House of Commons - Priorities for investment in the railways

Priorities for investment in the railways - Transport Committee Contents

3 The value of rail enhancements

12. Of Network Rail's £35 billion investment programme between 2009 and 2014, £11.7 billion is to be spent specifically on increasing capacity,[15] either through major projects such as Thameslink (£2.7 billion during 2009-2014)[16] or Crossrail,[17] or through smaller-scale investments including new and longer trains and schemes to lengthen platforms. The scale of the enhancement programme in Control Period 4 (2009-2014) is more than twice that of Control Period 3, covering 2004-09. Whereas enhancement expenditure accounted for approximately 11% of total rail expenditure between 2004 and 2009 it now accounts for 33%.[18] Eddington's report suggested that transport improvements should be aimed at "tackling problems and shortages", as these are most likely to offer real benefits to passengers and freight users and offer best value-for-money.[19]

13. Given the current financial climate, and the likely pressure on funds in the coming years, we wanted to explore whether such large investments to enhance the rail network provided value-for-money for the economy and society. We received much evidence on this issue; some of the key points are highlighted below.

Economic benefits

14. Enhancing the rail network—either through improving services and relieving capacity constraints on existing railway lines, restoring old or constructing new lines (including high speed lines), or improving stations—can potentially provide a range of economic benefits. These can be grouped into:

direct economic benefits to rail users (for example through time savings), and
wider economic benefits (through stimulating the regional and national economy).

DIRECT ECONOMIC BENEFITS

15. Eddington's Transport Study concluded that transport improvements could provide direct economic benefits to both passengers and freight users, through reduced journey times and reduced congestion. These benefits are what is usually measured in conventional cost-benefit analyses of transport projects. Eddington calculated that a 5% reduction in travel time for all road business travel, for example, could generate around £2.5 billion of cost savings—some 0.2% of GDP. Congestion and delays on the transport network, on the other hand, directly impacted on economic growth. If left unchecked, Eddington argued that the rising cost of congestion would waste an extra £22 billion worth of time in England alone by 2025. He warned that commuter rail lines, in particular, were forecast to see further increases in overcrowding, and intercity rail services would see many trains at or beyond seating capacity on the approaches to cities.[20]

16. Witnesses gave specific examples of direct economic benefits to their regions through rail enhancement projects. An economic study commissioned by the Northern Way concluded that almost £11 billion of direct benefits to rail users throughout the North could be gained through enhancing rail services in the Manchester Hub (see paragraph 55), through journey time savings and crowding reductions.[21] Research undertaken for the South Yorkshire Passenger Transport Executive and Integrated Transport Authority and others argued that improving connectivity between South Yorkshire and London could provide direct economic benefits of £29 billion over a 60-year period.[22] Other studies concluded that overcrowding on three rail routes meant Leeds and Greater Manchester lost 895 jobs and £36m of GVA[23] in one year. Pteg said these numbers would double by 2014 if no action was taken to increase capacity on these routes.[24]

17. Improvements and enhancements to the rail freight network were also said to offer direct economic benefits through improved connectivity. Several witnesses said that greater use of rail freight, along with improved service reliability, would help UK businesses compete more effectively in the global market by providing more options for the transfer of goods and by reducing the cost of logistics for exporters, importers and domestic freight users alike.[25]

WIDER ECONOMIC BENEFITS

18. According to Eddington, transport "cannot of itself create growth": instead, it was "an enabler that can improve productivity when other conditions are right" and he pointed to the importance of other factors, such as skills.[26] He recognised, however, that transport improvements could potentially provide wider economic benefits than those captured in traditional cost-benefits analyses. Transport investments could, for example, support clusters and agglomerations[27] (typically in urban areas or industrial locations) of economic activity, by expanding labour market catchment areas, improving job matching,[28] and facilitating business to business interactions. In London, he concluded that there could be additional GDP benefits from agglomeration effects of 30% over and above direct time savings of a transport intervention.[29] Witnesses emphasised the agglomeration benefits of various rail enhancement projects. The City of London told us that Crossrail would provide agglomeration benefits in the range of £36 billion to £67 billion over 60 years.[30] A network of high speed rail routes was said to add as much as £13 billion to the UK economy through agglomeration benefits.[31]

19. Contrary to Eddington's views, several witnesses also said rail enhancement projects could potentially regenerate areas, particularly relatively poor regions.[32] London TravelWatch said that a justification for the East London Line extension had been its ability to assist in the regeneration and economic uplift of the areas served.[33] Eurostar gave the example of Lille, a city that had been "transformed" by its location on the TGV high speed network in France.[34] Station upgrades could also help to regenerate an area.[35] Others, however, were more sceptical about this argument. It was stated that high speed rail investment in other European countries had not always resulted in transformational change in the areas served by the line. In France, for example, Tours or smaller centres such as Le Creusot had not experienced the same effects as Lille or Lyon. The economic analysis used to estimate such regional economic benefits were alleged to be "highly complex and newly developed".[36] Eddington said that a "build it and they will come" approach to transport projects which attempted to regenerate areas and regions was "dangerous".[37]

20. Another wider economic benefit from rail enhancement projects mentioned by witnesses was the creation of construction jobs.[38] Capital investment projects were described as a "classic countercyclical economic measure" to protect the employment of skilled workers and the continued existence of engineering businesses, and to facilitate the development and retention of a technical skills base for the industry in the country.[39]

21. A minority of organisations questioned the economic value of rail enhancements in general. Some pointed to the fact that rail required substantial subsidy by the taxpayer—unlike road or air travel—yet only accounted for a small fraction of passenger travel within the UK. However, rail travel is a very important mode of transport for businesses. Approximately 92% of industries use the rail network for passenger travel and freight movements. 65% of rail journeys in the North East, 70% in the North West, and 82% in the East of England are made for business purposes or by commuters.[40] Rail is also an increasingly important mode of transport for passengers travelling between regions in the North of England: rail passenger journeys between the North West and Yorkshire & the Humber, for example, have increased by 88% since 1995-96.[41]

22. Others said that, too often, inadequate consideration was given to other transport schemes, such as congestion-relieving road schemes, when decisions on major rail enhancements were made.[42] Eddington too warned that investment in "grand" enhancement projects were "rarely assessed" against other interventions that would achieve the same goals.[43]

Environmental benefits

23. Rail is a more environmentally friendly mode of transport than road or air. Eddington said it was essential that, from both an economic and environmental perspective, the environmental impacts of transport were "fully reflected in decision-making".[44] Network Rail said that the average carbon dioxide emissions for a passenger rail journey was about half that of an equivalent car journey and about one-quarter of an equivalent journey by air. Improved rail links, therefore, "reduce the cost of mitigating climate change by reducing the need for road and air travel".[45] Eurostar said that the reduction in journey times created by the first high speed rail line had contributed to an increased market share for rail, and therefore "reduced overall CO₂ emissions as a result of higher load factors". It said it produced 10 times less carbon per passenger travelling than flights between London and Paris and London and Brussels.[46] Fewer cars on the road would also reduce the amount of pollution for walkers and cyclists, with subsequent cost savings to the health service.[47]

24. Enhancing the rail freight network was also said to have important carbon reduction benefits. On average, rail freight produces 70% less carbon emissions than road freight.[48] Freight On Rail said rail currently had 24% of the market in relation to Felixstowe Port; planned enhancements could take rail's share to between 35%-40% and remove 40 million lorry miles each year.[49] The Rail Freight Group said that enhancing rail freight capacity could, by 2030, save 4.6m tonnes of CO₂ per year for the UK—which was important for the Government's climate change targets.[50]

25. Other witnesses were more sceptical of the carbon reduction benefits of major rail enhancement schemes, partly because of the emissions resulting from construction. For example, an estimated 80,660 tonnes of CO₂ per annum will be generated during the construction phase of Crossrail.[51] Manchester Airports Group said rail construction involved "significantly more" carbon emissions than the construction involved in new airport infrastructure, because the "land take, concrete and steel requirements, station and signalling infrastructure for new rail build is far larger (because of line length) than new runways at airports".[52] During operation, however, Crossrail is estimated to save more emissions as a result of modal shift than it emits through energy consumption during any year.[53]

26. Other commentators have argued that enhancing, and enlarging, the rail network simply encourages more travel, and thus more carbon emissions: the RAC Foundation said that about a fifth of passengers on a potential new high speed line from London to Scotland would be new, "induced" passengers. The Foundation said the Government's objective should be to examine alternatives, such as home working and shorter commutes, instead of encouraging more long-distance travel.[54]

27. There are differing views on the economic and environmental benefits of investing to enhance the railway network. It is clear, however, that enhancements to the railway network provide good value-for-money in many cases and are a worthwhile investment of public funds. Rail network enhancements can have important economic benefits and help to regenerate, and connect, local communities. If extra transport capacity is needed, rail is also more environmentally friendly than road or air. The UK's challenging climate change targets increase the attractiveness of investing in the network, to encourage modal shift in terms of both passenger and freight transport and to make the railway network itself greener.

28. We welcome the scale of the current investment programme and we commend the Government for its commitment to the railways. The Government is right to prioritise increasing capacity during the current control period, and we are pleased that the Government is investing in growth. We call for this to continue across the country in the next period.

15 Ev 121 [Network Rail] Back

16 Total programme cost of £5.5 billion to be committed by the Government. Ev 121 [Network Rail]. Back

17 The total cost of Crossrail is estimated to be about £16 billion. Central Government is contributing £5 billion towards the scheme, with Transport for London and the Greater London Authority responsible for £7.7 billion. Other funding derives from private sources. Network Rail is spending £2.3 billion on Crossrail. Ev 121 [Network Rail] Back

18 Department for Transport, Delivering a Sustainable Railway, Cm 7176, July 2007 Back

19 In particular, Eddington said that the strategic economic priorities for long-term transport policy should be growing and congested urban areas and their catchments, and the key inter-urban corridors and the key international gateways that are showing signs of increasing congestion and unreliability. The Government should focus on these areas because they are heavily used, of growing economic importance, and showing signs of congestion and unreliability. Sir Rod Eddington, The Eddington Transport Study: The Case for Action, December 2006, p 6 Back

20 Sir Rod Eddington, The Eddington Transport Study: The Case for Action, December 2006, pp 1, 6 Back

21 The Northern Way, Manchester Hub Phase 1-Transport Modelling and Benefit Assessment, April 2009, p 77. Prepared by Steer Davies Gleave. Eddington treated overcrowding as a form of congestion that had a direct impact on businesses and travellers. He noted, however, that it was not easy to translate these impacts into economic costs because, as well as the discomfort and reduced attractiveness of rail travel which goes with rising overcrowding, punctuality and reliability may also be affected as the network carries more passengers. Sir Rod Eddington, The Eddington Transport Study: Main Report, December 2006, p 111 Back

22 Leeds City Region and Sheffield City Region, The Case for High Speed Rail to the Leeds and Sheffield City Regions, August 2009, p 1. Research undertaken by Arup and Voltera. Ev 107 Back

23 Gross Value Added. Back

24 Ev 170 Back

25 Freight Transport Association [Ev 125]; Network Rail [Ev 116]; Royal Borough of Kensington & Chelsea [Ev 80]; London Borough of Croydon [Ev 167] Back

26 Sir Rod Eddington, The Eddington Transport Study: The Case for Action, December 2006, p 11 Back