CTRL’s engineering success blighted by financial failures

The project to build the Channel Tunnel Rail Link has enjoyed mixed fortunes and could be termed as either a success or a failure depending on whether it is looked at from an engineering or a financial point of view. Indeed, its financial troubles have tended to overshadow a superb engineering achievement built under difficult circumstances.

To add to the difficulties in assessing the project, there is the wider question of its purpose given that the cost to the public purse is, at a conservative estimate, £6bn and there are doubts about various aspects of its usage.The funding has long been an area of controversy, heightened by the fact that the project recently, much to Gordon Brown’s consternation, was suddenly put back on the government’s books because it was no longer deemed by the Office of National Statistics to be in the private sector, as all the risk was with taxpayers.

Moreover, a plan to get it off the books as soon as possible by inviting bidders, following the expression of interest from a team led Adrian Montague, a former Treasury official, had to be shelved rather embarrassingly for the government at the end of March. The leaders of the consortium building the line were outraged that ministers were prepared to sell off a half finished scheme not only greatly reducing its value but also taking away valuable management time from the key job of ensuring the line opens on time at the end of next year.

Moreover, Montague was seen as a government crony who had been encouraged to bid in order to ensure rapid reprivatisation.Funding the CTRL has never been a simple issue and the scheme has been through a series of incarnations which have, at each stage, resulted in extra costs. Initially the line was to have gone through south London with a long tunnel that would have connected with both Waterloo and a terminal at King’s Cross. But this was felt not to bring sufficient regeneration benefits, and would have required considerable demolition of housing in south London, as well as very expensive tunnelling under central London.

Therefore, in October 1991, Michael Heseltine, the Conservative environment secretary, announced that the route should come in from the East which would encourage regeneration but would result in a delay well beyond the opening of the Channel Tunnel itself – a matter of 12 years as it turns out!The original scheme for the present 67 mile alignment, announced in 1996, was predicated on the notion that the Eurostar services linking London with Paris and Brussels would make good profits.

To smooth the process the trains, worth a cool billion pounds, were given to the winning consortium, London & Continental, which is made up of eight companies including SNCF, National Express, Bechtel Ove Arup and Halcrow.The deal was hailed as a ‘flagship of the Private Finance Initiative’ but collapsed within two years because far from returning a profit, Eurostar made losses and therefore there was no cash flow on which to raise the funding for the scheme.

John Prescott, the then Transport Secretary, faced a difficult decision – either to scrap the project, on which work had already started or bail it out. He was constrained by the Treasury’s requirement to ensure that the risk would remain with the private sector and by the fact that London & Continental had to be retained as the contractor since that had been written into the act enabling the scheme to be built. Since the consortium had already been given a grant of £1.7bn at the outset, the Treasury insisted there should be no further money available.Prescott’s response was an accounting trick – to guarantee £5bn worth of debt and soft loans but not come up with any new money. Railtrack also agreed to provide a further £700m which, since its demise, is also now with the government.Why it took the Office of National Statistics seven years to uncover that transparent deceit involving £6bn of taxpayers money is a mystery.

However, since the ONS has now been given independence by Gordon Brown, it will be interesting to see whether the £20bn debt of Network Rail, which is also underwritten by the government, will be treated in the same way, and that would blow a really big hole in Big Gordon’s books.The scheme was now to be built in two sections, exacerbating delays but reducing the cost and the first section opened in September 2003, speeding up journey times for Eurostar trains by 15 minutes. The second is now due to be completed before the end of next year, though a precise opening date has not yet been determined.In terms of engineering, with a huge amount of tunnelling and two major bridges, the scheme has proceeded remarkably smoothly.

The first section was completed ‘on time and on budget’ and LCR claim the second one is ‘within the established limits’, which suggests that the consortium will struggle to bring it in within the total £5.2bn construction cost.The big question then is what is the link for? First, obviously it will be used by Eurostar trains bringing journey times to Paris down to a mere two hours and 15 minutes and Brussels will be just two hours away. In other words, both will be nearer in time from central London than Manchester.Secondly, from 2009, the line will be used by domestic services from Kent which will shorten journey times by up to 35 minutes. However, not all Kent commuters will welcome the new service.

In addition to the fact that fares in the new integrated Kent franchise are going up by 3% above the rate of inflation, there will be a premium for the high speed services, possibly as much as 30%, which will run into St Pancras. While some commuters may be delighted at having their journey time cut by half an hour, others may not be so pleased especially if they work in the West End or the City for which Cannon Street and Charing Cross respectively are far more convenient.The Kent domestic services are really being introduced because a purpose had to be found for the line, rather than any pressing transport need.

It is a rare case of infrastructure being provided before the need arises, but there is a question mark over whether it is value for money which is usually a commendable policy but poses a risk for the government should the line be underused.Third, the line has been fitted with passing loops so that it can be used by freight, but it remains to be seen whether a market for freight can emerge, given that it would only be suitable for intermodal freight that can be transported at a high enough line speed not to disrupt other services.However, while Britain at last gets a dedicated high speed line, the decision to build it heading south from London rather than the other way will long be a subject of controversy unless passengers and freight crowd on by the early years of the next decade.

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