Supplementary memorandum by the Railway
Reform Group (RI 11A)
The Transport Sub-committee has already invited
evidence on the role of the (currently shadow) Strategic Rail
Authority in the renewal, maintenance and development of the rail
network both directly and by securing investment from sources
other than Railtrack, including from train operating companies
through the franchise replacement process. In addition the Sub-committee
will consider what criteria the Authority is using to decide on
the replacement of franchises. In the light of developments during
the summer, in particular the publication of the Government's
10-year plan for transport, this further supplementary memorandum
of evidence is presented by the Railway Reform Group. As the Rail
Regulator was due to publish his final conclusions at the time
of writing this memorandum we have sought the Sub-committee's
permission to present a further supplementary memorandum, if appropriate
to do so, with our observations on the outcome of the periodic
review of Railtrack's access charges by the Rail Regulator, rather
than rely on the draft conclusions published earlier.
The defects in the railway industry structure
identified in the 10-year plan placed the absence of a framework
for strategic planning of the industry as a whole at the forefront
and identified the failure of the structure in particular to cope
with the need for significant investment to accommodate sharply
increased growth in both passenger and freight traffic. Set against
a strategic aim of increasing the use of the railway by passengers
and freight, with enhanced capacity to meet demand and improving
the quality of service to all customers, the "bigger and
better railway" was to be created by a true public and private
The SRA: A role searching for accountability
The role of the Strategic Rail Authority is
defined in its enabling legislation but the 10-year plan specifies
that the SRA will "decide what quality and capacity improvements
are needed. It will procure them. . .will monitor delivery. .
.be empowered to take swift action" and "will work to
the directions and guidance from Ministers". Against this
role the SRA will have sole accountability for the disbursement
of £29 billion consisting of:
£12 billion for revenue support
of passenger and freight train operators;
£7 billion for the Rail Modernisation
Fund to facilitate an increased use of the network by 50 per cent
for passenger use and 80 per cent for freight;
£4 billion for what are described
as capital payments for renewal schemes, notably the West Coast
£5 billion for completion of
Channel Tunnel Rail Link and the development of St Pancras/King's
£1 billion for residual liabilities
of the British Railways Board and contributions to railway pensions
The Value for Money Question
Given the scale of this spending the key question
appears to us to be, what confidence can the nation and Government
have that in the SRA we have a mechanism for achieving in its
Chairman's words "a bigger bang for the taxpayers buck".
In short will good, or even adequate, value for money be derived
from this greatly increased level of public expenditure. Based
on performance so far of the shadow SRA we, regrettably, remain
to be convinced.
THE SRA: FITTING
As we pointed out in our initial memorandum
of evidence, substantial development of appropriate evaluation,
appraisal and analytical techniques has taken place since the
early 1960s and this should place the SRA in an enviable position
in regard to drawing on this collective expertise. In addition
the DETR has, as part of the 10 year plan process constructed
a robust and inclusive forecasting model which has concluded that
high rates of passenger and freight growth usage will continue
for the foreseeable future. The SRA therefore has access to a
formidable "toolkit" to prioritise its delivery. The
difficulty appears to be that it has no framework within which
to apply the range of techniques. Moreover in at least one case,
on the evidence of an admission from one of its senior managers,
the SRA may be "flying blind by the seat of its pants"
rather more than realised.
The absence of a framework has varying degrees
of effect clearly related to quantum of public money dispersed
but also has a common thread of making comparisons between different
types of schemes difficult most of the time and sometimes impossible.
The effects of framework absence
For small schemes (for instance, additional
revenue support (£100k), the existing system might be considered
satisfactory. An appraisal framework has been published, and schemes
can be analysed within this; however, the passmark remains unclear
and, as a result, it is difficult to judge the Value for Money
of any particular scheme.
A much greater problem comes with medium-sized
schemes. These are the key schemes which are going to make the
big difference in delivering rail service improvements across
the network, rather than just on selected key routes. Because
rail is a capital-intensive mode, many schemes cost a small number
of millions of pounds. Liaison is necessary with Railtrack, but
the existing system of expenditure led by single-operator Customer
Reasonable Requirements with the overlay of Incremental Outputs
Statements from the SRA, does not lend itself easily to a strategic
view of network development (for instance if a proposal benefits
several industry parties, but only to a small degree).
As an example, a developer-led proposal for
assistance with the capital funding of a new station may outgrow
the developer's remit if passing loops are also required in order
to ensure operational performance. Such loops, however, benefit
all TOCs on the line and potentially Railtrack; they are a strategic
asset, which calls for some strategic input.
The "Virtual Reality Railway"
A further example which has actually demonstrated
the pitfalls of an absence of framework even where there are existing
criteria, is the Anglia Railways service between Chelmsford and
Basingstoke. Whilst this is dealt with in detail in Annex A, providing
£2.8 million of public funding from the Rail Passenger Partnership
Scheme, whose criteria at least nod in the direction of NATA by
including such criteria as "heritage", "air quality"
and "bio-diversity" the outcome is a higher level of
subsidy per passenger than the Island Line. This not only raises
questions of value for money but more serious basic questions
of competence of the sSRA. The failures outlined in detail in
Annex A are illustrative of what is really happening on the ground
rather than the image propounded of what we have referred to before
as "the virtual reality railway". As can be seen from
the Report in Annex A, in this instance inaction is shared by
the regulatory bodies.
The SRA: Activity or Action
Despite the existence in Railtrack's NMS of
a map clearly indicating existing and future line capacity problems,
the SRA has also appeared impotent in directing such development
speedily, and ensuring implementation. The apparent confusion
which the Virgin Groups proposals for franchise replacement on
the East Coast Main Line created within the sSRA and the unenthusiastic
initial response, amply demonstrate this.
The East Coast Main Line franchise replacement
is of course of a completely different order of magnitude but
we consider that the same lack of framework is clearly giving
rise to similar difficulties. In addition, at this level, both
the public and private sector sources will have different sets
of investment criteria which have to be reconciled. The public
sector has social benefit as its primary return based on cost
benefit analysis, while the financial appraisal approach of the
private sector concentrates on the profitability of the project.
The reconciliation of these two disparate approaches is the key
to mutual confidence and therefore success in the sought after
full public-private partnership which the Government seeks as
a delivery method in the 10 year plan.
As yet there is no published material to indicate
that the SRA have developed a technique similar in scope to NATA
(DETR, 2000) or the Common Appraisal Methodology (DoT, 1994) or
indeed has moved beyond its "propose and provide" immaturity
espoused early in the current franchise replacement process.
As we indicated earlier the predecessor of the
SRA, OPRAF, produced an evaluation method based on the government's
criteria for transport investment. Again however this was intended
for marginal improvements in the system rather than for the appraisal
of franchises or major schemes such as the West Coast Main Line.
The OPRAF (1997, 1999) techniques would be applicable
to small schemes costing £1-£10 million such as loops,
new or improved stations. There is no indication that NATA is
to be applied for example to major schemes in the Railtrack Network
Management Statement for any public sector element of expenditure.
This again begs the question as to how inter-operator appraisal
is carried out and how the different submissions for each franchise
are to be compared.
Appraisal by Default
We are aware of the existence of cost benefit
analysis based on techniques which are being used by bidders for
new franchises and which, it is understood, have been approved
by the SRA, if only by default in accepting the outputs from such
appraisals as a basis for franchise replacement bids. Railtrack,
of course, has its own appraisal techniques for investment which
incorporate both financial appraisal and the social aspects of
Given the clear objectives set out in the Integrated
Transport White Paper and numerous studies including:
comparative results of projects using
the Common Appraisal Technique indicating that in areas of high
traffic/people flow, rail provides the best solution;
the impact of "parkway"
stations on adjacent traffic road flows has been to reduce such
flows, eg Bristol Parkway;
the transfer of traffic from road
to high speed rail is confirmed by modal split effects of the
TGV in France;
the transfer from air (a highly pollutive
mode) to rail (a low pollution mode) is confirmed by Eurostar/air
modal split impacts and again by the French TGV network;
transfers to rail from car as a consequence
of service quality improvements on the East Coast Main Line. The
table at Annex B indicates the degree of effectiveness of such
in urban areas of several European
cities eg Amsterdam, Grenoble and Munich, the improvements in
rail/light rail services have led to significant and sustained
increases in patronage.
We should be confident in saying that the SRA should
be capable of justifying rail investment through:
increases in demand from service
change in modal split (road/rail);
reductions in road traffic (a consequence
of change in modal split);
without recourse to coercion transfer from other
modes such as road. In any event the environmental consequences
of "predict and provide" for road traffic requires new
motorways (with visual intrusion, potential SSSI/AONB implications,
eco-system effects which in themselves generate additional traffic
(DETR/Mogeridge)), thus clearly additional roads are not the answer
and the 10 year plan supports this analysis.
The argument that people must travel less is
similarly not wholly acceptable nor is it likely in a democratic,
expanding market economy. Travel is one of the basic consequences
of wealth and freedom, particularly when put in the context of
recent eastern European experiences. Thus the most sustainable
form of transport in mass movement has to be encouraged and rail
meets that objective. The potential benefits to the industry as
a result of pro-actively pursuing policies which encourage modal
shift have been understood since the early 1990s and are illustrated
at Annex B. We also note that actual trends have confirmed these
Government expenditure on infrastructure (and
possibly rolling stock) can therefore be justified in cost benefit
terms. The primary criteria are:
(a) journey time reductions;
(b) resource costs of operating vehicles;
(c) accident cost reductions (safety);
(d) environmental improvements;
(e) economic regeneration and expansion.
and any proposal put forward by TOCs/Railtrack has
to be justified in terms of these criteria. Similarly the criteria
applicable to the SRA in determining its total expenditure and
allocation to franchises has to be taken into account.
Suggested criteria for assessing franchise replacement
Given the preceding justification for input
of "the taxpayers buck" assessment of new franchises
should transparently take into account the following criteria:
1. the service reflects demand flows and
has appropriate "cut off" points for adjacent franchises;
2. the franchise is sufficiently large to
be operationally possible and to achieve economies of scale but
be managed locally to achieve maximum market growth;
3. the franchise creates a dynamic railway
whose primary concern is service quality and an efficient attractive
railway serving customer needs;
4. any services on currently peripheral routes
will become major services where improved frequencies will lead
to increased demand;
5. the creation of "hubs" where
appropriate will allow increased frequencies leading towards a
strategic rational network of interval services;
6. that while political imperatives will
be a factor (the SRA is after all a politically appointed body),
value for money and operational feasibility will be the primary
elements in the Strategic Rail Authority's decisions.
Targeting the "Taxpayers Buck"
Research has consistently shown that the largest
potential mode shifts from road to rail are in off-peak trips
in the London & South East area, and in all trips in the "Middle
England" triangular belt between Bristol, Liverpool and Hull.
Only in these areas are there potential rail service improvements
large enough to change the balance between modes, and large enough
quantities to trips to be transferred to make a difference to
conditions on the roads.
For instance, in "Middle England",
road congestion is becoming an issue of growing importance. Not
only do traffic problems occur in the centres of urban areas such
as Oxford, Birmingham, Nottingham and Leeds, but also now on the
motorways and trunk roads linking these centres.
Many InterCity routes are already the subject
of service development, for those long-distance trips for which
they are suitable. However, people make far more medium-distance
trips, which suggests to us and others greater potential for inter-urban
services elsewhere in the country.
On the other hand, inter-urban train service
frequencies in Middle England are often only hourly, even between
significant centres of population (eg Sheffield & Nottingham,
Manchester/Stoke & Birmingham, and Birmingham & Bristol).
Theory shows that the reduction in headway from hourly to half-hourly
makes a significant difference to the ease of difficulty of making
a journey by rail, and therefore can "get people out of their
cars". So proposals for rail service frequency increases
on inter-urban flows in this area could make a significant impact.
Thus it is that a (barely-perceptible) one per cent mode shift
was forecast nationally from franchisees' proposed rail service
improvements, but a much higher and noticeable figure for the
West Midlands area (Harris, 1997).
Most proposals for such service enhancements
also create new links, by adding direct services between urban
areas not currently linked by rail except by a change of train.
An example of this is the proposed OxfordCoventryNottingham
service. Although all parts of this route are already served at
least every hour, through journeys require at least one interchange.
However, rationalisation of infrastructure in the past now means
that the introduction of additional services is not always possible
without costly enhancement worksfor instance, in raising
line speeds, double-tracking or adding passing loops for passenger
trains to overtake freight trains.
An example of this is the single-track LeamingtonCoventry
line. On the one hand, an increase in line speed has been suggested,
in order to minimise the time that trains spend on this line.
On the other hand, there are local authority-supported proposals
for an intermediate station at Kenilworth. Although Railtrack
believes that it can increase the number of trains passing along
the line without significant expenditure, a strategic investment
in double-tracking would greatly facilitate the planned increase
in train frequency (both passenger and freight) without prejudicing
train service reliability.
The sSRA has yet to publish its Strategic Plan,
already delayed twice. Expectations of this Plan are extremely
high and the level of committed Government funding supports this
high level of expectation. The plan must provide the framework
which is needed and which the current activity of establishing
discrete Project Development Boards jointly by the SRA with Railtrack
do not begin to address.
The Strategic Plan must also provide for a process
of reconciling the two disparate approaches to investment appraisal.
As we have observed, both the public and private sector have different
sets of investment criteria which have to be reconciled. Only
when this is achieved and social benefit is seen as transparently
balanced with profitability, thus sterilising the debate about
profits and safety, will the SRA have any claim to leadership
of the industry. Without mutual confidence being established there
will be no success in the sought after full public-private partnership
which the Government seeks as the delivery mechanism of the ten-year
Currently however, as a result of a lack of
framework, opportunities are being lostfor railway development,
modal shift, and the achievement of Government's stated objectives.
With a range of forecasting tools indicating
a continuing latent growth for rail travel, the significance of
such lost opportunities will become increasingly apparent if the
rail network becomes increasingly unreliable and over-crowded,
whilst still failing to meet the needs of several key markets.
This is particularly the case across that swathe of Middle England
which is politically-important.
The Railway Reform Group
18 October 2000
DoT (1994) Common Appraisal Framework for urban
transport projects; MVA/Oscar Faber/ITS Leeds for Department of
Transport, London and Birmingham City Council.
DETR (2000) Guidance on the Methodology for
Multi Modal Studies (as a basis for the New Approach to Transport
Appraisal (NATA)) DETR, London.
OPRAF (1999a) Rail Passenger Partnership: Bidding
Guidance Office of Passenger Rail Franchising, London.
OPRAF (1999b) Planning Criteriaa guide
to the appraisal of support for passenger rail services, OPRAF,
OPRAF (1997) Appraisal of Support for Rail Passenger
ServicesPlanning Criteria "a criteria guide"
Harris, N G (1997) "The Privatisation of
British Rail and its Impact on Mode Share", IHT Lecture,
University of Newcastle.