Rail Infrastructure Investment

Huw Merriman Excerpts

Thursday 17th January 2019 Westminster Hall

[Lilian Greenwood]

My hon. Friend makes an important point, which I will come to in due course. He is a long-standing, experienced and expert member of the Transport Committee, and I am delighted that he is here this afternoon.

The DFT also argues that it is difficult to break down regional spending accurately, saying that where expenditure on the railway takes place is not always an accurate reflection of where the benefits are felt. The Department also emphasises the difficulty of analysing investment annually, or even five-yearly, given that railway assets typically have a lifespan of 25 to 40 years, pointing out that there was inevitably

“a cyclical nature to replacing them that does not lend itself to an even split of funding across all regions within every 5 year control period.”

Of course, there is merit in those arguments, but I simply ask the Minister, when was there a time when investment in the north exceeded investment in the south?

While the Government’s commitment to rebalancing the economy is welcome, it is clear from past experience that, as my hon. Friend the Member for Blackley and Broughton (Graham Stringer) said, current methods for making investment decisions make it much easier for highly populated, economically successful places to prove the case for schemes in their area, because the model has a bias towards schemes that exhibit strong levels of potential demand and/or high potential to relieve existing transport congestion. Witnesses to the inquiry told us that this approach inevitably drew more investment to London and unless the system could be altered to take greater account of wider economic benefits, the process would be inexorable.

Maria Machancoses, the director of Midlands Connect, told us that

“figures on the disparity of investment, no matter which formula you look at—whether by the DFT or the Treasury—they all say that outside London it is just not working.”

Her view was that this should be the starting point from which to “move forward.” However, in their response to our report, the Government did not accept the suggestion that their scheme appraisal methods did not provide a fair share of investment in rail across the UK’s regions. This completely fails to acknowledge the overwhelming feeling across the country that investment in rail is unfairly concentrated in a few small areas.

While there are undeniable complexities in accurately breaking down regional spending and identifying where the benefits of investment are felt, the Government must recognise the concerns that have been raised about the regional disparities of investment in our rail network and take action to address them. It is hard to believe that the Department will do so if it does not accept that there is a problem in the first place.

The DFT has published a rebalancing toolkit, to be used as part of the strategic assessment of future investment programmes. This was welcomed in principle by our witnesses. However, when we asked the then Rail Minister, the hon. Member for Blackpool North and Cleveleys (Paul Maynard), for examples of the toolkit’s influence on DFT’s transport investment decisions, he could not provide a single specific example. He told us that it was “relatively early days” for the approach. Our witnesses said that the Government needed to prove that what the rebalancing toolkit is meant to achieve will actually take place. I ask the Minister, over a year after the toolkit was introduced, how has it influenced the DFT’s investment decisions?

In our report, we also called on the Government to be more specific about the economic rebalancing effects they intend to achieve. We call on them to tell the regions in need of regeneration how they can prove their cases and secure investment. We argued that people in the north-east and south-west, regions that have experienced relative under-investment in recent periods, must have a clear sense of what the Government are trying to achieve in order to be able to judge their success.

We also recommended that use of the rebalancing toolkit be mandatory and that the Department worked with Her Majesty’s Treasury to explore how economic rebalancing can be made an intrinsic part of appraising transport schemes. That would put rebalancing at the heart of investment decisions, rather than it merely being an add-on. In response, the Government have told us that it would be impractical to make use of the toolkit mandatory. Why has the Department developed a toolkit that is impractical to use?

Let me turn to rail electrification. Under successive Governments since 2009, the Department has made a compelling case for widespread electrification, moving from diesel to electric traction, particularly on heavily used parts of the network, which would reduce journey times and facilitate lighter, more efficient trains, reducing long-term costs, improving environmental sustainability and enhancing capacity. The Government’s decision to cancel electrification schemes in south Wales, the midlands and the Lake district were a huge disappointment for people who had been promised improvements to their network. Following the cancellation of these schemes, there are also serious questions about the Government’s support for future electrification of the network.

It is clear that the plans for electrification were over-ambitious and suffered from inadequate planning and budgeting. The schemes were hampered by an unclear definition of responsibilities between the DFT, Network Rail and the Office of Rail and Road, and disappointment at their cancellation was compounded by poor communication by the Department for Transport.

Although the decision to cancel the midland main line and the lakes line schemes was taken in March 2017, it was not announced until July, on the day the House rose for its summer recess, limiting opportunities for scrutiny of the decision. The Government also presented the decision not to electrify these lines as a positive story about passenger benefits being delivered in other ways. The announcement, unsurprisingly, was met with scepticism by those who saw it as a pragmatic, cost-based response to overruns. The National Audit Office agreed with those sceptics, and concluded:

“The Department decided to cancel projects in 2017 because Network Rail’s 2014-2019 investment portfolio was no longer affordable.”

Passengers on the midland main line and Great Western main line should eventually see some improvements in capacity and journey time from other enhancements in control period 5, but the way that enhancement to these lines has been handled is far from ideal and has done nothing to create confidence in the Government’s approach to rail improvements.

[Huw Merriman (Bexhill and Battle) (Con)]

I congratulate the hon. Lady, my friend, the Chair of the Select Committee, on securing the debate. She took us through our Select Committee report and chaired us so well. The Government rightly place great faith in the future in hybrid trains and bi-mode, but does she share my concern that we are in a bit of a hiatus? We either have electrification or technology that is not quite there. Many communities—mine in particular, with the extension of HS1—are faced with uncertainty as to whether they will ever get a better service.

[Lilian Greenwood]

The hon. Gentleman is a very valued member of the Select Committee. While new traction, hydrogen and battery potentially have a place on our railway, it is clear that they are not sufficiently developed to be a proper replacement for electrification. There is some doubt about whether they will ever be a suitable replacement for electric trains, particularly on inter-city journeys operating at higher speeds. He is right to raise concerns about the time that might be taken for parts of the country to see improvements to their services, particularly if there is a continued aspiration to use bi-mode technology. While that can provide some benefits, it undoubtedly also has a significant impact on operating costs. When passengers are very concerned about their fares raising, building in long-term costs seems a wise approach.

While it is now clear that the electrification schemes that had been planned were undeliverable, the Railway Industry Association and others were convinced that, for now, electrification remained the optimal solution to train traction. The case for electrification is particularly strong on heavily used routes, balancing significant benefits to passengers with the wider environmental benefits and long-term cost efficiency. Our report called for electrification to be delivered through a long-term rolling programme in which the Department, Network Rail and the wider industry learn the lessons of earlier schemes and strive to reduce costs. Do not throw the baby out with the bath water.

A key driver of Government investment in the rail network is their commitment to reduce carbon emissions. In February 2018, the Government called on the industry to produce a vision for how it will decarbonise with an initial response due in September last year. The Government response to our report confirmed that an industry taskforce, led by Malcolm Brown, is taking this forward. Have the Government received this taskforce’s report on how to decarbonise the rail system? If so, what does it say and what are the Government doing with it? David Clarke, technical director of the Railway Industry Association, has said that to achieve the Government’s aim of decarbonising UK railways by 2040,

“electrification must be one of the prime options for intensively used routes”.

The Government accepted our recommendation that it should engage with RIA’s electrification cost challenge initiative. The Department committed to producing a report on cost-effective electrification by this summer, but has said that it will remain agnostic about the best means of securing rail enhancement and that it does not expect proposals for new enhancement to begin with a predefined solution such as electrification. I am afraid it is clear that the Government have no plans for the future electrification of the railways.

I ask the Minister to update us on the Government’s work to produce a report with the industry on cost-effective electrification. When we conducted our inquiry, we heard that there was considerable interest in third-party-funded electrification schemes on the midland main line. We recommended that those proposals should be fully considered as an alternative to the proposed bi-mode solution.

The Government accepted our recommendation and said that they would fully consider

“Any proposals made to government or Network Rail about private sector solutions on the Midland Mainline that could provide benefits in addition to the passenger benefits that are being secured by the Government.”

What discussions have the Government had with third parties about proposals for electrifying the midland main line, and how will the improvements for passengers of the enhancements that will be going ahead compare with the improvements that would be delivered by electrification?

Some hon. Members present represent areas of the north covered by the transpennine route. The upgrade of that route is expected to include some electrification, but those enhancements have been considerably reduced since the then Chancellor announced in 2016 that the Government were

“giving the green light to High Speed 3 between Manchester and Leeds”.—[Official Report, 16 March 2016; Vol. 607, c. 961.]

There are serious concerns that the upgrade will not be fit for purpose for freight trains, and that because only part of the line will be electrified, the route will need bi-mode trains, which will build in higher operating costs for years to come. Are the current proposals for the transpennine route upgrade in line with the advice from Transport for the North? If not, why not? I note the letter to the Secretary of State for Transport from the operator of Humber, Mersey and Tees ports on 7 January, which says:

“It is of increasing concern that the Department for Transport and Network Rail are undervaluing our industry in the North and undermining the economic goal and objectives of the Northern Powerhouse; it will only make the productivity gap between the North and South of England even greater and devalues further the role of Transport for the North.”

It is concerning when the industry feels that the transpennine route upgrade, as it is currently considered, will lead

“to an utter dependence upon the M62 for Transpennine freight traffic for at least another generation.”

We have talked about some of the problems experienced as a result of planned railway improvements in the past five years, which have triggered successive reviews of the planning and delivery of enhancements and led to a substantial change in the way future investment in the railways will be considered and delivered. The next five-year control period will focus on operations, maintenance and renewals, the volume of which will increase substantially, not least because of the number of renewals that have been postponed from the current control period.

Following those postponements, the greater focus on maintenance and renewals in control period 6, which starts in April, is necessary and welcome, but there are long-standing concerns in the industry that investment in renewals has been lumpy, stop-start and boom and bust. We have heard that the level of uncertainty about upcoming spending could have knock-on effects on the wider industry’s confidence to invest in its workforce, skills and innovation.

In our report, we called on the Government to work with Network Rail, the regulator and the industry to look at the ways in which investment could be smoothed out from the start of control period 6, throughout that period and beyond. The Government accepted that recommendation, so I ask the Minister, how has the Department worked with the industry to smooth out investment for the upcoming control period?

Instead of forming part of the five-year control periods for Network Rail investment, future enhancements of the rail network are now subject to a separate process. The new rail network enhancements pipeline is intended to support a continuous planning approach and move away from the overly rigid five-year cycle that was linked to railway control periods.

The Government have signalled that they expect more railway enhancements to be market-led proposals brought forward by third parties. We heard that there was likely to be interest from third parties in bringing forward such proposals, but it was not clear to us that Network Rail had the structures or culture in place to support such third parties to engage and participate in the planning, delivery, funding or financing of the railway.