Is there really a financial crisis on the railways?


Almost unnoticed, the railways are enjoying an investment boom. Major projects, such as Crossrail, Thameslink and the East London Line Extension are under construction while electrification of the Great Western line to Bristol and South Wales and the Liverpool – Manchester route has been promised. There is even talk of building a north south high speed line though that will take years even to get onto the drawing board, despite the fact the idea has cross party support.

 There is big money involved. Crossrail, including the Treasury’s optimum bias premium is £16m, Thameslink tops £5.5bn and the East London Line will cost around £1bn. Then there’s Network Rail’s current five year investment programme which started in April this year and is worth over £30bn (though some of that is double counting and much is being spent on routine maintenance and renewal). It includes the redevelopment of Reading and Birmingham New Street stations, as well as a whole host of line improvements to speed up journeys on key routes such Edinburgh – Glasgow and London – Sheffield.

 This is the biggest programme of railway improvements in decades, but, and there has to be a ‘but’, there is an air of unreality about it given that we are in a recession and public spending cuts are on the way. One train franchise, National Express East Coast, has just thrown the towel in and there are fears there may be others as passenger growth stalls. And while there is a pretence that some of this money is coming from the private sector, the bald fact is that nearly all of is being paid for out of the public purse. There is an air of disbelief in the rail industry that all this investment will really go through just as the recession is biting.

 There is, too, a worrying historic precedent. The last time that the railways had comparable amounts available for investment was the Modernisation Plan of the mid 1950s when the Tory government of the day embarked on a programme costing over £1bn (worth £22bn now, but proportionately even more). Electrification was going to be a central plank but much money was wasted on redundant schemes, such as huge marshalling yards and new steam engines. Within a few years it was dubbed a failure and a certain Dr Richard Beeching was appointed as the chairman of British Railways. His recipe, of course, was quite the opposite, and following his advice, a third of the network was closed in the 1960s and 1970s.

 However, the railways are better protected against such an eventuality than they have ever been. Thanks to the complex and almost incomprehensible system of Network Rail negotiating its investment programme with the Office of Rail Regulation in five year periods, with a budget guaranteed from the government, the railways’ money is virtually ringfenced. An incoming government – Tory or Labour – intent on cuts to transport, would find it very difficult to cut back on the agreed programme which happens to run till 2014. Privatisation may have been botched, as virtually all politicians agree, and wasted billions of pounds of taxpayers money through the cost of making the changes and the continued extra subsidy that feeds through to private companies’ pockets, but it has had the undoubted advantage of guaranteeing the budget for the railways for the medium term.

 There is a risk that some of the big projects may be scaled back or not go through. Crossrail, in particular, is vulnerable as the Tories are not unequivocally committed to it and station redevelopments are inevitably dependent on property values, but most of this programme is safe. Rail is back in fashion and politicians while it does not yet have the status of education or health, there are no votes to be won in cutting back on rail investment. Indeed, it is the roads budget that would be a more obvious source of savings since it does not have the same long term protection as Network Rail’s programme. There will be no second Dr Beeching and the survival of the existing rail network is guaranteed.

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