Transport and the Economy - Transport Committee Contents


Written evidence from Rail Freight Group (TE 20)

1.  Rail Freight Group is pleased to submit evidence to the Transport Committee's Inquiry into Transport and the Economy.

2.  RFG is the representative body for rail freight in the UK. Our aim is to grow the volume of rail freight where it is economically and environmentally sound to do so. We represent around 120 member companies operating in all sectors of rail freight, from train operators, ports and shipping lines to customers and suppliers.

3.  RFG recognises that control of public finances is the top priority of the Coalition Government. This has implications across all areas of transport as spending is reduced or cut. However, the Government has also indicated that it remains committed to carbon reduction and its policies and actions must also therefore be aligned to that objective as well.

4.  The Department for Transport has yet to clarify how it will continue to support rail freight after the impacts of the spending review are known and understood. For example, will its advocacy role continue, will the lorry charging scheme support modal shift and how will any restructure/break up of Network Rail impact on rail freight? Government's actions in these areas have as much potential impact as the spending cuts themselves, and we hope that the findings of this Inquiry will help DfT to prioritise its actions accordingly. A lack of funds does not need to mean a lack of interest.

RAIL FREIGHT AND THE ECONOMY

5.  Rail freight makes an acknowledged contribution to the economy. Data released by Network Rail indicates that rail freight directly contributes some £870 million to the economy but actually supports an output of £5.9 billion, some six times its direct turnover.

6.  Since privatisation, rail freight has been transformed into a competitive and efficient operation. There are now five operators in the UK, and customers have a real choice of rail haulier. Private sector terminals are opening, offering additional choice, and the major ports are also improving their rail freight offerings.

7.  The sector has also become more efficient, achieving real unit cost savings of some 30%. This has come from managerial changes and reductions, investing in new equipment and technologies, and from 'sweating the assets'. The ability to run longer, and higher gauge trains on certain routes has also helped increase efficiency.

8.  As a consequence of these changes, rail freight has grown some 60% overall since privatisation. In the last two years, through the recession, rail freight volumes overall have fallen. However, a more detailed assessment of the data shows that, whilst the traditional bulk sectors have fared badly — coal in particular has been severely affected — the newer non bulk sectors have continued to grow year on year. In particular the movement of containerised goods from the major ports and between UK cities has increased year on year for the past seven years, and has grown by 63% (tonne-km) over that period. The volumes of intermodal goods on rail is now comparable to the volume of coal on rail.

9.  This suggests that rail freight is now adapting well to the change in the UK economy from production to import, and is equipping itself to address the challenges of this sector. However, ongoing Government support is vital if this success is to continue.

Have Economic Conditions Changed Since Eddington?

10.  Clearly, since the Eddington report was published, the UK has suffered a major recession, and, whilst it appears that the economy is recovering to some extent, the impact of spending cuts has yet to have its full impact. The recession has clearly had an impact on all transport sectors; port volumes fell, road haulage volumes fell and overall road congestion dipped somewhat. It is therefore likely that the data behind the Eddington study now appears outdated.

11.  However, whilst the absolute levels of traffic may have differed, the trends have remained unchanged. This suggests that the priority areas highlighted by Eddington — urban areas, key interurban corridors and international gateways are still valid. For rail freight, the links between the major ports and UK cities and between those cities themselves have been demonstrated to be the growth areas, and align well with Eddington's analysis.

12.  Eddington highlighted the need to consider small scale, as well as large interventions, and as funding is reduced, this strategy will need to continue to be applied. In the rail sector there are numerous small scale interventions which can generate capacity, such as increasing services overnight and at weekends, small scale enhancements on top of renewals and minor signalling modifications to permit longer freight trains to operate. Such types of measures will help growth to continue throughout a period of austerity.

What type of spending should be prioritised

13.  Government has been clear that, alongside its fiscal priorities, reducing carbon and promoting sustainable transport is also key. We therefore consider that the extent of carbon reduction should be a major consideration in deciding transport priorities.

14.  In Philip Hammonds speech to the IBM Start Conference on 10 September, he emphasised his commitment to sustainability. For passenger transport, he indicated that the move to electric cars was the key way that carbon reduction was to be achieved in the UK. However he did not mention freight. The electric HGV has not yet been developed and is likely to be many decades away, if feasible at all. Technologies such as improved aerodynamics have a place but the contribution is modest. It is therefore clear that rail freight must continue to have a place in low carbon freight transport. We would therefore expect to see DfT's spending priorities recognise this.

15.  Whilst we are not opposed to High Speed Rail, we remain sceptical about the benefits that might accrue to rail freight. A much stronger commitment will be necessary on the use of any released capacity for rail freight, and a physical link to HS1 for intercontinental services will also be necessary if the route is to support rail freight.

16.  We are also concerned that DfT is seeking to prioritise spending on a major restructuring of Network Rail. Whilst we understand Government's frustration at the company, any change needs to protect the needs of the national operators, including freight operators. We would expect that the Government would have to provide strong evidence in support of change, since any such alteration to the structure of the railway would certainly cost a lot of money in the short term. Changing Network Rail's governance and working practices might well be a more fruitful means of cutting costs and could achieve the coalition's manifesto commitments of making the company more accountable to its stakeholders. It could be done without legislation provided the company and its members agreed.

17.  Whatever changes are proposed, it is vital that there is, as a minimum, a national body responsible for timetabling, access, charges, capacity reservation, co-ordination of engineering work, performance regimes and possession planning as well as safety. If restructuring is to proceed we would favour lower cost solutions - such as regional cost centres — which help meet ORR and DfT objectives but protect freight services.

BALANCE BETWEEN REVENUE AND CAPITAL

18.   For rail freight, the cost of capital equipment has historically been a major issue in developing new rail freight services. This has been particularly true in, for example, the construction sector, where the high capital costs of discharging equipment for rail have been difficult for the sector to bear. In the past, freight facilities grant was often used to help meet this cost.

19.  In the intermodal and domestic sectors, capital costs are still high. However there are some differences. Equipment is more standardised and some, like containers, can be used by different transport modes. Handling equipment can be selected for the size of operation, from small facilities using container lift or reach stacker to large facilities using cranes. Linking intermodal facilities with other services such as warehousing also reduces overall transport costs. Many developers have investment funds available for such facilities subject to a supportive planning regime (see below). So, in the growth sectors, the need for Government investment in capital equipment is likely to be less than previously if the conditions are right for private sector investment. This means that presently the intermodal sector needs revenue support ahead of capital support at present.

20.  That said, there remains a need to ensure that the rail network supports an efficient rail freight sector. The current programme of work anticipated to support the Strategic Freight Network in CP4 is of course at threat from spending cuts and we have yet to see which schemes remain. However we would consider capital schemes which increase efficiency, such as gauge clearance and train lengthening should remain priorities.

21.  Aside from investment, we consider that Government must act in support of rail freight efficiencies, for example, by supporting the development of innovate wagon types, and ensuring that efficient freight operations are possible in any restructured rail network. Measures such as longer lorries, which undermine the economics of rail freight should also be resisted.

22.  Capital investment, and support for efficiency measures are key because as rail freight efficiencies grow, and cost comparability with alternative modes improves, the need for rail freight revenue support will reduce. Over the last seven years, intermodal rail freight has grown by some 63% but the revenue support budget has remained largely unchanged at around £20 million per annum. This clearly indicates how the revenue support, whilst still vital, is reducing in real terms. Government should be supporting the industry in reducing further its need for revenue grant, through investing, or helping others to invest.

ASSESSMENT METHODS

23.  At the highest level, we consider that the assessment measures used for Government investment and transport schemes in particular must ensure that priority is given to schemes which deliver Government priorities. The new Ministers at DfT have indicated on several occasions that their key priorities are deficit reduction, and carbon reduction. We would therefore expect the assessment techniques to align with this.

24.  Presently, the assessment techniques do not give a particularly high weight to carbon. For example, schemes which have a negative overall carbon impact can still have high priority if they deliver (for example) significant journey time savings. We would suggest that a much higher weight should be given to carbon reduction targets.

25.  In mode shift benefit rates used by DfT in assessing rail freight schemes, removing a lorry from 1 mile of congested motorway is assumed to be worth £1 in congestion relief, but only 3p in carbon reduction. 34p is also removed from the benefits for the taxation loss from reduced road fuel. It is therefore clear that DfT value the taxation loss 10x more than the carbon reduction.

26.  We are concerned to ensure that DfT does not focus solely on the carbon benefits of electric cars to deliver its share of carbon reduction targets. The movement of freight makes up some 30% of all transport emissions and cannot be neglected in policy and in appraisal.

PLANNING

27.  The proposed reform of the planning system is causing concern in the rail freight sector as it appears likely that gaining planning permission for rail freight interchanges is likely to become considerably more challenging even than previously. To grow, rail freight will need more, modern terminals and an increase in rail linked warehousing. The analogy is that High Speed 2 will not be a success if no stations are to be built.

28.  Major interchanges over 60Ha presently come under the Infrastructure Planning Commission. The proposed changes to the Commission are unlikely to be particularly problematic, although there are concerns over the criteria that Ministers will apply to decision making once an inspector has concluded.

29.  However we have yet to see even a draft version of the National Policy Statement for National Networks, which will be a key document in determining how rail freight interchanges will be assessed. The document will need to be clear in setting out the national and sub national need for such facilities, and the criteria which should apply. The document should seek to balance local needs with the national need and not be dominated by the localism agenda. We would also be very concerned if there were any attempt to increase the threshold for consideration of interchanges.

30.  As well as the larger facilities, there are also many developments which fall below the threshold of the IPC. The abolition of regional strategies is unhelpful for such sites, as they had previously helped to balance the local issues and regional benefits and need. We consider that Local Enterprise Partnerships must be empowered to support the development of such facilities.

31.  Overall therefore, rail freight needs the planning system to include;

A strong National Policy Statement with clear guidance on the national and regional need for rail freight terminals;

  A clear role for National Policy Statements in the planning process for schemes below the threshold level;

  The "duty to co-operate" requirement on local authorities extended to clarify the areas which must be covered by such co-operation and the outputs which are expected;

  Clarity on the legal status of documents produced by Local Enterprise Partnerships in consideration of planning applications;

  Incentives given to Local Authorities to plan for "unpopular" developments such as rail freight terminals in their areas, akin to the recent announcement of incentives for house building.

September 2010



 
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