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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