Select Committee on Public Accounts Eleventh Report

2 Delivery of expected benefits

5. Five of the seven existing English light rail systems examined by the National Audit Office had delivered many, but not all, of their anticipated benefits. Passenger numbers had fallen well short of forecasts on three of these schemes, often because of over-optimistic passenger forecasts. Significantly over optimistic forecasts for the Sheffield Supertram resulted in the South Yorkshire Passenger Transport Executive having to sell the operating concession for only £1 million against an original expectation of £80 million. This shortfall in privatisation proceeds meant that the Department had to provide the Executive with extra subsidies of £6 million a year to finance the Executive's debt. Passenger forecasts were generated using guidance set out by the Department. The Department scrutinised and approved passenger forecasts, using independent consultants. The Department acknowledged that its guidance and appraisals had been deficient. It had therefore issued new guidance, which it expected to tackle optimism bias in passenger forecasts. It had also set up a small dedicated corporate finance team staffed by financial experts, and was about to create a directorate specialising in major transport schemes, to strengthen its expertise in appraising schemes and to reduce its dependency on consultants.[5]

6. The Department accepted that it should not have approved systems that were poorly integrated with other forms of transport. Outside London, light rail and de-regulated bus services were competing against each other for custom, rather than working together to provide customers with a comprehensive through service. Local authorities have statutory powers to put quality bus contracts in place as a means of integrating light rail with local bus services, but none has done so. The Department cannot insist on local authorities using their existing powers but acknowledged that the minimum 21 month statutory period between approving a quality bus contract scheme and its coming into force was too long. The Department was about to reduce this period to six months to make it easier for local authorities to put such contracts in place. The Department would expect proposals for all future schemes to include through-ticketing and timetable integration between light rail and buses.[6]

7. There is a clear contrast between light rail systems in England with those in France and Germany. Light rail abroad was better segregated from road traffic and given priority at junctions to provide quick and punctual services. Services connected centres of social and economic activity. Systems in England had had little or no impact on traffic congestion levels. The Department acknowledged that mistakes had been made in the design and delivery of schemes, in particular a failure to provide proper park and ride facilities to attract patronage and reduce traffic congestion. The Department and local authorities had learned lessons, particularly about the need to adopt light rail as part of a package of measures including those to restrain the use of cars in town and city centres. The Nottingham Express Transit system, which opened in April 2004, had well-placed park and ride facilities, good integration with local bus systems and reliable trams, and had passenger numbers close to the top of those forecast.[7]

8. The Department only has a partial evaluation of what has been delivered for the £1.2 billion of public money invested in light rail systems in England. The Department has not, for example, evaluated the provision of tangible assets such as vehicles, track and stations, and other quantifiable measures such as frequency of services. It commissioned consultants in 2000 to develop a methodology for evaluating the impact of systems, including on local regeneration, comparing the situation before and after the systems were built, but it had proved too difficult to develop an all-embracing methodology in isolation from a real scheme. The Department plans to develop such a methodology as part of the Manchester Metrolink Phase 3 scheme if that scheme goes ahead in a revised form, and will carry out a wide ranging evaluation to be used as a framework for other future schemes. It will not be able to apply the framework retrospectively to existing schemes in the absence of data for the period before these systems opened. The Department envisaged that a full evaluation would run for five to ten years in order to be able to assess regeneration impacts, which take several years to come through. It thought evaluations would therefore cost £10 million to £15 million to carry out.[8]

5   Qq 4-7, 19-23 Back

6   Qq 9, 24-26 Back

7   Qq 4, 7, 31, 70-71, 82, 124 Back

8   Qq 74, 76-79, 85-93 Back

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