Rail 510: Tram schemes deserve protection against predatory buses

Alistair Darling’s disdain for light rail is belied by the success of schemes such as Nottingham’s new tramway, argues CHRISTIAN WOLMAR.

I happened to be in Nottingham the other day, and, just for fun, took the wonderfully quiet and sleek tram, even though my destination was just one stop – price 80p – away. Nottingham is the most unequivocal success story of the light rail schemes built in the UK over the past 20 years, if one discounts the Docklands Light Railway which is not really a tram scheme at all.

Yet the Department for Transport does not like tram schemes and the future of light rail hangs in the balance. Alistair Darling, in particular, set back the prospect of new tram lines by several years when he revealed that the three most advanced schemes – Manchester’s three new lines, Leeds and South Hampshire – were to lose DfT backing because of mounting costs.

Since that information was slipped out under the cover of the various other transport announcements last July, the political impact has been limited, though in Manchester there is widespread anger which has even translated into street demonstrations in favour of the new lines.

Darling is a Treasury man through and through, and he argued that the soaring costs of the schemes made them unaffordable and not value for money. But then one suspects that, had he been around, Nottingham would not have got its tram scheme approved either. Remember, as I wrote in this column last May ( RAIL 487), “when Alistair Darling left the recent opening of the Nottingham tram line, he apparently muttered to his advisors that he hoped this was the last opening of an overpriced, over-budget system that he would have to attend.” Well, given that it is a racing certainty he will no longer be in Transport next month, that’s one of his few political aims he managed to achieve.

But the way light rail projects have become unaffordable in this country is, in great part, a result of the failure of government policies. A rare insight into the muddleheadness that pervades the DfT was well illustrated by a letter published recently in Local Transport Today. Michael Faulkner, the former head of local transport policy at the DfT, writing in a debate about the problems with light rail schemes, said: “Intelligent bus operators will run, or persist with, a service that competes with light rail only if they can get a decent return from it… Banning the bus would be good for the tram’s finances, bad for the consumer.”

In other words, buses should be able to continue operating in competition with trams, cherry-picking passengers on busy sections rather than co-ordinating their services with them. This is just patent nonsense. If the government, both local and national, invests a couple of hundred million in a tram scheme, then it is ridiculous to continue allowing smelly buses to continue to clog up the streets because of some ideological notion about competition. Buses require very little investment and are highly flexible, which means they can cream off profitable bits of a tram route, without providing anything like as good a service, and therefore tram systems have to be protected through the creation of an integrated transport network.

In many cases, buses were able to charge lower fares than trams, thus wrecking the light rail schemes’ finances, but leading to a much inferior network than had the system been properly integrated. While there may have been cheaper fares in the short term, it was at the cost of an inferior service and, of course, more congestion on the streets for road users. That is precisely what happened in Sheffield where, essentially, the operations of the tram scheme, built at public expense, were virtually given away to Stagecoach because there was no integration of public transport services, and the trams were therefore uneconomic.

Trams, on the other hand, involve heavy fixed investment which may require protection against such light-footed competitors as buses that are only required to give a few weeks’ notice about changes in their service. Without such protection, the investment may never be possible. But that does not mean it should not be made, because of the many other types of benefits of light rail, many of which cannot be captured through the farebox.

So it is no wonder that several tram systems have not lived up to passenger forecasts and therefore got into financial trouble. This has had the knock-on effect of deterring investors, pushing up the price of schemes, and hence Darling’s announcement.

Now interestingly, despite Darling’s disparaging remarks in the ministerial car, Nottingham has been a success story. It has just completed its first year of operation and there were 8.2 million users, 10% more than expected. And why? Simply because the scheme followed common sense rules when creating a light rail system. The local council was a partner in the scheme, but also runs most of the local buses. Therefore it was easy to ensure that the two modes of transport did not compete. Moreover, park-and-ride schemes were a major feature of the system, and it operates along one of the busiest transport corridors, ending up with a stop next to the station.

The system has been built to a high standard because it was realised right from the outset that this was the only way of attracting motorists out of their cars. The Nottingham experience backs up the notion that people much prefer trams to buses and they are able to attract middle class exmotorists in a way that buses never will.

Recent research by Steer Davies Gleave for the Passenger Transport Executive Group found that light rail cuts traffic much more effectively than major improvements to bus services. Around
20% of rush hour light rail users have switched from the car compared with between
4% and 6.5% for bus improvement schemes. At weekends, up to 50% of people travelling had previously gone by car. That ensures trams have a major regenerative effect, something that Marsham Street simply never takes into account. While the government is right to question the soaring costs, there is much that ministers can do.

For example, one of the reasons for the high expense of schemes in the UK compared with those abroad is that the cost of moving utilities is entirely borne by the tram developers, whereas elsewhere they are either partly or fully paid for by the utility companies or the state. Moreover, there was not the same dogmatic insistence on complex risk-transfer financing deals which are considered mandatory here. All of these issues were highlighted in the excellent report published a year ago by the National Audit Office, Improving Public Transport through Light Rail.

Yet, while the government has got itself into a bit of a pickle over light rail, those straightforward lessons do not seem to have been learnt by ministers. Sure, they have moved a bit on the Manchester schemes by promising that there was still £520 million (out of an estimated cost of £900m) from the department on the table to support the lines. And one detects that they are finally moving away from the idea that Private Finance Initiative schemes are the only way of building a light rail line, having understood that transferring risk to the private sector can be an expensive business.

However, there is still no guarantee that Manchester’s three lines will be built, despite the fact that £200m has already been spent, and that all the local Labour MPs are furious that the government should have pulled the rug from underneath them so near an election. Indeed, if ever there was a time for promoters of light rail schemes to try to extract a promise out of the government, it is now. But, I fear, Darling is a man who is determined to ensure that there is no trace left of his existence once he has left office.

Risk aversion damages rail

One of the reasons for soaring costs on the railway has been the increased risk aversion by all types of people working in the industry. Given that the Hatfield trial, against five middle managers, is taking place at the moment, is this such a surprise? No one, understandably, wants to find themselves in the dock.

It was no surprise, then, that an interesting piece of research commissioned by the government from Arthur D Little – called ‘Risk Aversion in the British Rail Industry’ – found that, indeed, there was a widespread culture of risk aversion and that one of its principle manifestations was, in the polite use of the term, backside-covering. It found that “decisions that in the past were made by competent frontline staff were being taken by more senior management who lack the technical expertise, with a view to minimising corporate risk.”

Other reasons were that given “the fragmented structure of the industry, managing the contract has become more important.” And that there was “confusion over roles within the industry and a lack of clear leadership – no single vision for the railway and the safety objectives it should achieve.”

Like many pieces of consultancy, it is a statement of the bleedin’ obvious. But it’s nice to hear it from outsiders who look at the dysfunctional railway industry and come to the same conclusions as many of us old-timers.

Not surprisingly, this piece of research has been given little prominence by the DfT and its findings appear to have been quietly buried. That is because there is a clear underlying message: until we have a unified, vertically integrated railway run by competent railwaymen and women grounded in all aspects of operating the system, then this risk aversion – and its corollary, cost escalation – will be here to stay.

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