Rail 578: France should avoid PPP complexity

Off to Marseille, a fascinating city which seems little changed from the scenes in the 1971 classic The French Connection apart from the fact that it now boasts two metro lines and a three hour connection by TGV from Paris, which, of course, is how I got there.

I was invited to speak at a conference organised by a group seeking to extend the high speed line beyond its current terminus at Marseille Saint Charles through to Nice, since, at the moment, the trains to the Cote d’Azur use the ligne classique. While the trains provide a fantastic scenic ride by the sea, where the patches of yellow sand beaches are separated by crumbling red cliffs, that ranks high amongst Europe’s best coastal rail routes, it takes forever and is not for those in a hurry. Delegates at the conference, which was supported by the various local authorities and attended by railway managers from SNCF and RFF, the French equivalent of Network Rail, were anxious for the region not to be left off the TGV map. While much of the area is prosperous, there are large pockets of poverty which the tourists never see and the success of the recently completed TGV Est in attracting huge passenger flows as well as stimulating development has spurred virtually every French town of any significance to put forward schemes for TGV extensions or branch lines.

The organisers had invited me because they are worried about the new enthusiasm of the French government for Public Private Partnerships and they want to know more about the British experience. Not only does Britain leads the world in the development of Private Finance Initiative projects and PPPs (the difference is marginal), but we are also way ahead in terms of disasters such the collapse of the initial scheme to build the Channel Tunnel Rail Link and, of course, the Railtrack and Metronet debacles.

The French government passed a law in 2006 encouraging PPPs but providing a very wide definition of what precisely is included. Indeed, one of the speakers talked about our franchising system as if it were a PPP when, to my mind, it is more a system of contracting out. However, since it includes an element of risk transfer, it falls within the wide French compass.

On the French railways there are three schemes that are being developed as PPPs – a connection between Gare du Nord and Charles de Gaulle airport, a 300 kilometre extension of the TGV between Tours in Western France and Bordeaux, reducing the time from Paris to Bordeaux to just two hours and a 60 kilometre by pass of Nimes and Montpellier in the south west. The first is slated to have no public money but the other two, costing a total of £4bn, require considerable subsidy.

The speakers make clear that increasingly in France, just as in the UK, PPPs are becoming the only game in town. The UK experience is relied on as evidence by both supporters and opponents of the concept. The fans point out all the usual arguments based on the key point that the state cannot afford to make the investment itself and therefore needs to borrow in the private sector. But one canny questioner refuted this, saying what, in macroeconomic terms, is the difference between the government borrowing off the banks and the private sector doing so – except, of course, the latter pay interest of 0.7 per cent more than the state.

Two speakers supporting PPPs trot out figures from an old National Audit Office report which said that only 24 per cent of public sector schemes were not subject to delays compared with 70 per cent of PFI deals. However, that report has been criticised in academic circles for not comparing like with like, since the public sector schemes were more complex and difficult than the PFI ones. Indeed, the public sector comparisons used to justify the London Underground PPP would have made Pinocchio’s nose shoot out.

Then another supporter says that a big advantage of PPP schemes was that the costs to the public sector were fixed, as the private companies took on all the risk. And of course there is the argument about efficiency, that the private sector is simply better at delivering. Tell that to Transport for London. Given that the Underground PPP was justified on the basis that the government did not want another £1bn cost overrun as happened with the Jubilee Line Extension, and now that is precisely what the Metronet collapse could cost the public sector, these are arguments that runs rather hollow.

In France, of course, they still have a powerful rail organisation but those working for SNCF say that gradually its core competence is being lost as more of its design and research work is contracted out. They are worried it will go the way of Railtrack, a shell organisation which lost its ability to run a railway, a process fortunately reversed by Network Rail. They do not want to learn the hard way but the fashion for using new funding and financing methods seems to make it inevitable that they will.

Already one project is in trouble, the £600m scheme to build a link the French and Spanish high speed lines underneath the Pyrennées between Figueras and Perpignan. The problem is the delay to the high speed line through Barcelona which has been held up by concerns that it will damage the famous unfinished Sagra Familia cathedral designed by Gaudi (who incidentally was killed by a tram in 1926). The Spanish speaker outlining the scheme, who had given a detailed presentation with all the relevant numbers, suddenly goes all coy and says he can’t possibly reveal the arrangements. The contrast between his reticence and the previous speaker’s insistence that the costs of PPPs were always transparent did not pass unnoticed.

Despite all these caveats, it is clear that the PPP concept is here to stay given the self-imposed constraints on government spending. As more and more PPPs are created, the skills required to draw up and implement schemes are gradually migrate from the public to the private sectors, making the change irreversible. As a consequence, the shift towards costly complexity is irreversible. There is a whole industry which is dependent on PPPs and stimulating their demand. It was beyond irony that Pricewaterhousecoopers, which was the main intellectual driving force behind the Underground PPP has also been asked by government to advise it on what to do about the Metronet collapse! In the absence of impartial advice and information, and, apart from the unions, defenders of the traditional way of doing things, it is difficult to know see how this juggernaut can be turned round.

I don’t think you have to be a unreconstructed Marxist agitator, as one well known rail boss wrongly calls me, to point out that all the people involved in this process – the lawyers, consultants, railway managers etc – make an awful lot of money personally out of the complex arrangements that now pervade the industry. You only have to consider the recent Metronet pay-offs to realise that it tends to be a heads we win, tails you lose situation as regards public money. The whole area is so fuzzy that the second – and successful – scheme to build the Channel Tunnel Rail Link, High Speed One as we must now call it, was recently put back on the government’s books, as was the London Underground PPP, making all the efforts to these crazy financial structures redundant. If half the effort that went into dreaming up dodgy financing methods for infrastructure schemes in vain attempts to keep them off the government’s books went, instead, into building them, we would have a railway to be proud of.

 

Department’s insistence on playing trains means uncomfortable ride for many

Another rolling stock row on First Great Western is looming. Remember the tales after Christmas last year when suddenly rolling stock shortages briefly led to the unlikely result that Bath – Bristol route briefly became Britain’s number one overcrowded railway and the normally quiescent commuters there stage a fares strike. The media lapped it up and now there is about to be a reprise.

Next February, the much disliked Adelante, not even a decade old, which had been leased to supplement services on the company’s main routes, are going to be mothballed as they are being replaced by refurbished HSTs. The Adelantes are very unreliable for a new train and have proved costly to run. However, at the same time, the relatively pleasant 158s which had been brought into fill the gaps after the fiasco are having to go back up north and they will be exchanged for 13 set of the dreaded ‘bus on rails’ 142s Pacers.

The line most in need of more stock is the much neglected route between Cardiff and Portsmouth, which has experienced high growth rates for many years as highlighted in 2004 the local Rail Passengers Council report The mainline they shouldn’t ignore. In a sensible world, that line would get the 180s, while its existing fleet of 158s would be cascaded to the branch lines to be used instead of the 142s. However, there seems little prospect of this rational solution coming about. FGW is not convinced that a business case exists for them to bear the full brunt of the additional expenditure required to re-lease what are some of the most expensive trains in the world to run and the Department for Transport appears reluctant to intervene..

In the last issue’s editorial, Nigel Harris highlighted how the Department is tinkering with the rolling stock market at its peril. Indeed, but with the Strategic Rail Authority gone the way of British Rail and Railtrack, it is difficult to see who else can sort out this mess. Last time, FGW bought its way out of the problem by leasing 12 additional 158 units from Trans Pennine and these units have been absolutely essential to providing sufficient capacity for the remainder of this year.

Neither ministers nor the FGW can really afford another major row or another game of pass the blame, as happened after last year’s shenanigans?. In fact, both were. FGW thought it could run the franchise with fewer trains than before, and the Department allowed its bid, based on that calculation, to go through. One thing for sure; if comfortable 180s are sitting in the sidings, while 30 year old Pacers bash the rails, the flak will be flying at both FGW and the Department. Deservedly.

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