Memorandum by Mott MacDonald (LR 87)
INTEGRATED TRANSPORT: THE FUTURE OF LIGHT
RAIL AND MODERN TRAMS IN BRITAIN
INTRODUCTION
Mott MacDonald [MM] is pleased to submit evidence
to the House of Commons Transport Committee. MM is a leading multi-disciplinary
consultancy with transportation as its main business. We have
over 8000 staff world wide and over the last 20 years have played
a leading role in the planning and development of light rail schemes
in the UK, including the schemes in Newcastle upon Tyne, Manchester,
Nottingham, West Midlands and Dublin. We continue to provide advice
to the promoters of these schemes and are providing technical
and procurement advice on the development of schemes in Edinburgh
and Liverpool.
For the Light Rail and Modern Trams industry
in Britain to have a successful future then we must look at the
history of experience both at home and abroad to guide its direction
for the future. To have taken steps, that in the safety of retrospective
wisdom can be seen as less than ideal is only human and the basis
on which civilisation progresses. To repeat those mistakes is
tantamount to carelessness.
Society at large can benefit enormously from
this form of Transport but unless we can fully embrace all the
difficult issues associated with implementation, progress will
be painfully slow or even non-existent.
The following provides our comments on the issues
being addressed by the Transport Committee.
THE COSTS
AND BENEFITS
OF LIGHT
RAIL
Cost per kilometre varies substantially depending
on conditions, terrain and level of promoter specification/expectations.
Typically costs in the UK are currently ranging between £15
million and £20 million per kilometre. Tramcars represent
approximately 25% of this capital cost, with vehicles currently
costing between £1.5 million and £2 million each.
The design, particularly the weight, of vehicles
determines many other system costs; variables include energy requirements,
the size of the overhead equipment and its supporting infrastructure
and track installation design. Simplicity of vehicle design can
also reduce the cost of depot infrastructure and long term maintenance.
Yet the vehicles are often one of the last items to be considered
and procured.
Utilities relocation costs may represent 20%
of capital cost. In the UK promoters have to pay 92.5% of the
costs of diverting utilities. In Germany promoters contribute
less, while in France they pay nothing. The necessity of relocating
utilities on the premise of minimising future disruption to service
patterns is no longer accepted or affordable and this will have
an effect on cost. Many current schemes are seeking to adopt a
risk based approach to managing utility diversions. This is yet
to be fully accepted by the Utility Companies.
It is important to define what is meant by "benefit"
in examining the performance of light rail schemes. Different
schemes are promoted for different purposes and a clear understanding
of the policy objectives of the promoter is required. Typical
objectives are:
— to serve the local economy;
— to help reduce road traffic growth
and thus congestion;
— to benefit the environment;
— to tackle social exclusion;
— to assist in regeneration.
Economic benefits form a large part of the Government
NATA and STAG evaluation techniques and all schemes have had to
demonstrate benefits in this area. There is ample evidence from
the Manchester Metrolink and Croydon Tramlink to show that the
overall local economy has improved with the introduction of tramways.
Road congestion is largely a result of the ever-growing
level of private car use. Disincentives to car use [congestion
charging, road tolls, high parking charges, fuel duty escalators,
etc.] are unpopular, as demonstrated in Edinburgh. Additional
means of securing a modal shift are required. Evidence from current
UK tramways has shown that they have all demonstrated a modal
shift of between 15-20%, without the direct application of disincentives
to car use. Bus priority schemes have had a less successful track
record. The Director General of the West Midlands PTE is on record
as saying that whilst Midland Metro had achieved 15% modal shift
the "bus showcase" routes [which are run by the same
operator] have only achieved 2-3% modal shift.[27]
Environmental benefits are largely as a result
of modal shift replacing trips by internal combustion engine vehicles
with electric traction, thus ensuring no pollution at the point
of use.
Social exclusion results from disadvantaged
groups not having access to reliable transport, or not being able
to afford transport. In this context the "price" of
transport includes not only the fare, but also reliability and
the time spent in making a journey. Evidence from a number of
schemes has shown that providing reliable, quick and affordable
travel has opened up work and leisure opportunities for disadvantaged
groups.
Regeneration had been the objective of a number
of schemes and is best exemplified by the success of the Docklands
Light Railway. Initial studies suggested that potential redevelopment
in Docklands could only justify a bus link to existing railheads.
Developers responded by insisting that only a reliable, permanent
fixed link would encourage them to invest in the area. The initial
railway was opened in 1986 and demand has consistently outstripped
transport supply from that date. On a smaller scale Croydon was
experiencing decay in the older parts of the town, with decaying
occupancy rates in 1960s office blocks in the new town. Tramlink
has improved access and has resulted in virtually 100% occupancy
rates in the older parts of town and a spurt of refurbishment
and rebuilding in the new town.
WHAT LIGHT
RAIL SYSTEMS
NEED TO
BE SUCCESSFUL
Within four years of opening Manchester Metrolink
was carrying 13 million passengers per year, almost twice the
previous railway loadings. Although conceived primarily as a city
centre commuter service, the particular success of Metrolink has
been for attracting off-peak travel.
Newcastle, Docklands and Manchester are very
much seen as the exemplars of success and have helped justify
why such schemes are needed. They either had an existing rail
base or supported massive land use changes. Unfortunately, this
was not the case for Sheffield. Unlike these schemes Sheffield
is mainly a street based system which provided new capacity on
(mostly) new alignments in heavily trafficked corridors. Insufficient
traffic priorities at junctions has lead to longer than anticipated
journey times and poor punctuality. It was also planned prior
to, but opened after, bus deregulation and was prone to significant
competition from local bus operators.
Stagecoach won the 26 year operating franchise
for Sheffield Supertram in 1997. Significant efforts to better
integrate with the City's transport network have since seen passenger
numbers rise. Ridership having increased from just over 5 million
in its first full year of operation to over 12 million by 2003.
To maximise their potential light rail schemes
should preferably penetrate the city centre. This has not been
the case with the West Midlands scheme, which terminates on the
edge of Birmingham city centre and as such lacks the visibility
and penetration of other schemes. The proposed Snow Hill to Five
Ways extension seeks to redress this issue.
If light rail schemes are to be successful they
need to be:
— integrated with the land-use and
development plans of the local authorities—Docklands has
shown how this can be achieved.
— integrated into the overall transport
network. This requires adequate park and ride facilities at outer
termini, taxi and bus feeders to the tramway trunk network and
integration with major heavy rail and metro stations.
— Passenger information and ticketing
must encourage multi-modal travel across the transport network—public
transport operators should be competing against the private car,
not competing amongst themselves. Cities such as Hanover, Zurich,
the Hague and Strasbourg demonstrate how this can be achieved.
HOW EFFECTIVELY
IS LIGHT
RAIL USED
AS PART
OF AN
INTEGRATED TRANSPORT
SYSTEM?
Light rail can be one element of an integrated
transport system. To be effective integration requires a firm,
consistent, long term framework on which plans can be based.
With the exception of London there is no effective
example of an integrated transport network in the UK. Setting
an overall strategy for economic development, land use and transport
planning in the UK is overly complicated and lacks co-ordination
. In any given area the functions are spread over a number of
local authorities and transport executives and an array of ad
hoc government initiatives and agencies. The ability of public
bodies to plan and provide public transport is frustrated by the
fragmented nature of the industry. Rail is operated by a mixture
of central government subvention and private sector operation.
Bus and taxi services are deregulated, with local authorities
having very little influence on service patterns.
Most UK tram systems have not been set in the
context of an overall public transport network, which would utilise
buses and taxis for low-volume short trips, trams for major corridors
into cities and metros or heavy rail for the highest volume and
longer trips. An integrated network would see each mode acting
as a feeder distributor to the other modes. Unfortunately a UK
legacy for competition within the industry, rather than competition
between public and private transport, has resulted in all modes
fighting for patronage—even where inappropriate and the
competition damages the overall public service.
Both the Newcastle Metro and Sheffield Supertram
were promoted as part of an integrated bus/rail network. Deregulation
shattered the integration—resulting in the collapse of Metro
ridership and the continuing underperformance of Sheffield. Later
systems, such as Croydon and Nottingham have been better integrated.
Nottingham has good Park and Ride facilities and the bus network
has been reshaped to remove wasteful competition with the tram
line. London (including Croydon) has the benefit of an overall
planning authority for metro, tram and bus, with through ticketing,
common information and marketing. The 2004 fares revision has
attracted significant further custom by making bus and tram ticketing
interchangeable.
The disintegration of the public transport industry
in the UK, coupled with the largely cautious approach to inter-operator
cooperation adopted by the OFT has prevented the industry mounting
an effective challenge to the dominance of the motor car over
much of the country. At the same time the private sector is reluctant
to provide the investment needed to compensate for the lack of
government investment in public transport when the industry is
so fragmented and internally competitive.
The UK position contrasts markedly with the
position of most of our EU partners; Germany has an integrated
public transport system in each major conurbation, centrally planned
and promoted and incorporating a mixture of municipal and quasi-private
operators; in France joint public/private enterprises operate
integrated public transport networks in cities outside Paris and
similarly integrated approaches are adopted in the Netherlands,
Belgium and Italy.
BARRIERS TO
THE DEVELOPMENT
OF LIGHT
RAIL
Lack of standardisation is a major barrier to
development. We fully agree with NAO recommendations for the formation
of tram specific technical, operational and safety standards.
To derive maximum benefits it is important that harmonisation
is achieved where possible at an EU rather than purely national
level. The recommendations coming forward from the European Commission
LibeRTIN project (the thematic network investigation technical
harmonisation and standardisation of light rail vehicles) could
provide an appropriate mechanism to drive this process forward.
Vehicle costs are unduly high as a relatively
small number of vehicles is required for each scheme and the uniqueness
of each UK fleet reduces the opportunity to take advantage of
economies of scale, particularly with respect to long term maintenance
costs.
Interface and reaching agreement with Network
Rail has often proved unduly prolonged and expensive. In part
this is due to their complex management structure and at times
a reluctance to actively assist towards enhancement of public
transport provision as a whole.
A less prominent but effective barrier to the
development of light rail in the UK has been Government failure
to recognise the benefits to be derived from a steady flow of
work, thus allowing industry to build up and maintain a corpus
of knowledge and expertise.
The processes involved in the Transport and
Works Act procedures are long and subject to unpredictable delay
and a promoter has no clear indication of the time that it will
take the Secretary of State to reach a final decision on the award
of an Order. This is similarly off-putting to firms participating
in early private sector involvement in schemes.
The delays in agreeing government investment
in schemes offers a further disincentive to private sector involvement
and can see some of the value of public sector funds being eroded
by inflation. The allocation of risk is often skewed and results
in the price of the scheme being inflated by private sector risk
premia [see section on financing arrangements, below ]
This attitude can be compared with that of the
French government. Here the government willed the end of reducing
private transport use; identified the means as light rail (or
mini-metro in a limited number of cities); provided part of the
financial wherewithal by means of the versement transport payroll
tax; has helped to streamline the obtaining of powers for schemes
and has encouraged public/private joint working through the societé
mixte approach. The result has been that 10 successful tramways
have been built in France in the last 19 years.
Including local bus operator(s) in the concession
is a way to minimise competition, and can lead to an effective
"re-shaping" of local bus services around the tram network
to maximise integration. This has been the case in Nottingham,
where fortuitously the local bus operator was part of the winning
consortium, but it seems wrong to leave this choice to market
forces. Where bus competition is a concern authorities could seek
to actively manage risk through use of local authority powers
to enter into bus quality contracts.
The procurement process offers an expensive
and high risk exercise to the private sector. Many firms are now
refusing to participate in the process. Those that do are seeking
to recover their costs by higher bid-prices. Contract award delays,
such as experienced on Manchester Metrolink Phase 3, will inevitably
further increase costs and reduce the attractiveness of PFI light
rail procurements to the private sector.
THE EFFECT
OF DIFFERENT
FINANCING ARRANGEMENTS
ON THE
OVERALL COST
OF LIGHT
RAIL SYSTEMS
The funding mechanism adopted on UK schemes
to manage and secure funding of schemes is the Private Finance
Initiative. Under a traditional PFI contract a private sector
consortium will design, build, finance, operate and maintain the
project. The Consortium in return receives service payments over
time out of public money, linked to its performance during the
contract. Such structures (as used in Croydon and Manchester)
do not cope well with subsequent extensions to the system.
Inappropriate risk allocation in UK schemes,
as between the public and private sector, is contributing to the
high capital cost compared with schemes elsewhere in Europe, and
is making light rail unattractive compared with other forms of
public transport. In particular, the private sector is rightly
reluctant to fully accept farebox/revenue risk.
Where the private sector takes revenue risk,
it will seek to mitigate risk by ensuring the scheme's revenue
forecasts are conservative and that its financial structure has
taken account of the possibility of a shortfall between predicted
and actual revenue. Funders are very sceptical of the accuracy
of patronage and revenue forecasts and it is difficult to raise
private sector funding for light rail schemes where repayment
relies substantially on farebox revenue. An alternative approach
might be for the public sector to bear most of this risk in its
introductory phase, with an increasing transfer of risk to the
private sector as a scheme becomes more fully established.
There is a growing difference between the cost
of the input elements of a scheme and the price charged by the
private sector. These differences are largely a reflection of
the risk premia applied by the private sector, combined with an
element of disenchantment with the delays and frustrations experienced
in previous UK light rail schemes. Some companies have withdrawn
altogether from the light rail market, whilst other financial
agencies are seeking a much higher Internal Rate of Return for
what are seen as difficult and high-risk contracts.
The essence of PFI was to place risk where it
could best be managed—transferring ridership risk to the
private sector contradicts this principle. The holder of a 30
year operating concession has very little influence over macro
management of the local economy, cannot influence land use and
planning decisions, nor road building programmes. They are not
even given an enforceable contract as to the level of priority
that they will be given at signalised junctions in the highway—even
though such priority is vital if they are to achieve and maintain
competitive run times.
Private financing approaches might be considered
to work best when they follow the models adopted for Prisons,
Hospitals, Roads, etc., ie a structure where the private sector
has no exposure to revenue risk and facility operation [other
than routine maintenance of the structure]. This approach has
been developed over a number of contracts by the DLR. The Lewisham
extension was financed by a PPP procurement on an availability
and part revenue risk arrangement, with rolling stock, signalling
and operations remaining with the public sector. The current DLR
extension to Woolwich, via City Airport has used a "classic"
PFI procurement with the public sector paying an infrastructure
availability fee for the fixed concession term. In this case,
the private sector is carrying the risks it is readily able to
manage; design, financing, build and availability. The public
sector carries the patronage, operations, rolling stock and signalling
risks.
Time will tell which of the DLR approaches produce
the best results, but the Lewisham procurement has resulted in
an extension delivered on time and on budget, with a financially
sound private sector element. The Woolwich approach demonstrated
a short, comprehensible, bidding process with an early selection
of the preferred bidder—so minimising bid costs.
Alternative approaches that are precedented
and worth consideration include;
— the original DLR was publicly funded
by the London Docklands Development Corporation using public funds
that were generated by the sale of land at increased value as
a result of the development of the light railway. This approach
could be of great value where the Government is seeking to regenerate
brown field sites—as in the Thames gateway.
— many first generation tramways in
the USA were built to open up new tracts of land for development—the
cost of the line was set off against the increase in land value
once the improved accessibility was achieved. Similar approaches
were adopted by the private sector Underground Group in London
before 1933.
— increases in land values not owned
by the tramway promoter can be captured and recycled into capital
funding by use of local Transit Improvement District property
taxes, which are used in the USA, or the oneoff property taxes
levied in Toronto.
The model structures emerging in Edinburgh and
Liverpool (which separate operations from infrastructure contracts
and incorporate a more reasonable approach to risk and revenue
sharing) may also prove effective. A clear need exists for an
evaluation of alternative model structures to identify how financial
viability can be improved.
THE PRACTICALITY
OF ALTERNATIVES
TO LIGHT
RAIL, INCLUDING
INVESTMENT IN
BUSES
Bus services continue to carry a significant
number of passengers and improvements in bus services are important.
With a few notable exceptions, bus services are in continuing
overall decline, [down by 21% between 1982 and 2002][28]
both in absolute numbers of passengers carried and in market share.
This must be set against rail travel increasing by 36% between
the mid 1990s and 2002.[29]
The notable exception to this is in London,
where almost all the ridership gains reported for England and
Wales are generated. Conditions in London are potentially advantageous
to buses; the fleet has been modernised thanks to TfL requiring
new buses from tenders, there are extensive bus priority measures,
much of the infrastructure [both highway and parking space] provided
for cars is already saturated, the Congestion Charging scheme
in central London has had a beneficial effect in driving modal
shift and the Mayor is committed to subsidising high-frequency
bus services. This imay prove an extremely expensive option, with
estimates of total bus subsidy predicted to rise to £1 billion
by the end of the decade.
The cost of bus improvements are often understated,
This infrastructure is publicly funded and effectively provided
free or at a low "rent" with roads, bus stops, busways,
traffic management and policing all being funded by the taxpayer.
The provision of Fuel Duty Rebate skews the system against the
adoption of electric traction. All these elements are no doubt
worthy of public investment, but they must be taken into account
when making like-for-like comparisons between bus and tram schemes.
The Confederation of Passenger Transport UK gave evidence to the
1999 Select Committee Enquiry and said "For complete new
systems on reserved track with new stations, infrastructure and
a new vehicle fleet, the capital cost [of a busway] could be similar
to that of a light rail line".
The ability of busways to generate modal shift
is also open to debate. The comparative experience of West Midlands
PTE has already been referred to. Compared with light rail, there
is rather less than 100 miles of guided busway in the world and
the longest section in the UK is the 1.5km of the recently opened
Edinburgh "Fastway". The longest established guided
busway in Europe is in Essen and it is notable that far from being
extended to serve wider areas it has been curtailed and the Essen
public transport authorities are concentrating on upgrading their
tramway and light rail operations.
The experience of unguided busways is less encouraging,
with most of the long established north American systems failing
to achieve ridership targets. Ottawa spent 20 years developing
Bus Rapid Transit as an alternative to rail, but has now embarked
on a rail development programme. The UK's longest established
busway is in Runcorn, far from attracting new passengers to public
transport it has generated fewer trips per head of population
than in comparable towns across the north west.
The lower staff passenger ratio possible on
a bus system and the shorter service life of a bus mean that in
operating costs a rail system should offer lower passenger/km
costs than a busway. Studies carried out in the UK and the US
would seem to support this contention.
A development of light rail with significant
potential for the UK, is the "tram train" concept. Several
systems are currently in operation, most notably in Karlsruhe,
in Germany. This comprises a dual powered "tram like"
vehicle able to ride on both heavy railway tracks and the tramway
network—thus offering customers convenience and frequency
of direct access to the very heart of the city. This form of shared
track operation is also being developed in France and the Netherlands.
February 2005
27 HC153, 24 May 2000. Back
28
DfT Transport Trends 2002. Back
29
DfT Transport Trends 2002. Back
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