The future’s electric

Jimmy Savile was wrong. This is the age of the train, rather than the late   Seventies/early Eighties when he was the face of British Rail advertising   and immortalised that slogan.

The huge prominence given to yesterday’s announcement of the investment   programme for the railways shows how far we have come from the dog days of   the Beeching cuts and the decades that followed, years in which British   Rail’s finances were permanently squeezed by a series of unsympathetic   governments. When the beleaguered Prime Minister and Deputy Prime Minister   use an announcement about the railways to show how they are going to   kick-start the economy – and incidentally to tell us that they are still   good friends – it is clear that ministers see the revitalised rail industry   as a key part of Britain’s infrastructure for the 21st century.

Contrast this with the consultation paper on aviation, slipped out almost   apologetically last week, which left the key issue, the need for more   capacity in the South East, unaddressed. Rail development smacks of   motherhood and apple pie by comparison.

Of course, scrutiny of the details reveals the usual flim-flam and hype   associated with government announcements. This is not the “biggest railway   investment since Victorian times” – most of the schemes have previously been   announced and there is little real new money. The widely touted £9.4 billion   figure is for improvements over a five-year period, which works out at under   £2 billion per year; that is pretty much in line with spending sanctioned by   the previous government (the comparable figure was £7.4 billion, equivalent   to just under £9 billion in today’s money) and much less than the £1.24   billion (roughly £25 billion in today’s money) modernisation plan   implemented by Winston Churchill’s government in the mid 1950s.

The “network grant”, which represents the main subsidy to the industry, is   expected to be £18.3 billion for the 2014-19 period represented by this   announcement, slightly more than the allocation of £17.6 billion during the   current five-year period and less if inflation is taken into account. David   Cameron’s statement that investment in the railways is being “accelerated”   may, therefore, be just about statistically correct, but the pace is more   2CV than Ferrari. Certainly, yesterday’s announcement does not represent the   step change in investment implied by the spin but is rather a continuation –   indeed very welcome – of support for the railways.

There is no mention of the private sector footing any of the bill. This   reflects the reality of the quasi-privatised railway but it is an irony   given that the railways were privatised in the 1990s precisely on the basis   that governments would no longer have to foot the bill. Railway insiders   always knew this would be a nonsense, since networks across the world have   only very rarely been able to pay for themselves, but this latest   announcement merely highlights that the industry will always need a helping   hand from taxpayers.

Apart from stacking yet more on to Network Rail’s burgeoning debt, currently   £27 billion, the money for the investment has to come from either taxes or   fares. This Government has followed its predecessor in trying to increase   the farepayers’ proportion of overall expenditure from around a half to two   thirds. The justification is that fare rises help pay for the investment but   in reality they merely allow the Government to keep subsidies down.

However, this year Justine Greening, the Transport Secretary, managed to   persuade the Treasury at the last moment to impose a fare increase of 1 per   cent above inflation, rather than the 3 per cent proposed. In her press   briefing yesterday, she made clear that she was trying hard to limit the   rise for January 2013. Indeed, it is politically difficult for the   Government to allow fares to rise well above inflation when it holds down   proposed fuel tax increases, given that doing this costs the Treasury much   more than a freeze on fares.

Despite these caveats, there is much good news in the plan, with the emphasis   on electrification, improvements for freight and, in a way most important,   the long-term commitment to railways that is being displayed. The growth in   rail use of the past two decades has been phenomenal, with numbers using the   network almost doubling. Despite the recession and austerity measures,   passenger numbers are still going up, by around 6 per cent this year. The   political emphasis on rail, therefore, can be seen partly as a response to   demand. Ms Greening mentioned how “twentysomethings” were increasingly   sticking to rail rather than using cars as soon as they were able to drive.   This does seem to represent a social trend because, as one young woman put   it to me: “Why would we want to drive when we can use our iPhones and iPads   on the train?” Facebook and Twitter, in other words, have become the   railways’ new best friend and many companies have installed Wi-Fi in their   carriages.

All of this planned investment is directed at the existing network, with the   cost of HS2, the proposed new north-south high speed line, accounted for   separately by the Department for Transport. Opponents of the new line   suggest that this focus on the current network may point to the commitment   to HS2 wavering; this was denied by government sources but it would   certainly make it easier to postpone the £32 billion HS2 project.

Politics is never far from railway schemes and this announcement is no   exception. Rail investment has been criticised as very London-centric, given   that two huge schemes, Crossrail and Thameslink, are under way. Now, in an   effort to improve the electoral prospects of Tories in the North, the   emphasis has shifted away from the capital.

In particular, the electrification of the Welsh valley lines has long been   sought by the Assembly in Wales, where Tory fortunes revived slightly at the   2010 election, as has the extension of wires to Swansea, rather than the   previous end point of Cardiff, on the Great Western line. The Coalition   clearly hopes, too, that the proposed electrification of the Midland main   line between Bedford and Sheffield will not go unnoticed in Nick Clegg’s   constituency of Sheffield Hallam.

As a consequence, given the limited amount of new money available, other   widely supported schemes, such as electrifying the Barking to Gospel Oak   line, a key freight route linking east and north London, and the reopening   of the Uckfield to Lewes line closed by Beeching, which would relieve   pressure on the overcrowded Brighton main line, have not been included.   Despite the confidence expressed in railways by the Government, the industry   still faces problems resulting from the privatisation of the mid 1990s,   which all parties now accept was botched. It has left the industry   fragmented and with a high cost structure that was highlighted by Sir Roy   McNulty’s report on the industry last year.

The Government wants the industry to cut costs by 30 per cent, as recommended   by McNulty, by the end of the decade, arguing that costs are much higher   than those of equivalent railways on the Continent. However, those networks   are not burdened with a franchising structure that results in excessive   costs and duplication; nor, even though they are state-owned, with the level   of micromanagement employed by the Department for Transport (widely referred   to as Daft across the industry).

The Government has stressed that unless these savings can be found, investment   will be cut and fares will have to rise. Yesterday’s announcement is, in   fact, the start of a complex process which involves the Office of Rail   Regulation assessing whether these plans are realistic given the amount of   money available.

It is impossible to say yet, but if the Government has set out these projects   on the basis that the reductions can be carried out and the ORR decides it   has been over-optimistic, then some may be shelved. Before rail supporters   can rejoice, they must await the ORR’s verdict, which will not be delivered   until next year. Then, perhaps, they will try to resurrect poor old Jimmy   Savile.

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