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.