Examination of Witnesses (Questions 200
- 219)
WEDNESDAY 9 MARCH 2005
MR PAUL
DAVISON, MR
ROGER HARDING,
MR PETER
HENDY, MR
PAT ARMSTRONG
AND MR
NEIL SCALES
Q200 Ian Lucas: Mr Davison wants
to respond to that.
Mr Davison: I will respond to
a couple of the issues. One is that it was late and over budget.
Late it was, by about six months. It did not cost us a penny more
than we said we would pay for it and it did not cost the public
a penny more than we said we would pay for it. We said we would
pay just short of £200 million and that is what we paid the
builder. Any costs overrun was absorbed by the builders and they
took that on the nose. It was not a massive cost overrun—I
do not have the detailed figures but I can probably get them for
you—but it was of the order of 10%, which on a first of
build for a long while—and certainly for the team who built
it—is a reasonably creditable performance, and at £7
million or £8 million a tram route kilometre it is substantially
cheaper than the figures I see at the moment, which are at least
two and a half times that, and I have to say that I do not understand
why they are two and a half times that, having looked very carefully
at the build cost for a tram link. In terms of integrating the
transport, we have looked at what was proposed and where we are
now and if we just look at the number of bus miles that are run
around Croydon, on routes that parallel the tram routes there
are approaching 30% more bus miles run over the period since 1995-96.
I think it is odd that we are running more bus miles along the
routes and not running more bus miles to join up with the tram
scheme and then use the trams as the way to get into central Croydon.
It is not meant to be a claimant's document, I am just trying
to make the point that it is crucial to tram schemes in general
that you restructure and integrate the buses. It has been done
in Nottingham, to good effect. Equally, it is good that we have
park and ride. There is no parking at all on Tramlink, and park
and ride takes people out of their car and puts them on public
transport in circumstances where you can then get high volumes
of people into the centre of Croydon or Wimbledon or wherever,
fairly economically. It seems to me that we should have done more
to try to get this integration since the tram scheme opened in
2000.
Q201 Mrs Ellman: Is there enough
certainty in Government funding for light rail systems?
Mr Scales: I think on our particular
scheme we are very fortunate to have the indicative funding of
£170 million. We then had to do a lot of work with our colleagues
in the Department of Transport to satisfy in terms of the risk
transfer, in terms of all the modelling that we have had to do—and
fortunately we built a three-line model for Merseytram before
we actually got this far. I think the real risk is our colleagues
in the Treasury and the Department have got to go at the Treasury
and fight their corner along with everybody else. So I think that
is the real issue. The contractors and builders and our colleagues
on the operating side like certainty. I think there is enough
certainty as long as you have made your case and the Department
have enough ammunition to go to the Treasury with.
Q202 Mrs Ellman: Three lines are
planned for Merseytram, how confident are you that three lines
will in fact be built?
Mr Scales: I think I am all right
on Line 1. Our colleagues in the Department for Transport have
got annex E, the public sector bid for Line 2 and we can evaluate
that once we get Line 1 out of the way. Line 3, down to the airport,
we could run into difficulty with that only because it is so far
in the future and I do not know the exact route because we have
not done the work on the route yet. But we have a heavy rail option
and we are building a large interchange at Allerton, as you know,
which is going to serve the airport as well. Allerton interchange
is three kilometres from John Lennon Airport.
Q203 Mrs Ellman: Mr Armstrong, you
referred earlier to getting the nod from the Department. Is a
nod good enough?
Mr Armstrong: It is always very
difficult to have that certainty. As I explained earlier, it was
a very long time before we got the go ahead for Line 1 and that
uncertainty is very difficult, particularly for the private sector,
to live with and also to maintain public support locally both
politically and from the general public. When I said, "nod",
yes, it is something more than that, but it is certainly a very
conditioned approval that we are hoping to get for our phase two,
and we would like to think fairly quickly. If I can just make
the note, Nottingham's Express Transit is exactly one year old
today, so it is quite an auspicious time to be down here.
Q204 Mrs Ellman: Mr Hendy, did you
want to add to that?
Mr Hendy: Yes, I think I should
add to the witness in the previous session who mentioned UK Tram.
The light rail and tram industry as a whole recognises that one
of the criticisms and worries that Government has about these
systems is the apparently rapidly inflating cost of building these
systems, and a lot of that is around what the previous witness
was questioned about, which is the particular procurement of individual
systems, the low volume of cars purchased, the experience which
appears to be relived in different systems and about difficulties
in construction. So one of the practical ways we can help Government
feel more comfortable about the quoted costs and the quoted patronage
is to do the work under UK Tram, which is about trying to establish
better methods of procurement, the most appropriate procurement,
reducing the risk premium particularly for construction and the
equipment, and other things to get not standard cars, but standardised
specifications. I do not think you will find anybody in the wider
industry who does not believe that this is a good thing to do,
to give Government a bit more confidence than it currently has
that the cost of these things will not just spiral out of control
either now or in the future.
Mr Davison: If I could add one
feature? I have been involved in major projects certainly through
the first part of my career and one of the things that you do
get is you get economies of expertise, and the fact is that if
we were building tramways at a reasonable rate, as they do in
the rest of Europe, we would get this economy of expertise and
it would mean that people build higher quality products, they
find the quick and easy ways to build it and they find the quick
and easy ways to specify it, and you end up with major economies,
and they ought not be discounted. They can be very, very high
in terms of the way in which a £200 million project might
have over three or four iterations declined to be 50% almost of
the original process.
Q205 Mrs Ellman: Do any of you detect
any change in Government policy towards light rail? Do you think
that Government is less keen than it was?
Mr Davison: I feel we have actually
to some extent prejudiced the future of light rail because everybody
sees us as a problem.
Q206 Chairman: "We" being
who?
Mr Davison: Croydon Tramlink,
how we have been seen to be a difficult project at some stage.
But I think that the benefits are not sold on the general integrated
transport high volume routes, and the fact that if you make the
risks predictable and share them properly they can be very good
projects and they would be seen as being an advantage in the same
way they are in major cities across Europe.
Q207 Chairman: Mr Scales?
Mr Scales: I think it is all about
minimising risk, Chairman, and what we have tried to do on Merseytram
is minimise the risk. We have done topographical surveys along
the route, tree surveys, we have been working with the statutory
undertakers for five years, we know where all the stats are on
the route; we have dug about 1,000 holes to make sure that—
Q208 Chairman: Do the utilities know
where the facilities are along the route?
Mr Scales: They do now on our
route, Chairman; they did not before. It is all about minimising
risk. Fortunately we have this three-line model as well, so our
economists can talk to the Department's economists and do all
sorts of sensitivities. But no plans of first contact with the
enemy and the only thing you can guarantee about a business plan
it will be wrong! So what we have tried to do with our colleagues
in the Department is to get the 95% and just go with it. That
is what we want to do. So it is all about minimising risk.
Q209 Mrs Ellman: But it is possible
for the Department to withdraw funding part way through a project;
is that correct?
Mr Hendy: It is very hard for
them to do that when people are digging holes in the ground and
I think that is one of the difficulties, that when you start on
one of these things you do have to finish it. The Department also,
and I think with some cause, have been rightly worried about the
fact that many of the projects in Britain have failed to achieve
the passenger numbers which the promoters claimed in the beginning.
We have already discussed some of the reasons for that and I think
that it is incumbent on the promoters, both public sector promoters
and the consortia that get into these things, to be realistic
about passenger generation because there are some spectacular
differences between the passenger numbers claimed for the systems
before they operate and ones which turn up in practice. That does
lead to giving the Department some considerable nervousness.
Mr Scales: The practice we adopted
was to get the operators on board very early—two years before
we applied for the Transport and Works Act Order—and it
is their numbers that have gone into our model, it is their numbers
that have been validated and it is their numbers that are in the
business case because at the end of the day we are looking for
an operator colleague for 25 years, so they have to make that
work for 25 years. So what we have done is not use silly numbers
on our patronage figures, but we have had the private sector validate
them and the private sector warrant them.
Q210 Mrs Ellman: What about evaluation
of light rail schemes? Do you feel that the criteria used are
reasonable and the assessment is reasonable?
Mr Scales: We used the new approach
to transport appraisal, which is environment, safety, economy,
accessibility and integration and our benefit cost ratio is really,
really low because we are going through some of the poorest areas
in the land—six of our pathways areas are areas of multiple
deprivation. So our benefit cost ratio is just about over one
because we are tying the tram fares to bus fares because the people
along the route do not have any time value of money. So having
embraced the new approach to transport appraisal, when the Department
start loading the rates of 1.5 to one our scheme will necessarily
be in difficulty. In Mr Stringer's area, where a metro link is
already established, for example, they can easily get benefit
costs ratios of two to one because they can do premium fares and
we cannot. So I think we are okay as long as we recognise that
there is no generic tram system in the UK, they are all different,
but they are not all appraised in one single way and I think that
is something that needs to be looked at.
Q211 Chairman: I am going to stop
you there. That is fine but you were asked about evaluations.
Mr Rowland said to do an evaluation would cost between £10
million and £15 million. Firstly, do you think that is right,
do you think it is necessary and do you think those are reasonable
costs?
Mr Scales: I think they are reasonable
costs because Mr Rowland is the accounting officer for each of
those projects so he has to be satisfied.
Q212 Chairman: I accept that.
Mr Scales: Whether they are reasonable
costs or not, I do not have the figures, but we spent in Merseytravel
something like £15 million on Line 1 just to get it up and
running.
Q213 Chairman: Would you think that
to say it would cost £15 million to evaluate whether that
was actually worthy and whether the figures were right would be
a fairly sensible assessment or an over the top assessment?
Mr Scales: I think that is excessive,
Chairman.
Q214 Clive Efford: Mr Hendy, why
is there no park and ride on the Croydon Tramlink?
Mr Hendy: I think you will need
to ask the London Borough of Croydon that. I think they have declined
to give planning permission for any park and ride schemes. You
will know that although Transport for London has very great powers
it does not have local planning powers. It is not the case that
there might not be good sites for it, but they do need to be local
authority approved, and bearing in mind the borough were the joint
promoters of the original Act they clearly had good reason—admittedly
of their own—for not giving planning permission to proposals
which had been made.
Q215 Clive Efford: Is it a missed
opportunity for integration?
Mr Davison: As I understand Croydon's
position, they do not want to be a sort of parkway round the edge
of south London, so that people park at a park and ride site on
the Tramlink and then travel straight into central London, avoiding
Croydon. There seems to me to be the opportunity to put park and
ride sites to relieve road congestion and then use the relieved
road congestion, for instance, for building another tramway. So
if you put a park and ride site at Purley to take the cars off
the road and then put a tramway Purley to Streatham, and that
way you end up with moving people on to public transport rather
than them just parking in a particular area when they are coming
from the south coast, and you actually get modal shift that way.
Q216 Clive Efford: Mr Hendy, with
the West London tram and the Tramlink extension at Crystal Palace
and the Canning Town, Royal Arsenal tram links we can expect better
integration of those schemes because you are managing them from
the start?
Mr Hendy: I think you can expect
us to seek to exploit park and ride opportunities where they would
naturally occur, providing that local authorities are willing
to accept park and ride into the local community.
Q217 Clive Efford: What is the future
for the park and ride that is currently taking place at Greenwich
North station? There is a car park that takes over 1,000 cars
a day that is going to be built on and there will be no park and
ride area any more.
Mr Hendy: I would have to get
back to you on that; I have no knowledge of that particular location.
Q218 Clive Efford: So the income
from the car park, does it come into Transport for London?
Mr Hendy: I think it does not.
Q219 Clive Efford: It must be phenomenal.
Mr Hendy: That, if I may say,
is a second or third order issue. You are talking about North
Greenwich on the Jubilee line? I do not think all the car parking
space is going to be built over.
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