There is something to be said for tightening our belts. Having lots of money swilling around inevitably leads to waste and the discipline of a smaller budget can often lead to better governance. This is well illustrated by the decision by Lord Adonis to postpone the Intercity Express Programme to replace the 125 HST sets. While this move has been forced on the Department for Transport by the continued banking crisis and the collapse of passenger growth, it may actually, as ministers love to say about new franchises, be ‘good news for both rail passengers and taxpayers’.
Taxpayers first. OK, so more than £20m has been tossed away in pursuit of a scheme that always looked shaky and there is no way that money is never going to be recovered. However, that is chicken feed in relation to the overall £7.5bn cost of the scheme which did not involve a set number of trains but rather, initially, a staggeringly wide range between 500 and 2,000 coaches which was eventually honed down to something like 1,400.
In fact, this sort of lack of specificity highlights one of the key problems with the whole concept. The winning bidder, a consortium led by Hitachi, would have been contracted to provide not a certain number of trains, but to fill a set amount of diagrams each day. While such power by the hour deals are not uncommon, this deal would have been far more complex, involving the design, manufacture, financing, servicing and maintenance of the complete package, over the 30 year life of the fleet. That was a lot to load onto the private bidders and not surprisingly by the end of the process there were just two left and one the loser, Bombardier-Siemens, privately was greatly relieved not to have won it.
The trouble with such contracts, as we have seen all too often in various aspects of government procurement ranging from hospitals and schools to motorways and the London Underground PPP, is that they are sophisticated attempts to off-load all kinds of risk to the private sector which first charges enormous amounts to take on that risk and secondly attempts to ensure that much of the risk has really remained with the state.
Of course in theory it is a good idea to reduce the risk of the public sector. In practice, though, as the London Underground PPP has shown, it is very hard to transfer the right amount of risk commensurate with what is being paid for. The private companies tend to be cannier because they are experienced in this game and tend to employ better lawyers, while all the time being under pressure to deliver to their shareholders.
The other aspect of the taxpayer which seemed to make no sense in terms of value for money is that the contractor was being asked to develop a relatively small fleet of trains for which were tightly specified for the unique characteristics of the British rail network and consequently it was highly unlikely that the cost of developing the train would be recouped in further sales either in this country or abroad.
Extra cost was created by the need to have what were five different types of train, diesel, electric and hybrid with long (10 car) and short (5 car) versions for the latter two. Moreover, the very concept of having a hybrid unit, with a pantograph and a diesel power car may have been interesting and revolutionary but seemed unnecessary and expensive.
It was dreamt up in effect to maintain a direct connection with London for sections of the railway such as north of Edinburgh or west of Swansea (when the Great Western is electrified) but this seemed more out a political rather than a commercial imperative. After all, very few people use trains for such long distance journeys and making them change was a far cheaper option which would have obviated the need for such an expensive train. Yes, I know this may infuriate some Rail readers, but I do think that occasionally the reality of providing rail services to small sections of the population given that there is an opportunity cost – in other words, there is a finite amount of money which could be spent on alternative and far more beneficial to many more people – has to be spelt out.
What about passengers? Well, the IEP was going to be faster, with rapid acceleration and braking, and therefore would have cut journey times. Passengers love new trains – once they have been out of the box long enough to be reliable – and undoubtedly these would have attracted a few extra people onto the railways. However, the high cost, and the way that maintenance was factored into the rental would have meant that there was added financial pressure on the railways.
As I have mentioned before, we are at the moment living in a false world. Ever since the start of the banking crisis two years ago, it has become clear that the strange juxtaposition of a massive investment programme in the railways with a declining or stagnant economy was unsustainable. There is going to be a smaller pot, and much of the investment programme is already effectively guaranteed because of the way that Network Rail’s funding is determined.
The scrapping of the IEP – and that is the reality – is a small price to pay if other investment is maintained. Far more important schemes such as Thameslink, new rolling stock for overcrowded commuter routes and electrification need to be protected.
Yes, it will be rather embarrassing if in 15 years time, we are still travelling around in 125s that were designed over 50 years previously. But let’s count our blessings. They are excellent trains, virtually every component apart from the body shell will have been replaced and they will be cheap to operate and maintain. Perhaps, by then, First Great Western’s successors will have replaced what must be the ghastly décor for their trains which have all the charm and comfort of MI5’s interrogation chambers. As long as the trains run smoothly and reliably, few passengers will be aware of their vintage.
As for what should happen now, the obvious solution is to buy off the peg trains, possibly modified for the vagaries of the British loading gauge, or even of adapting Pendolinos. Lord Adonis has appointed Sir Andrew Foster, the former head of the Audit Commission, to examine whether the IEP project is viable. It is a strange move given that there should be enough expertise in the Department to make this assessment and it strengthens the case for the creation of a railways agency independent of government.
Certainly a bit of sober reflection into the needs of Britain’s intercity rail services, even by someone with no past experience of the railways, will do no harm. Sir Andrew is a substantial figure who will learn quickly and his appointment appears to be a clever way of trying to depoliticise the issue. The appointment does, however, beg the question of why this assessment was not carried out before the £20m was spent on working up the concept and starting the bidding process, rather than afterwards.
Therefore, I suspect a more sinister motive behind this move. It strikes me that Sir Andrew – what a lot of titled Andrews there are in this story – has been appointed more to ensure that Hitachi don’t sue the Department or go for a judicial review of Lord Andre’s decision and therefore his findings are a foregone conclusion. Like any remotely sensible fellow, he will rule that the IEP was simply the wrong idea and send it to the scrap heap. While the IEP hardly made sense in the good times, now that they are over it is as dead as the dodo but far less mourned.
The value of objective research
While on the subject of saving money on railway investment, a fascinating article (http://www.guardian.co.uk/education/2010/feb/02/higher-education-research-grants) popped up in all places the education section of the Guardian. It was written by a professor of philosophy, Jonathan Wolff, and was a critique of the government’s insistence that all academic research should be assessed on its ‘impact’, a nebulous concept at the best of times.
So where is the relevance of the outpourings of a philosopher professor to the railway? Well, after the Hatfield train crash, the good professor had been asked to assess the value of investing in Automatic Train Protection for the whole industry. That would have costs billions of pounds and both railway managers and government was reluctant to implement the programme. This was, remember, the time of panic in the industry when a spate of three serious crashes in four years – actually historically low but highly publicised – had led to fears that the railways were unsafe. I remember frequently appearing on the media at the time and being asked questions like ‘why are the railways killing so many people?’
The professor advised the railway companies to ask people what they thought about rail safety and he found that far from wanting expensive high tech solutions, they pinned the blame on poor supervision and bad managers, and wanted to be reassured that the situation would improve. In fact, the report was never published as those who commissioned it feared there would be a media backlash about skimping on safety.
In the event, the sensible decision of introducing the cheaper but almost as effective TPWS system was made and there have been no accidents caused by SPADs since Ladbroke Grove. I would, though, still like to read his report which, apparently, ‘remains in the filing cabinet of a few people who have probably moved on to quite different jobs’. Brown paper envelope, anyone?