce a minimum of 120 new build vehicles, “significantly reduces flexibility for bidders”. 

In response, McLoughlin said he was “formally directing” Rutnam to proceed with approving the release of the ITT for Northern and TPE. 

McLoughlin noted the value for money concerns, but said: “I believe there are wider issues to consider which I accept fall outside the remit of the Accounting Officer but that I consider are material. 

“In particular, the use of Pacers has a negative impact on the reputation of rail services in the Northern area. I don’t consider that the continued use of these uncomfortable and low quality vehicles is compatible with our vision for economic growth and prosperity in the north.” 

Mick Whelan, general secretary of the ASLEF union, said it is “always worrying” when a secretary of state has used a ministerial direction. 

“It means that a minister has ordered his permanent secretary to go ahead when the civil service, who clearly have serious doubts about the enterprise, believes it does not offer the taxpayer proper value for money,” he added. 

“Of course we want to see the back of the Pacers, and the introduction of a modern fleet, but we have been calling for that for years. The devil, as always, is in the detail. And we know that these plans will mean higher fares for passengers and cuts to jobs for railway staff.” 

There has been no reaction yet from either of the companies who were seeking non-new build options to potentially replace the Pacers: Vivarail and its refurbished London Underground D78 stock, or Porterbrook and its 'Class 144e' 'upgraded Pacer' concept, which cost £800,000 to develop. 

(Image: c. Stefan Wermuth/PA Wire) 

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Lesf   28/02/2015 at 01:08

Anyone would think there's an election coming.

Nonsuchmike   28/02/2015 at 14:54

Every day that Pacers still "patrol" our railway system is now an embarrassment. The thought of them still going about their business until 2020 makes me shudder; they should be phased out in the next eighteen months max., and replaced with more efficient, more comfortable, more appropriate trains and carriages for commuters throughout the UK. This is not a north v south issue, it is a matter of TOCs trying to squeeze the maximum profit from the public with the lowest outlay in a scam which must be considered insane if not bordering on the criminal when you think how frequently the travelling "sardines" have to put up with disruptions, cancellations, fare increases - just for the privilege of being squashed for an hour or so in thes e outdated forms of transport. What a high price we pay for the glorious benefits of competition and privatisation in our railways.

Neil Palmer   02/03/2015 at 07:56

Nonsuchmike It's not a case of TOC's trying to squeeze maximum profit, it;s a case of what government has been willing to pay to replace Pacers in the way of less subsidy, or receiving less from TOC's in payment. Until now government had not been willing to do this to replace Pacers. Lesf, Yeah - you'd almost think that wouldn't you. ;-)

Steve   02/03/2015 at 11:08

This I assume explains the focus on residual value in the ITT, it allows costs to be accurately reflected over the life of any given project. No operator is going to suffer the cost of new assets if they are going to hand those assets over to another operator in ten years time.

Neil Palmer   02/03/2015 at 14:32

I meant to say: "it's a case of what government has been willing to pay to replace Pacers in the way of MORE subsidy, or receiving less from TOC's in payment:.

Graham Nalty   05/03/2015 at 14:03

I have to say 'very well done' to Transport Secretary Patrick Mcloughlin here. Benefit to cost studies are a tool used by good managers to assess part of the effect of their decisions and used by bad managers to justify a bad decision. There are much wider issues here and Mr McLoughlin is right to take these into account. It is the future of the whole northern economy. The end result of applying benefit to cost is that the rich get richer and the poor get poorer. We need to rebalance the UK economy and investment in rail transport in the North on a par with London is the best way to go, not trying to reduce rail use. I only wish Mr McLoughlin was as forthright with common sense on HS2 and tell those in HS2 Ltd. that parkway stations on high speed lines will destroy jobs in our tertiary cities as studies by leading experts have proven. All other countries bring their high speed lines into city centres, so why not the UK.

Aaa   07/01/2017 at 04:29


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