Clear policy statements needed for rail freight development

Source: RTM Oct/Nov 16

Philippa Edmunds, Freight on Rail manager, reflects on the DfT’s new rail freight strategy and what it means for the sector.

The DfT rail freight strategy, published in September, is most welcome as it provides a clear vision for rail freight. It will help industry plan and provide greater certainty to customers and investors at a time when it needs to adapt to changes in its market and, in particular, steep declines in coal traffic. 

DfT has a key role in setting the overall strategic framework in providing guidance to the regulator and Network Rail, as well as guiding devolved and local government. The strategy highlights that rail freight is worth £1.6bn per year to the UK economy and that each year the industry carries goods worth over £30bn, ranging from high-end whiskies and luxury cars to supermarket goods, cement and construction materials. A quarter of consumer goods imported into the UK are transported by rail and customers would use rail services more if there was additional capacity. 

As part of this strategy, DfT commissioned Arup to make recommendations on how to support and expand the industry, which remains one of the most dynamic in Europe. 

Rail freight has a proven track record in adaptability and innovation. Initiatives include DB Cargo’s pop-up terminals for aggregates discharge; DRS’s new dual mode electro-diesel locomotive 88; and Freightliner’s conversion of coal hoppers into modern box wagons for the transport of aggregates.  

Carbon reduction is centre stage

Carbon reduction through greater use of rail is rightly centre stage in both this government policy and the DfT Freight Carbon Review, due to be published shortly. If Arup’s recommendations, in particular network enhancements and affordable freight charges, are implemented, rail can help the government meet its legally binding CO2 emissions reductions targets in the Climate Change Act. Arup’s analysis shows rail has the potential to save over 4.6 million tonnes of CO2, a reduction of around 19% of total 2013 HGV emissions. 

Freight on Rail is campaigning for new comparative road/rail emissions research including CO2, NOX and PM10 and PM2.5 as recommended by Arup, to be a key output from this strategy on the grounds that government policy decisions are being taken on outdated figures at the moment. 

Lack of network capacity suppressing demand 

The study also identifies the key growth markets of ports intermodal (deep sea containers), construction and the potential for domestic intermodal (containers being transported within the UK), biomass for power generation and the automotive industry. 

The strategy acknowledges that there is suppressed demand for rail freight services because of a lack of network capacity. For example, the Port of Felixstowe, which now has 32 daily services in and out of port, can fill every additional rail slot which becomes available. The Felixstowe branch line upgrades currently underway should generate another 10 daily slots. Other port links and upgrades for construction traffic from the Peak District are also funded and in the pipeline, but further targeted government investments, such as increasing the capacity on the cross-country route between Felixstowe and the north, would bring step changes in the volumes of rail freight and result in huge socio-economic benefits for UK Plc and society. 

Future investment planning for the Strategic Freight Network (SFN), which will be informed by Network Rail’s ‘Freight Network Study’, the DfT’s strategy and the industry working groups, is now underway. The Hendy Review noted that the average benefit to cost ratio of projects funded by the SFN budget was between four and five, very high according to the DfT’s criteria. 

In the case of domestic intermodal traffic, more Strategic Rail Freight Interchanges (SRFIs) like Daventry SRFI, which removes 23 million lorry miles per year largely from the strategic road network, are needed. East Midlands Airport, Etwall Common near Derby, I-Port Doncaster and Four Ashes near Stafford are all progressing with others in the pipeline. SRFIs will make rail much more competitive in the next leg of the supply chain from national to regional distribution centres or customer stores. Similarly, more aggregates terminals are needed in cities like London, Birmingham and Manchester to facilitate the greater use of rail for construction projects. 

The merit of safeguarding scarce rail land on the network for future potential rail use is recognised by the DfT. But there is considerable pressure on Network Rail to sell lands to pay for its current enhancement programme, so the industry will have to be proactive in defending our position.  

GBR DSC 0760 edit

Supporting the Virtual Freight Route 

The strategy also highlights other policies which need to be clarified or developed. In particular, the DfT needs to support Network Rail in achieving its Virtual Freight Route (VFR) by working with the infrastructure owner and the industry to define what the VRF actually means and can deliver in practice. The VFR, which Network Rail has adopted as a result of the Shaw Review recommendations, must promote and protect nationwide rail freight services. Currently, there is a lack of clarity on how the interfaces with other routes will be managed and who will decide on enhancements, especially where there are conflicts with a geographically based route. 

Freight on Rail has long campaigned on tackling the market distortion between rail and HGVs, a point supported by Arup. HGVs pay less than a third of their costs imposed on society which makes it hard for rail to compete, especially in consumer markets. This strategy rightly highlights that the positive socio-economic benefits of rail freight to the UK are not currently recognised in the ORR track access charging regime, and the adverse implications for government and society if significant increases in track access charges result in trainloads of freight moving back to road. This is particularly relevant for those commodities where rail freight is in direct competition with road and operators, therefore have a limited ability to pass on any increase in costs to their customers. 

ORR is therefore expected to note the government’s rail freight strategy when setting track access charges. The secretary of state wishes to discuss with ORR any changes to the charges the regulator propose which would adversely affect the competitiveness of rail freight compared to other modes. Furthermore, ORR’s decision on charging should reflect the wider government decision on support and funding to freight so clarity on the ORR charges review, processes and governance is needed.  

In order to correct the imbalance between the modes, Arup suggests re-introducing the fuel duty escalator for road traffic to help fund infrastructure upgrades. The government is investigating whether there should be further support for rail freight in view of its socio-economic benefits, but any further support would be subject to the identification of future funding and must not to distort the market. 

However, missing from both the strategy and the Arup report is acknowledgement of the considerable benefits for UK Plc from introducing a distance-based lorry road charging system which could make HGVs pay a fairer share of their costs. 

Rail is the most environmentally friendly means of land transport to satisfy our growing demand for consumer goods while reducing road congestion and road collisions. The sector requires stable and clear policy statements backed up by delivery of enhancements to maintain confidence and encourage FOCs and other market participants, such as terminal operators, to continue investing.

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