Select Committee on Transport Written Evidence


Memorandum by the Light Rapid Transit Forum (LR 61)

INTEGRATED TRANSPORT:  THE FUTURE OF LIGHT RAIL AND MODERN TRAMS IN BRITAIN

  The Light Rapid Transit Forum ("LRTF") was launched in February 2004 to represent the views of the private sector involved in Light Rapid Transit schemes in the UK. The Light Rapid Transit Forum is a representative body drawn from operators, contractors, suppliers, funders, programme managers, equity providers and consultants to the Light Rapid Transit industry.

  The main purpose of the LRTF is to enable private sector organisations involved in Light Rapid Transit schemes to discuss, study and research the issues which affect them and to communicate effectively with the public sector both at local and national government level. Membership exceeds 46 organisations and individuals. The Forum (together with CPT, the PTE Group and Transport for London) is one of the four sponsors of UK Tram, the proposed umbrella organisation for the tram industry.

1.  THE COSTS AND BENEFITS OF LIGHT RAIL

Increase in costs

  Light rail costs were examined in the House of Commons ETRA Committee Report on Light Rapid Transit Systems [HC 153 of 24 May 2000], Prof Hass-Klau has given comparative data on light rail costs in "Bus or Light Rail; Making the right choice" [1998]. The NAO Report [HC 518 23 April 2004] commented that "new schemes are on average more than £3 million/km more expensive...than those that have already been built". Members of the LRTF keep databases on light rail costs and can confirm that all-inclusive costs for a light rail scheme are now averaging around £13 million/km. This is worrying and can be attributed to: the higher risk premiums being applied, the lack of standardisation of all elements of schemes, high utility diversion costs and some element of cost recovery from the perceived excessive costs of tendering. It should be noted that cost-creep does not seem to be as prevalent in schemes in other parts of the EU and that recent North American schemes are coming in on, or under, budget.

Comparison of LRT and bus costs

  In comparing light rail and busway costs it is important to ensure a like for like comparison. The CPT(UK) in their submission to the ETRA Inquiry said that "For a complete new system on reserved track . . . the capital cost [of a busway] could be similar to that of a light rail line". Buses have a role in short journey, lower volume applications and trams are more economic where passenger demand requires at least a 10 minute tram service. This takes into account that:

    —  in terms of capacity two buses are needed for one tram;

    —  in terms of speed two buses are needed for one tram;

    —  in terms of life span between three and five buses are needed for one tram; and

    —  the higher staff/passenger ratio on tramway systems will result in broadly similar operational costs per passenger at higher traffic volumes.

Benefits of Light Rail

  The costs of LRT systems must be set against their proven benefits;

    —  tramways are successful in attracting people out of motor cars. A modal shift of 15%-20% is achieved on UK tramways—something never achieved with buses;

    —  rail systems are capable of supporting regeneration; the DLR is the most outstanding example of this. Research in Manchester and Croydon has demonstrated similar effects;

    —  LRT can benefit the environment—not only do trams not emit pollution at the point of use, but they can also use electricity from renewable resources;

    —  LRT can be used to serve and encourage new developments without disfiguring the landscape with congested roads—it is noticeable that new housing schemes in the Thames Gateway are predicated on rail services (DLR to Barking etc). Future developments will need to be based around heavy and light rail services if they are not to generate "M4" congestion phenomena.

  Given the lower benefits of a bus-based scheme a tramway will frequently offer better value for money.

2.  WHAT LIGHT RAIL SYSTEMS NEED TO BE SUCCESSFUL

  The LRT Forum consider that the success of a light rail system should be gauged by:

Capacity

  Greater efficiency in transporting between 1,500 and 8,000 passengers per hour than other public transport modes, such as bus, metro or heavy rail and the private car.

Modal shift

  Achievement of modal shift from the private car to public transport.

  LRT schemes provide an acceptable alternative to use of the car in terms of quality, security, frequency, reliability and image. Modern LRT schemes have demonstrated modal shift of between 17-20% based on research by Centro/GMPTE. Both Croydon and Nottingham have been positively welcomed by the residents and businesses which has contributed to passenger usage. While upgrading of bus services produces increased passenger flows these are generally attributable to changes in travel patterns by existing public transport users rather than to shift from car to bus.

Optimised highway use

  Light rail provides the highest level of passenger carrying capacity per metre of road width compared with bus and car usage.

Reliability

  Light rail is more reliable in terms of frequency and waiting time than bus, given fixed track and junction priority, contributing to higher economic productivity, and less stress suffered by individuals.

Environmental benefit

  Light rail is capable of delivering improvements to the cityscape urban fabric: the integration of walking and cycling, reduction in air/noise pollution, reduction in road traffic accidents. It also has a role in encouraging social inclusion. DLR and Croydon have demonstrated regeneration effects.

Safety and accessibility

  Safety and accessibility are major integral elements of modern light rail schemes. Level floor boarding, passenger help points, CCTV, lighting, and the use of conductors, contribute to a safe, and accessible secure environment.

Integration

  Integration of transport modes and networks is fundamental to the success of public transport including light rail. Integration requires planning of convenient multi modal interchanges, use of multi-modal ticketing schemes and consistent fares structures, provision of passenger information on a modal basis, and compatible passenger treatment (eg consistent passengers' charters). Planning of park and ride facilities and encouragement of feeder bus services assist the public to make use of light rail.

3.  HOW EFFECTIVELY IS LIGHT RAIL USED AS PART OF AN INTEGRATED TRANSPORT SYSTEM

Role of Integration

  Policy needs to set light rail systems in the context of an overall network of public transport which provides buses for low volume short trips, heavy rail for high volume longer trips, and trams and light rail for intermediate volume. There is a need for a public transport strategy to link key population centres, health and education establishments, leisure centres and business communities with appropriate public transport solutions driven by passenger requirements and volume. In practice the extent to which UK light rail systems are integrated within a local public transport system varies widely and is largely dependent on whether or not the system operates in a regulated public transport environment.

Local Integration

  Below the policy and strategy level integration operates in two principal ways:

    —  with other services and modes as part of an integrated transport network; and

    —  use of fares and ticketing schemes.

  Sheffield, Manchester and West Midlands have both achieved limited network and service integration extending to fares and ticketing. These systems interchange at major rail heads. Integration with buses is much more limited mainly due to the deregulated nature of bus services in these cities.

  Later systems such as in Croydon and Nottingham are more integrated. Rail services (and in Croydon the Underground at Wimbledon) were well integrated with the original designs. Nottingham has good park and ride and bus services have been reshaped to support the tram system.

  The bus services in Croydon do not integrate so well largely due to the Mayor's London-wide policy to improve and increase bus services. This has resulted in a significant increase in bus mileage run since Tramlink opened with minimal bus route re-organisation.

  Ticketing integration in Nottingham works reasonably well and since 2004 Croydon Tramlink users have benefited from a common fares structure for buses and trams. This recent change has boosted tram passenger numbers by 12% as well as making interchange much easier for passengers.

Bus Regulation

  Further stages of integration are challenging to achieve, given bus deregulation outside London. Encouragement should be given by the Department for Transport to use Bus Quality Contracts regulation to ensure feeder bus services to light rail stops and consistent fares between bus and tram (and other modes).

4.  BARRIERS TO DEVELOPMENT OF LIGHT RAIL

Length of Gestation Period

  The process for developing and approving Light Rail schemes needs to be streamlined so that the gestation period is minimised and bid costs reduced. Schemes can take from 5-13 years to deliver which is costly for both the public and private sector.

  This may well require further devolution of power away from Central Government to local bodies/authorities with power to raise funding and financing for their priority schemes. Reducing the time for development also mitigates political change which may otherwise occur two or three times during the life of a scheme.

  Improvements to the planning process for major projects as well as alignment of the roles of the highway authority with the public sector procurer are required.

Economic Appraisal Process

  This needs to be aligned so that it captures environmental and social benefits without expecting the private sector to fund these.

  The public sector currently captures all of such benefits in its submission for government approval, but in the tender process not all of these benefits attract a monetary value and cannot therefore be funded by the private sector.

Procurement Process

  Government needs to show commitment to light rail. Early contractor/operator involvement and the use of standardised procurement procedures and documentation will assist in the production of schemes that are attractive and financially viable to the private sector. In addition the time taken to select and award a contract needs to be reduced.

  Costs associated with bidding for light rail schemes are prohibitive and restrict competition. Bidders typical bid costs (to financial close) can be in excess of £1 million with no guarantee of return. Standardisation coupled with a pipeline of schemes to bid for, would reduce cost and increase the chances of success.

Risk

  The risk profile needs to be reconsidered so that appropriate risk is placed with those most suited to manage it. This may mean the public sector taking responsibility for the delivery of key elements such as utilities and third party accommodation works. Risks associated with obtaining planning permission following the Transport and Works Act Order and the associated conditions contribute to increased driving.

  Light rail needs to be seen as carrying a similar risk compared to other PFI/PPP projects. Private sector bidders can choose to put time and resources into bidding for less risky PFI/PPP schemes such as health, education, roads and defence.

Utilities

  In the UK 92.5% of the costs associated with diverting utilities has to be covered by the project with the remaining contribution from the utilities. This is a major departure between European and UK practice as noted in the NAO report.

  In addition to increasing project capital costs, utilities risk incurs very high risk premiums as often the scope, timing and access implications will change during the construction phase. The UK system would benefit from reassessing the need for utilities diversions and to the extent that they are necessary whether responsibility would be better managed in the public than the private sector.

5.  THE EFFECT OF DIFFERENT FINANCING ARRANGEMENTS (PUBLIC/PRIVATE) ON THE OVERALL COST OF LIGHT RAIL SYSTEMS

  Light Rail Schemes are complex, resource intensive projects, primarily due to multiple interfaces and decision makers (including planning authorities, highways authorities, land owners, utilities, Network Rail, PTEs). Accordingly they are very expensive to bid and, currently, there is a high risk of no decision being made. The PFI/PPP approach makes matters more difficult since this implies bidders being given an output specification—this may give whole life casting certainty to the public sector but can lead to greater overall cost.

  Requiring funders to take full revenue risk does not achieve good value for money: lenders in particular require heavy discounts (30 to 40%) to be applied to unproven revenues to establish the level of debt a project can support. In many cases, this will mean no debt. Light rail should be able to adopt a similar revenue support approach to that used for heavy rail and (as for heavy rail) this should not be unfairly scored against the project cost.

  Alternatively, the private sector will be strongly attracted to structures where they have no exposure to revenue risk and provide facility but not service operation; in other words a procurement model closer to the PFI approach in other sectors (such as hospitals, roads, schools). Operation can be carried out under an entirely separate concession.

  The most successful example of financing a scheme is the Docklands Light Railway (DLR) which has used different arrangements during stages of development:

    —  the initial DLR and the Beckton extension were publicly financed using a design, build procurement;

    —  the Lewisham extension was financed under a PPP procurement using public and private (mainly bond) funds on an availability and part revenue risk concession basis. The risk of rolling stock, operations, signalling, planning and most of the revenue risk was with the public sector;

    —  the extensions to City Airport and Woolwich have used PFI procurement with the public sector paying an infrastructure availability fee for a concession period and taking revenue, patronage and operational risk. The private sector has the financing, design, build and alignment availability risk;

    —  under these arrangements the public sector needs to manage integration risk.

  Other on street schemes which do not have the closed alignment of DLR carry different risks and pricing. Use of Early Operator Involvement as currently in Edinburgh and Liverpool is a welcome change in procurement. It has the potential to deliver better value for money by improving patronage and putting the operator into a better position to take operating risk.

  Much of the cost increase seen in Manchester, Leeds and South Hants is a reaction to experience on recent light rail projects where the private sector has lost money on the construction. This suggests that costs are becoming more realistic rather than out of control.

  Costs may appear to have become more expensive but this is the essence of the PFI process. Costs are apparent at an early stage and risks are appropriately apportioned and costed. This may be contrasted with a purely public sector procurement process (such as the Jubilee Line) where costs and risks only became apparent during construction. There is some evidence that fixing costs at pre-design stage leads inevitably to the pricing of contingent risk.

6.  THE PRACTICALITY OF ALTERNATIVES TO LIGHT RAIL, SUCH AS INCREASED INVESTMENT IN BUSES

  The LRTF considers that an efficient public transport system requires integration of modes, bus, light rail, heavy rail and the private car, each of which has a role to play depending on passenger numbers, geographic considerations, emissions policy and user preferences.

  The LRTF has set out in answer to the preceding questions, particularly questions 1, 2 and 3, its position on

    —  where light rail is more economic and efficient as a transport mode than bus;

    —  the need to compare like with like when comparing capital and operating costs; and

    —  the benefits of light rail compared with bus.

  Any comparison of increased investment or alternatives needs to recognise that under current procurement arrangements LRT is expected to bear the capital cost of infrastructure as well as the provision of vehicles and take an informed view of the infrastructure and congestion cost associated with eg bus and guided bus.

Mary Bonar

LRTF Secretariat

February 2005



 
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