Examination of Witnesses (Questions 8360
- 8379)
8360. It may be said to you that that is not
the matter before this Committee, because options 2 and 3 only
run from Paddington and not from Maidenhead. Does that make a
difference to the point?
(Mr Hardie) It might make a slight difference
but I do not think, in the large scale of things, that changes
to the west of Paddington will greatly influence what is happening
in the south-east of London and North Kent. That could only be
confirmed by more modelling, and we did not have that modelling
at our disposal.
8361. So if we turn on to page 33 (again an
extract from the Montague Report) and Option 2, whole life net
costs, what benefit to cost ratio does that come out with?[34]
(Mr Hardie) This comes out with
a ratio of 1.41:1.
8362. Option 3, on the next page, 34?[35]
(Mr Hardie) This is the extension
beyond Abbey Wood to Ebbsfleet and it shows that the benefit cost
ratio for the project as a whole rises from 1.41 to 1.46:1.
8363. So an improvement as a result of the extension
from Abbey Wood to Ebbsfleet?
(Mr Hardie) That is right, yes.
8364. Then, on page 35, I think there is a correction
to the bottom of your note. Is that right?[36]
(Mr Hardie) The bundle does have
the correction in it. To be clear, the double-starred note at
the bottom should say: "Slide 38 shows that £268 million
included only £83 million of initial capital cost".
The emphasis is it should be £268 million.
8365. Let us go back to the substantive point
in paragraph 275. What are the points that you are drawing attention
to in paragraph 275 of the Montague Report?
(Mr Hardie) First of all, is the comment from
the Montague Report itself which described £268 million as
a "modest incremental cost". The second thing is that
for that modest incremental cost one had an incremental benefit
cost ratio of 3.21:1. The other point I would like to make out
of it is that the £268 million of net incremental costs referred
to in the Montague Report does, of course, include a host of future
operating and maintenance costs and other tax losses etc, which
were bundled up into the present value. I thought what was quite
significant within that figure was that in terms of an actual
increase in project cost the figure was only £83 million
of initial capital cost.
8366. Montague notes (if I can just ask you
about the third sentence): "Extension to Ebbsfleet would
also support the regeneration of the Thames Gateway." Is
that a separate point which is dealt with by the next witness?
(Mr Hardie) Yes. I have not referred to it
myself for that reason.
8367. Page 36, paragraph 31 of the Montague
Report.[37]
What is it that you wish to draw to the Committee's attention
from this extract?
(Mr Hardie) I felt we could not
ignore the traction notices around the rolling stock and that
in terms of assessing our own view of the project we should take
that into account. What the Montague Report did not do was identify
what additional costs there would be in terms of creating from
the start a class of rolling stock which had dual voltage. He
did point out that the case should perhaps be reviewed in that
light. I think we believe it is an important issue because if
Crossrail is to go to Ebbsfleet in the long term, and for any
part of that route, were the third rail to be continued, then
stock must be capable of operating over it, in which case the
stock should be designed right from the beginning for that purpose.
Otherwise, retrospective adjustment to the stock would be very
much more expensive.
8368. You say on page 37 that the extra cost
of dual voltage trains is not great if specified from the outset.[38]
You say it is not unusual and it is not cutting edge technology.
(Mr Hardie) That is right. Certainly
dual voltage stock exists at the moment and while I cannot put
a price on the marginal cost of including it at the beginning,
certainly if it is specified at the beginning and the designers
know that from the start, then the stock can be designed in such
a way that the equipment is either on board right from the beginning
or perhaps some sort of passive provision is made to allow the
inclusion of the DC equipment at a later date.
8369. An example of a line where dual voltage
stock is used would be?
(Mr Hardie) Thameslink. It is quite a normal
operation to change power supply in the course of operation.
8370. Mr Cameron: One of the points made
by Mr Elvin in opening was that an advantage of going to Abbey
Wood and stopping there was that Crossrail could be served by
overhead lines and not by the third rail.
8371. Mr Elvin: I think I can cut this
short and say to the Committee that I am told I can give an undertaking
that the rolling stock will make passive provision for dual voltage
so that there will not be any prejudice caused.
8372. Sir Peter Soulsby: That is very
helpful.
8373. Mr Cameron: I am grateful for that.
So we can go to the third point on page 37. What is that third
point that you are seeking to make?
(Mr Hardie) If the trains go beyond Abbey Wood
towards Ebbsfleet then they have to pass Slade Green depot, and
it could be a very convenient place in which to stable certainly
some of the trains that serve that branch, and it would also perhaps
then allow some of the trains that might otherwise have been stabled
at Romford to be stabled at Slade Green and, in this way, some
of the concerns about the operation of Romford depot might also
be relieved. I have not worked out a complete service plan for
that.
8374. We can go to your page 38.[39]
There I think you explain how the Montague Report arrives at the
benefit to cost ratio of 3.21:1 for the extension to Ebbsfleet.
(Mr Hardie) Yes, what I have pointed
out is that I have got three columns of figures there The first
column, which I have called "Abbey Wood (Option 2)"
is actually presented in the Montague Report, as is the middle
column "Ebbsfleet (Option 3)". However, in the third
column I have had to deduce those figures and come back to recreate
the benefit cost ratio of 3.21:1 that the Montague Report quoted.
It is a straightforward matter of addition and subtraction.
8375. For example—I am not going to go
through them all—row one, "capital costs" you
get the £83 million by deducting the figure for Option 2
from the figure for Option 3.
(Mr Hardie) Yes, that is right.
8376. And the 3.21:1, of course, is not your
figure; it is the Montague figure that we looked at on page 35.
(Mr Hardie) That is right.
8377. You then take it further by considering
costs not accounted for in Montague. Can you take us through your
next few slides to explain the exercise that you carried out?
(Mr Hardie) Certainly. There were two sources
of information which set out where the costs assumed in the Montague
Report were insufficient. First is in the CLRL's letter to Bexley
Council of 26 January this year, where it says that a design study
carried out in 2002 suggested that a proposal to widen the railway
would cost £67 million, and that this figure could rise to
£90 million when risks are incorporated. It pointed out that
this figure made no allowance for railway systems and land purchases.
The second point comes from the Montague Report itself where it
pointed out that on the provision of a station of Ebbsfleet, it
had been assumed the costs would be borne by developers.[40]
So, to take those two sources to the next slide, which is slide
40, I have taken the most pessimistic figure of £90 million
for providing the four-tracking.[41]
I have started with the £83 million which comes from the
Montague Report, I have then added in the £90 million which
is the CLRL figure—the most pessimistic one—for putting
in the four-tracking; I have then assumed a further £10 million
costs for land purchases and the railway systems and then a further
£10 million for the provision of a station at Ebbsfleet.
Collectively, instead of the £83 million that was in Montague
I have now come up with a figure of £193 million.
8378. On page 41 you put the £193 million
figure in and it comes out with a benefit to cost ratio of 2.27:1.
(Mr Hardie) That is right.
8379. Can you just remind us of the Department
for Transport's guidance on appraisal of schemes? Benefit cost
ratios of two or more indicate what?
(Mr Hardie) A high return.
34 Committee Ref: A88, The Business Case for Ebbsfleet
Option (2) Extract from para 273, Montague Report July 2004 (BEXYLB-32005A-033). Back
35
Committee Ref: A88, The Business Case for Ebbsfleet Option (3)
Table 7: Whole life net costs (Option 3), Montague Report July
2004 (BEXYLB-32005A-034). Back
36
Committee Ref: A88, The Business Case for Ebbsfleet Option (4)
Extract from para 275, Montague Report July 2004 (BEXYLB-32005A-035). Back
37
Committee Ref: A88, The Business Case for Ebbsfleet Option (5)
Extract from para 31, Montague Report July 2004 (BEXYLB-32005A-036). Back
38
Committee Ref: A88, The Business Case for Ebbsfleet Option (6)
(BEXYLB-32005A-037). Back
39
Committee Ref: A88, The Business Case for Ebbsfleet Option (7)
Table 6 and 7 (paras 273 and 275 in Montague Report) Compared
(BEXYLB-32005A-038). Back
40
Committee Ref: A88, The Business Case for Ebbsfleet Option (8)
Costs not accounted for in Montague Report (BEXYLB-32005A-039). Back
41
Committee Ref: A88, The Business Case for Ebbsfleet Option (8)
Revised Capital cost for Ebbsfleet extension (BEXYLB-32005A-040). Back
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