3 The cost of light rail
9. Cost is one of the biggest barriers to the further
expansion of light rail. Figure 2 shows that the construction
costs of a sample of existing light rail systems have ranged from
£5.4 million per kilometre to £21.2 million per kilometre.
Expected construction costs for proposed systems range from £11.8 million
to £15.8 million per kilometre. Lack of standardisation in
the design of vehicles and systems has driven up costs. A new
group known as UK Tram, consisting of Transport for London, Passenger
Transport Executives, the Federation for Passenger Transport and
private sector suppliers, has come together to produce best practice
and standards on light rail design by the end of 2005. The Department
will require promoters to adopt these standards as a condition
of grant for future schemes.[9]
Figure 2:
Construction costs per kilometre of a sample of existing and proposed
light rail systems in England
| Existing systems and date opened
| Actual construction cost
(£ millions)
| Construction cost at 2003/04 prices
(£ millions)
| Length of track (kilometres)
| Construction cost per km at 2003/04 prices
(£ millions)
|
| Manchester Metrolink Phase 1 1992
| 145 |
191 | 31
| 6.2
|
| Sheffield Supertram 1994-95
| 241 |
304 | 29
| 10.5
|
| Midland Metro 1999
| 145 |
160 | 21
| 7.6
|
| Croydon Tramlink 2000
| 200 |
218 | 28
| 7.8
|
| Manchester Metrolink Phase 2 2000
| 160 |
174 | 8.2
| 21.2
|
| Sunderland extension to Tyne & wear Metro 2002
| 98 |
101 | 18.5
| 5.4
|
| Nottingham Express Transit 2004
| 1801
| 180 |
14.3 | 12.6
|
| Average
| 167 |
190 | 21.4
| 10.2
|
| Proposed systems and planned year of opening
| Expected construction cost at 2003/04 prices
(£ millions)
| Proposed length of track (Kilometres)
| Expected construction cost per km at 2003/04 prices
(£ millions)
|
| Merseytram - 2007
| 225
| 19 |
11.8
|
| Leeds Supertram- 2007-08
| 442
| 28 |
15.8
|
| South Hampshire Rapid Transit -2007-08
| 171
| 14.3 |
12.0
|
| Average
| 279
| 20.4 |
13.2
|
Source: National Audit Office summary of Department for Transport
data
10. Digging up and diverting utilities such as water
and gas mains has also added to the cost of building light rail
systems. Utilities are usually dug up and the new infrastructure
resited in order to facilitate easy access in future. Legislation[10]
requires promoters to pay 92.5% of these costs, increasing the
costs of constructing light rail and hence the taxpayers' contribution
required. The Department considered that the costs of diversions
had been far too high, and that promoters had been too ready to
agree to the diversions. The Department accepted, however, that
it should have questioned promoters more closely on whether utilities
needed to be diverted, how the costs could be minimised and which
organisations should pay for the work. Promoters or their sub-contractors
might carry out the work for example, rather than the utility
companies, to reduce costs.[11]
11. The form of the contracts procuring light rail
systems has also had a bearing on costs. Although different types
of contract have been used, most have been design, build, operate
and maintain type contracts, or derivations of such contracts.
Under these types of contracts operators have been left to bear
all of the revenue risks. Escalating costs on proposed schemes
suggested that operators were building premia into their bids
to cover risks over which they had no control. These risks included,
for example, fares policy, local parking provision, traffic priorities,
planning consents along the light rail route and competing public
and road transport provision. The Department has recognised that
the price of light rail might have been inflated as a result.
It planned to issue guidance for promoters by the summer of 2005
on models of procuring light rail systems, including advice on
sharing revenue risks between the public and private sectors.[12]
12. New light rail technologies might offer scope
for reducing costs, but there have been barriers to their development
and take up. The promoters of ultra light rail, for example, claim
it offers low cost alternatives to the more traditional types
of systems. But these smaller, less expensive systems do not qualify
for departmental grants, which are for schemes costing £5
million or more. The Department plans to lower this threshold
for new local transport schemes from April 2006. It will also
invite local authorities to come forward with pilot schemes to
demonstrate to other promoters that ultra light rail schemes work.[13]
13. The Department expects the operation of light
rail systems to be self-financing and not to require any operating
subsidy from the government. The private sector operators of the
Midland Metro and Manchester Metrolink, however, both made significant
financial losses in 2001 and 2002, while the operators of the
Croydon Tramlink made significant losses in 2001-02 and 2002-03.
The Department did not believe that any operator was contemplating
withdrawing from a contract as a result of such losses. If an
operator were unable to continue and an alternative operator could
not be found, contract arrangements would allow operations to
be handed back to the relevant local authority which promoted
the scheme. Clawback arrangements in grant terms allow the Department
to reclaim monies if a system runs into financial difficulties
and the local authority decides to dispose of it. The private
sector would bear the losses and the Department might receive
some of its investment back.[14]
14. Risks to the taxpayer may nevertheless arise
if an operator fails. A system costing several hundred million
pounds to build might not be closed down if it reverted to the
local authority, and operating costs would therefore be incurred.
The local authority might have to subsidise another private sector
operator to take over the running of the system. If the local
authority disposes of the system, it is unlikely to recover the
full costs of construction and so repay the Department's grants.
Thus there is a residual risk to the taxpayer, warranting greater
concern on the part of the Department than it has currently shown
about the financial viability of light rail systems.
9 Qq 12, 49-52 Back
10
The New Roads and Streetworks Act 1991 was aimed at improving
the standard of repair of roads and reducing disruption to road
users caused by diverting utilities and was intended to establish
fair contribution rates to be paid by developers for diverting
utilities. Back
11
Qq 12, 67, 73 Back
12
Qq 12, 36-37, 40 Back
13
Q 123 Back
14
Qq 10-11, 104, 106 Back
|
