Transport cuts on the way

Talking to a well informed source at the Rail awards last night, I learnt that the Department for Transport has become one of the first departments to agree a budget with the Treasury. The transport secretary, Philip Hammond, has not only accepted the Treasury figure, but he has done so quickly because he wanted to jump over the table to sit on the other side of the Star Chamber. So now  he will sit alongside Osborne and Alexander pronouncing on the budgets of other departments.

In a way that is hardly surprising. Hammond never wanted to be Transport Secretary.  He is a Treasury man through and through, and now, with Osborne about to become the most unpopular man in Britain after Ashley Cole, he must reckon that, having been shafted over the Chief Secretary job because of the deal with the Libdems, he has a chance of the big job in a year or two. By the time the damage he is wreaking in transport starts to become apparent, Hammond will not be in Marsham Street.

The deal he has struck is over the overall transport budget, currently around the £17bn mark. How the cuts divide up between the different modes will, to a large extent, be up to him. Watch out for cuts in bus support – poss increasing the age of the pensioners’ pass – cutting back on roads investment, fuel tax rises and VED increases, disguised to fit along environmental lines. The big rail capital programmes such as Crossrial and Thameslink will prob survive, but watch for deep cuts elsewhere in railway investment.

  • Matt

    I query your view on Hammond’s chances of being chancellor:

    “He is a Treasury man through and through, and now, with Osborne about to become the most unpopular man in Britain after Ashley Cole, he must reckon that, having been shafted over the Chief Secretary job because of the deal with the Libdems, he has a chance of the big job in a year or two.”

    If the cuts do prove to be very unpopular, then Cameron would want to hang on to Osbourne as a lightning conductor, unless Cameron wants to do a U -turn – which is unlikely.

    Also, as Cameron said that Tory plans to cut the OAP Buss Pass were Labour ‘lies” so “poss increasing the age of the pensioners’ pass” (although merited – and it it should be means tested – why should Ken Clarke get one?) in my opinion this one would be off the agenda.

    The other thing to note that these cuts are due to be fully effective by 2015 – not October 2010. I think the most likely scenario is that there will be a substantial recovery in the state of public finances anyway (which we are seeing already), and by 2 -3 years in, the cuts we are seeing will not fully materialise. And there’ll be another General Election around the corner.

    I think putting up rail fares is an interesting one – one hand it in brings in more revenue, and undermines the business case for further investment (and thus government spending), but on the other it goes against green credentials, and also the 80:20 ratio of cuts to tax rises (if you categorise rail fares as a ‘tax’).

    What the govt do about the Network Rail CP4 settlement is another crucial one. Given that it is protected by the Railways Act, and we are now 18 months into CP4, I’d guess any variation would have to be ‘voluntary’, i.e. Network Rail would have to agree to it. This, in my opinion, is the real reason why a new CEO is being sought after – the govt want someone who will agree to waive some aspects of the CP4 settlement, without having to get another Railways Act in place. And the previous CEO didn’t look like he would play ball. Otherwise, Network Rail joins the Health Service and the OFID as a protected department (at a time when police and soldiers will be losing their jobs as well) – an untenable situation.

    You also have to ask about the future of our ‘grand projets’, most notable HS2. How on this (or any) earth can that scheme be justified? Only by having a trainspotter in Marsham Street did it go anywhere. Get rid now – it’s the crossbreed of a white elephant and a gravy train.

    And also the structure of the railway has to be reviewed – in the longest uninterrupted economic expansion in the last 150 years it cost more taxpayers money than ever before. Something has to be wrong somewhere. Either it’s too big (too many loss making lines) or it’s the wrong shape (too fragmented with too many profit centres). Anyhow, it can’t carry on, however much Tom Windsor wants to give privatisation of Network Rail just one more go (to paraphrase TW: please, please please -we’ve learnt our mistakes, honest, please please please, it’ll be worth £12billion, oh please, please etc)

    Rant over

  • Greg Tingey

    Take Network Rail out, and shoot it.
    Go for “vertical” integration.
    That should give you serious economies of operation, stright off …..

  • Chris

    Good grief Matt, you make some good points then stuff it up with nonsense about HS2. We should be well into recovery by the time any substantial amount of money is spent on the project, and even then its cost – per year – wouldnt have a huge impact on the DfT’s budget. There are plenty of arguments over whether to go ahead with HS2, but the ‘we cant afford it’ is nonsense.

  • Matt

    And another thing….

    CW says: “Watch out for cuts in bus support – poss increasing the age of the pensioners’ pass – cutting back on roads investment, fuel tax rises and VED increases, disguised to fit along environmental lines”.

    Fuel tax rises and VED increases are at the discretion of the Treasury. Given the 80:20 cuts to tax increase ratio, one can safely say that they will not form part of the 25% saving.

    Given that DfT’s budget is c£18billion, a 25% cut equals £4.5 billion. Is cutting back on road investment and the OAP bus pass age increase going to deliver that??

    The only way is to get that efficiency is doing something very painful things. Like closing loss making rural railway lines. And de-scoping major projects, like Thameslink and Crossrail (and white elephants such as HS2).

    That’s the only way to save projects which do have a business case, most notably of the electrification projects kicking about.

    The trouble with the current debate is that no-one is coming up with ideas to cut their own budget – and it’s not just transport – look at what’s happening with the inter service rivalry over the defence review, or the police defending their budgets.

    The railway should have come up with its own ideas on efficiencies – but the Balkanisation of the railway has stopped this happening, and all anyone wants to do is defend their turf.

  • Ian Raymond

    Matt, some good points, but you are way wide of the mark on HS2. The benefit of HS2 lies not just in shaving a few minutes off journey times (for which no doubt us paying pnters will be royally charged) but in the fact that it will dramatically increase connectivity in the regions.
    Face facts; as long as rail management believe in running pitiable 2 and 5-car units at frequent intervals rather than proper length trains, the existing network is at capacity. And as far as I know Adonis is not / was not a ‘train spotter’ – just that rarity, a head of department who actually spent time learning about his post.
    Incidentally the best efficiency would surely be if there was just one company running it all; with franchises / ROSCOS / etc. each needing to feather their own nest, I refuse to believe the current setup is the most economic solution. And someone please pass Tom Windsor the big wooden spoon he so richly deserves.

  • John

    Under the Railways Act it is not for Network Rail to decide on strategy and accordingly they do not have in-house transport planners. They do employ people who believe themselves to be transport economists whose mantra is ‘the role of rail is to move people to and from Major Cities quickly’.
    Certainly the view is often expressed that money is made from long distance train services – but how much of the population would be served by a network cut back to suit such a mantra, and could Govt support be justified ? Are we absolutely sure that local lightweight (Parry People Mover etc) is not money making (with bonus of making the network accessible) ?
    Who audits the transport economists ?

  • RapidAssistant

    Quote “he has a chance of the big job in a year or two.”

    That’s assuming of course that the coalition lasts that long – which I still doubt.

  • I don’t agree, Rapid, even though I wish I could. Think about it – how wil the coalition collapse? Both sides know it would be disastrous, especially with a resurgent Labour party no longer in hock to New Labour and with a new leader. Whatever internal problems they might have, they know they have to brazen it out as there is no alternative.

  • Stephen G

    If there are cuts to be made in railway investment, then HS2 should be the first to go. With the upgrading of the WCML and return to main line status of the Chiltern line, it should not be made a priority. Far better to concentrate on getting the most out of the existing network to create better freight paths and bide our time until the economy improves. Smaller less expensive projects such as East-West Rail would arguably bring better value for money than a line which will never be able to compete with the low-cost airlines and create obstacles for Chiltern’s future plans to extend to Rugby and eventually Leicester.

  • Dan

    Yes, but as I’ve said before on these blogs these (possibly sensible) comments about HS2 here have no relation to how decisions are made in a political environment – both parties commited to going froward with HS2 – all these politicians sat round and said “we’ll do it” – the Tories even said it 1st – you can’t then turn round and say “oh actually we did say that but we’re not going to” as every journo, opposition MP etc then says – “so you told us you were going to do something, but you did not do it as soon as you got in to power you changed your mind – so how can we believe anything else you told us you would do”. It becomes a decision made for reasons that are nothing to do with rational transport planning – we may not like that – but when you want taxpayers money for things you have to do what the politicos want to do. The consequences can be bad – but that’s the way it is.

    Again, it’s like the debate about building motorways – it would have made more sense on a rational level to have pressed ahead with a national plan for by passes as many advocated at the time – but it would now be unthinkable not to have an M-way network!

    All the stuff about being ‘able to afford it’ style debates are largely irrelevant too. Big projects look unaffordable – but they are not, it’s ongoing subsidy that costs a lot, not up front capital investment. We should juts get on with building it – and sign the contracts with construction companies when they are desperate due to the recession and for once sign up to contracts that are more favourbale to the taxpayer.

  • Matt

    Rapid – the other thing about the coalition only has to have 45% of the votes in a no confidence motion to survive – effectively the Tories could govern alone

    Dan: “All the stuff about being ‘able to afford it’ style debates are largely irrelevant too. Big projects look unaffordable – but they are not, it’s ongoing subsidy that costs a lot, not up front capital investment.” – that sounds like PPP – are you Gordon Brown in disguise?

  • Matt

    Dan – and another thing, this isn’t true:
    “– you can’t then turn round and say “oh actually we did say that but we’re not going to” as every journo, opposition MP etc then says – “so you told us you were going to do something, but you did not do it as soon as you got in to power you changed your mind – so how can we believe anything else you told us you would do”. ”

    The history of politics is littered with U turns. The Poll Tax? Football ID scheme of the 1980s (abandoned after Hillsborough)?

    What will happen is that either an inquiry will be set up which will poo-poo the idea, or a new Sec for Transport will say things such as ‘things have changed etc, we didn’t forsee x” and the scheme will be quietly dropped.

    Afterall, we only built the Channel Tunnel as a sop to the Europhile wing of the Tory party before they became an extinct species.

  • RapidAssistant

    Matt, Christian – what if, just what if there was a Tory/Lib Dem “falling out” – and David Cameron called a snap election if the Tories were wildly ahead in the polls to gain an outright majoriry. Unlikely though as the coalition will be about as popular as the proverbial nettles in a nudist colony once the cuts and tax hikes start to bite. Has there been a piece of legislation passed yet to enforce fixed five year terms? I know that there is any number of permutations and scenarios and you could debate it until doomsday.

    Equally remember that the up front costs of a large piece of shiny new infrastructure is only the beginning – once you’ve built it you have to then maintain it which is something that seldom gets discussed upfront.

  • Dan

    “The history of politics is littered with U turns. The Poll Tax?”

    The Council Tax is almost identical to the Poll tax in that the vast balance of tax falls on a high number of middle banded properties. The higher bands are limited in their % relationship to the lowest band, they can’t be more than x times the lowest band even if the dwelling value is 10x times the cheapest home – that was no U turn. It was the same thing spun as something else.

    “Football ID scheme of the 1980s (abandoned after Hillsborough)?”

    Don’t reacll this being a major manifesto plank in the same way, nor one that could be easily picked on by opponents and allow finger pointing ‘you lied to us’ accusations. Sorry but not in the same league.

    More comparable would be things like Blue Streak – a comparison with that would be more useful. HS2 is becoming a ‘concorde’ style project.

    Yes, a new sec of state may do as you say – but they will be attacked for it by opponents – and then the whole 3rd runway goes back on the agenda – which opens up oppostion to say to lots of people “see they lied to you” – HS2 may not get built soon, but they WILL keep telling you it will be, they WILL cut other funds to divert money in to pre planning.

    The hype surrounding DB planning German – UK ICE tests and 2013 running and such stuff all will help push HS2 along.

    I’m not saying HS2 migth not be a waste of money – I’m saying the money will be spent – lets start discussing how to ensure it is not wasted. the biggest waste of money comes with delay – lets get on with it.

  • Matt

    Dan you seem to be saying even if its the wrong thing to do, we should get on and spend the money anyway. That doesn’t sound like a good way to invest.

    This country doesn’t need HS2. It has no business case. No-one flies from London to Birmingham or Leeds anymore, so where are the customers coming from? HS1/ Eurotunnel’s business case was based on wholefully over optimistic passenger numbers. Result? A £5 billion investment will be sold for £1.5billion.

    And who benefits? Rail travel is a minority mode, enjoyed by the wealthier sections of society. Basically we are talking of investing billions of taxpayer pounds (at a time remember when the costs of an ageing population will really be starting to pinch) on a scheme for the well off.

    U turn or no U turn. Any sensible govt has only one option: Get Rid

  • Dan

    “Dan you seem to be saying even if its the wrong thing to do, we should get on and spend the money anyway. That doesn’t sound like a good way to invest.”

    Matt – I’m not saying that is what we SHOULD do – I’m saying that is what will happen – that is what happens in political decision making cultures. Debates about business cases (which are largely faked up anyway to justify the political decisions – see Christian’s writings on that topic for a greater explanation – are irrelevant).

    I’m seekign to add to the knowldge pool by trying to exaplain what happens, not justify it.

    And – I must say suggesting that benefits of rail (or whatever) are only felt by users is shortsighted (how clogged would roads be if every rail passenger took to the car for each train journey they otherwise make?).

    Also cost of HS1 in terms of sale price is not connected with build cost – which is why it is pointless to sell it – but that is a different debate.

  • Tom

    “effectively the Tories could govern alone”

    They’d never pass the Finance Act, though, and without a budget the legitimacy of a government is virtually nil.

  • RapidAssistant

    Tom – stranger things have happened. Remember how much John Major stuttered and limped along for five years between 1992-1997, narrowly avoiding a no-confidence motion during the Europe debacle – remember the Maastricht Treaty and the Social Chapter (of which Cameron would pull out of if there had been a Tory majority) – yet still managed to survive somehow.

    It’s early days yet – 4 months is hardly indicative of how this situation will pan out. My guess is there are rocky times ahead.

  • A

    I think you need a better source!

  • A – wonderful email address – but my source was impeccable. Watch this space.

  • Rhydgaled

    @Matt: “This country doesn’t need HS2. It has no business case. No-one flies from London to Birmingham or Leeds anymore.”

    I agree that HS2, in the form outlined by the company of the same name, should be scrapped. In my opinion HighSpeed (160mph+) rail should only be built if it stacks up on enviromental grounds. Unless a new HighSpeed line can enable effective competition with air travel then building new conventional heavy rail (75-150mph) capacity is probably the better option. If further HighSpeed rail is to be built (which on cost grounds I doubt will happen) the proposed Leeds spur should be abandoned and once the line has opened to Birmingham work should continue northwards to Manchester and Glasgow, to actually compete with air travel. Another possibility for competition with air is a line from the London end of the one to Glasgow to Plymouth (via Bath (where trains could join the Great Western to Bristol)).

    As for the increase in conventional rail subsidy, closing lines is not the answer (that could be an enviromental desaster, as rail atracts passengers out of their cars better than buses). The problem has to be with the fragmentation, with each company out to make itself a profit (although there’s somthing going on with Network Rail’s costs for work too). The best solution would be to fix Network Rail’s overpricing (no idea how) and bring the entire network and rail assets (eg. rolling stock) back into public ownership (except for open access operators, who could keep any stock they actually own or lease some of British Rail mrk2’s.

  • Steve T

    Just a personal view on HS2 which is a little different.

    Cut the expensive infrastructure to get from Old Oak Common to Euston and terminate at Paddington. There are about to be major upgrades from Paddington to Maidenhead so integrate that part of HS2 with Crossrail urgently and have the lines ready.

    14 of the 24 trains an hour on Crossrail are planned to terminate at Paddington after going through central London. Use those 14 trains to get all suburban and Heathrow services out of Paddington electrified so that platforms at Paddington are freed up for HS2. I know this means a little bit more electrification to Reading (+Oxford/Newbury?) and the Greenford branches but this extra electrification is probably a lot cheaper than tunnelling under Primrose Hill??

    Going North from Old Oak Common – similar to HS1 and the M20, get the new route to follow the M40 instead of cutting swathes through gorgeous countryside blighting millions of homes. It would also probably be cheaper as much of the land being next to a motorway will be easier to develop into a Railway. Much of the route selection has already been levelled as well.

  • RapidAssistant

    The trouble with all this is that when it comes to railways, everyone is an instant expert. We all know what needs to be done, and why hasn’t it been done. And so it is with new ministers going into the Department for Transport (or any government department for that matter) – go in with “all guns blazing” thinking they can solve everything overnight. Then for a whole variety of technical, political and financial reasons find they can’t. The thorny issue inevitably comes down to money.

    Take overcrowding on the railways, you either lengthen trains or make them run more frequently. To do the former you have to procure and prove new rolling stock, the latter involves a combination of buying more trains and eliminating bottlenecks from the network through restoring double track sections and remodelling junctions – the principal reason that many timetables haven’t changed since BR days.

    The point is both scenarios require capital investment from government, and I don’t see any way of avoiding this. It’s the same old old weasel words that come from prospective governments – “we will reduce waste” and “improve efficiency” – how exactly???? That’s what rail privatisation was supposed to do and they discovered too late that British Rail was very good at making a silk purse from a sows ear……..

  • Alan Ji

    “RapidAssistant Said, …………. the up front costs of a large piece of shiny new infrastructure is only the beginning – once you’ve built it you have to then maintain it which is something that seldom gets discussed upfront.
    ReplyPosted on September 21st, 2010 at 8:18 am ”

    Technology has been getting more robust for centuries, but recently many technologies have been getting so robust that they don’t need much maintenance. Some readers will live to hear their grandchildren ask what that word used tomean..

  • Dan

    Technology has been getting more robust for centuries, but recently many technologies have been getting so robust that they don’t need much maintenance.

    Umm…..- why can’t this happen to my boiler then….

  • RapidAssistant

    Alan Ji – true, but this isn’t cars, television sets or other consumer durables we are talking about, which nowadays are largely maintenance free in comparison to days of old.

    There have indeed been huge reductions in the amount of maintenance (and not to mention a rigorous inspection regime that is enforced by law), that large civil engineering assets such as railways need – but it is still significant and is one of the reasons why railways are much more expensive to maintain than roads. These are the things that have been glossed over in the excitement over HS2.

  • Dan

    In an effort to be a bit more serious – the issue for some of these products is not so much ‘maintenance free’ but ‘maintenance not possible’. Illustrated to me by my friends car flat battery at summer campsite which ended up with wiped on board car pc and whole car had to be towed home to local dealer – 150 miles. We’d have bump started this as recently as the early 1990s.

    I bet this happens to trains when the on board computers go wrong and the whole unit has to be failed – when in old days the driver would have coaxed it.

    This does not matter if the technology reduces costs overall (of the train and the energy it uses) over its lifecycle – but does it? The toilets still smell on a Pendolino (but you have air conditioning that makes the train queit – which is not always a good thing on public transport as it just makes you have to listen to the next persons mobile / ipod / kids etc etc – so arguably pointless). When a failed sub assembly pulls a whole train out – then the cost of a replacment train makes the cheap sub assembly not so cheap after all…..

  • Peter Davidson

    Grrrrr…….yet another set of domestic blinkers being applied to HSR logic

    How many times does it need saying – HSR doesn’t work on a purely domestic stage – HS2, HS3 or any other lines this programme spawns are not directly about linking the provinces with London. No one flies from Birmingham to London anymore and the numbers using airborne links between Manchester and the UK capital have fallen significantly now that the full benefits (journey time reductions & vastly improved punctuality) of the expensive and long drawn out WCML refurbishment are in place.

    HSR is not about shrinking the journey times between major UK cities. The HSR rollout across the UK provinces is primarily about linking rest of the UK to mainland Europe – can’t speak for others but when I finally get the opportunity to board a High Speed Service emanating from my Region (NW England) the very last place I’ll be heading for is LONDON!!

    Prevarication, uncertainty and delay are the biggest enemies now – let’s just get on with building the damn thing, toute suite!!!!

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