Planning for new rolling stock
12. NITHC had identified the need to replace the
Class 80 rolling stock "before the end of the decade"
Initially, the acquisition of new rolling stock was seen as one
of four possible Private Finance Initiative (PFI) schemes for
An outline business case was completed in February 1998. DRD told
us that, following the Chancellor's announcement in May 1998 of
a major economic strategy aimed at promoting enterprise and encouraging
investment throughout Northern Ireland, a review was initiated
of potential Public/Private Partnership (PPP) opportunities for
public transport services. These superseded the PFI reports, recommendations
of which were put on hold as it was considered that "such
options could potentially offer greater opportunities to attract
both private sector finance and management skills."
13. The PPP study report, completed in December 1999,
concluded that PPP options involving the private sector were preferable
to options retaining services wholly in the public sector. It
also concluded that a franchise-type arrangement was likely to
prove the most effective means of achieving project objectives,
of which the most important is access to external sources of finance.
On timescale, the conclusion was that a PPP arrangement could
not be in place before 2005, with new trains following in 2006/7
at the earliest.
This report is currently under consideration by Northern Ireland
14. In view of the substantial period of time before
a PPP project could be expected to produce new rolling stock,
a review of interim train requirements and investment needs was
undertaken. This was completed in January 2000.
NITHC told us that a "do nothing" option was not considered
as the resultant severe curtailment of timetabled services was
contrary to Government policy.
Five options were selected for detailed appraisal, the capital
cost of which ranged from £7.4 million to £45.8 million.
15. The preferred option of the DRD would provide
for minor refurbishment of seven Class 80 units and six Mark II
coaches in 2000-01, and purchase of eight new three car sets and
four two car sets, to be introduced in 2002-03.
The capital expenditure cost will total £45.8 million, of
which £3.4 million will fall in 2000-01 and £1.4 million
This expenditure, totalling £4.8 million, would be exclusively
for refurbishment of existing units.
16. DRD told us
that the 1998 Comprehensive Spending Review (CSR) had provided
for expenditure of £5 million on railway rolling stock in
Northern Ireland. The CSR allocated a further £5 million
for 2001-02, subject to confirmation in the 2000 Spending Review.
As at that time the replacement of rolling stock was the subject
of a PFI Outline Business Case, provision was also made for an
additional £8 million in 2001-02 to meet the anticipated
annual cost associated with this. The aggregate of these three
sums appears to be the origin of the £18 million figure which
appeared in the press.
17. At present, only the refurbishment element of
the expenditure has been approved as DRD recognises that this
is now required irrespective of what solution is chosen for the
longer term, due to the amount of time needed to acquire new train
sets. However, DRD considers that decisions on the acquisition
of new stock should be held pending the outcome of the Railways
Task Force review. It has accordingly authorised NITHC to proceed
only with this refurbishment.
DRD is bidding in the 2000 Spending Review for the necessary resources
to enable NIR to start a programme of purchasing new trains.
18. NITHC told us that the effect of this refurbishment
is that NIR will again have a full minimum operational number
of train sets in March 2002 and a full fleet complement by the
end of 2002. However, we were told
that this situation will only exist for a short period, before
further sets would need to be taken out of service for refurbishment.
In any event, NITHC witnesses were unenthusiastic about having
to resort to refurbishment, rather than acquire new trains. Mr
Hesketh, the Managing Director, commented:
".... The idea of sending
30 year old trains across the water to get them patched and welded
is abhorrent to us but we have no choice. At this point in time,
it is the only way we can continue to operate trains safely with
the money available. We would much prefer even to see that money
spent on leasing new trains and the money we are spending on the
patch and weld job, as I call it, would go a long way to do that.
We would have all the benefits of new trains and all the customer
benefits that that brings, the reliability, the comfort, air-conditioning;
whereas all we are doing is patching up trains that are at or
near life expiry. We are not getting any advantage to the customer
from the significant millions of pounds that we are going to spend
over the next two years.".
19. DRD, for its part, also recognises that the year
2003 represents a key date in deciding the future of the railways
in Northern Ireland. As Mr Sweeney put it:
"Certainly, in any event,
we have reached the stage where there are some very fundamental
decisions required; of that there is no doubt. There is a threshold
now that is very clear, the year 2003, that if we are to continue
with the existing network it will require some very fundamental
decisions to put very significant investment in place. This is
something that has built up over the years, and, as I say, we
have reached the stage now where we must now make these fundamental
decisions, if Northern Ireland is to have the level of service
and network that it currently enjoys.".
20. We are inclined to agree with Mr Hesketh. Unless
there is to be very severe truncation of the network, some new
trains will be needed in any event.
It is clear that acquisition of the new trains is an essential
element in the strategy and that decisions need to be taken as
soon as possible, in the light of conclusions reached, following
the Railways Task Force Review, about the future size of the Northern
Ireland railway network.
21. We also sought information on how the balance
of the £5 million allocated for new rolling stock in 2000-01
was expected to be used. NITHC
saw it being used for ongoing revenue subvention, although it
had received no firm indications from DRD concerning its intentions.
Mr Aiken, the Corporate Affairs Director of NITHC, commented:
"We are simply assuming
that, if there were any surplus funds available on the rolling
stock procurement side or the refurbishment side, that would go
some way to addressing the overall funding deficiency."
DRD, for its part, anticipated
that the balance of the money will be allocated for work on upgrading
the brakes of the existing trains. Ultimately, it will be for
the Minister for Regional Development to decide.
22. Since we took evidence, two additional blocks
of funding for NIR in 2000-01 have been announced. We set out
further details of these at paragraph 59 below.
23. Likewise NITHC envisaged that the balance of
the further £5 million expected to be allocated for new rolling
stock in 2001-2 might be diverted to other useful capital expenditure.
DRD expected the allocation to be determined by its Minister after
the deliberations of the Railways Task Force had been completed.
DRD also commented that it would not be in a position to spend
any money under a PPP in 2001-02, so the further £8 million
allocated in the 1998 CSR for 2001-02 at present remains unallocated,
although it might be used to finance part of the interim solution.
24. We are concerned that the process of procuring
replacement stock for the Class 80 trains has been so drawn out.
A requirement was identified in 1993 for replacement around the
turn of the century. That should have provided sufficient time
for decisions to be taken and the stock to be acquired. These
decisions were not taken and the upshot is the need to have recourse
to an expensive, short-term solution.
25. On the evidence available to us, there appears
to have been a general lack of priority given to expenditure on
rolling stock replacement. The Government has itself admitted
that transport expenditure has been given a lower priority in
Northern Ireland than in Great Britain.
Mr Aiken of NITHC described the position as follows:
"The pattern during
the whole of the 1990s has been that the company would submit
a corporate plan which pointed out the funding requirements which
were usually well in excess of secured PE and the traditional
pattern then was that the plan would be brought back with a view
to trying to make it compliant with the available PE cover. That
process, a ritual which occurred every year, effectively created
a bow wave of under-investment and this year, for the first time,
we have quantified the scale of that under-investment."
DRD witnesses conceded that NITHC's bids for resources
had "been considered in annual spending rounds, and it is
true that they have not received as much, or indeed anything like
as much, as they wished to."
They maintained, though, that DRD had been bidding for extra money
for railway rolling stock for the past two years "but Ministers
have decided that other priorities were more important for the
limited amount of funds available in the Northern Ireland Block.".
Also, officials had not anticipated at the start of the public/private
partnership report that the lead-in period would be so long.
26. We hope that both the Northern Ireland Assembly
and the Northern Ireland Executive will take steps to prevent
a recurrence of this unfortunate situation. The quality of the
railway service in Northern Ireland has undoubtedly suffered as
a result of a continuity of Government indecision over how to
fund the new rolling stock. The deteriorating nature of the rolling
stock may well have been a factor in the significant decline in
usage of intra-Province services over the last three years.
A graph showing overall passenger numbers using these services
from 1992-93 to 1999-2000 inclusive is reproduced below. As Mr
Heron, a non-executive director of NITHC, commented:
"For someone like myself
who, because of where I live, regularly has to use the roads to
get into Belfast, there is not a sufficient alternative there
at this stage. If we continue the under-investment in the railway,
as has been the case over a large number of years, we are going
to see a further decline in people using quality alternatives
and increasing the pressure on the roads."
Passenger numbers: all services except
cross border services