Written evidence from DB Schenker (TE 69)
1. DB Schenker is pleased to submit evidence
to the Transport Committee's Inquiry into Transport and the Economy.
2. DB Schenker is the largest UK rail freight
operator. DB Schenker moves around 80 million tonnes / 10 billion
tonne kilometres of freight a year and employs 3,500 staff in
Great Britain. Besides transporting coal for electricity generation,
steel and petroleum, we move stone, deep-sea containers and operate
international freight services through the Channel Tunnel in connection
with our open access freight business in France and Spain. DB
Schenker is wholly owned by Deutsche Bahn AG, the second largest
logistics provider in the world.
3. Rail freight produces between three and four
times less CO2 per tonne moved than road haulage and
up to ten times less polluting emissions. Whilst rail must continue
to reduce its own carbon footprint, its primary contribution to
Climate Change is to continue to attract traffic from more polluting
modes.
4. Rail freight in Britain has been one of the
success stories of privatisation and has grown by over 60% in
the last fourteen years, increasing its surface market share from
8% to 11.5%. At the same time the industry has become more efficient
with DB Schenker having reduced key asset numbers and costs by
over 30% in the past five years. Although rail freight volumes
have reduced during the recession, the industry continues to invest
in the firm expectation that absolute growth, as well as increased
market share, are achievable.
5. Rail freight industry forecasts, endorsed
by the Department for Transport and Network Rail, suggest a doubling
of rail freight activity by 2030. The rail industry's "Planning
Ahead" document anticipates an increase in rail freight's
market share from 11.5% to 20%.
6. Increasing rail's market share is perfectly
feasible -critical to this will be both the development of both
new terminals and the Strategic Freight Network
(see http://www.dft.gov.uk/pgr/rail/strategyfinance/strategy/freightnetwork.)
RAIL FREIGHT
AND THE
ECONOMY
7. Rail freight has a key role in certain sectors
of the economy and has historically been the transport mode of
choice in the movement of certain bulk products such as coal for
electricity generation and iron ore for steel making.
8. Network Rail's recent publication, The Value
and Importance of Rail Freight, estimates that rail freight directly
contributes £870 million to the economy but supports
a turnover six times greater.
9. In nearly all the markets that rail freight
trades in, it plays a major role despite facing strong modal competitive
pressures, primarily from road haulage but also from shipping,
pipelines and product substitution in some markets.
10. Rail freight's importance to the economy
therefore continues.
Have the UK's economic conditions changed materially
since the Eddington Transport Study?
11. The economic sectors that rail freight trades
in have all suffered, to a greater or lesser extent, from the
impact of the Recession.
Steel and Aggregates are two bulk sectors where volumes
were notably adversely affected although they have since started
to recover.
In parallel, but not directly as a result of the
Recession, coal lost market share to gas in the market for electricity
generation and movements of coal have been correspondingly reduced
whilst record levels of inventory were reduced.
In contrast, however, both rail's market share and
the absolute volume carried of containers - the key growth market
for the future - have continued to grow over each of the past
four years. Growth in tonne kms of containers grew by 9% in both
2006 and 2007, by 0.2% in 2008 (with growth still being achieved
in the depth of the recession) and by over 6% in 2009.
12. The impact of the Comprehensive Spending
Review may impact on the recovery of the economic sectors with
which rail freight trades - e.g. the Steel and Construction industries
are dependent to a significant degree on public sector investment
in roads and other infrastructure projects.
13. However, none of this suggests that the main
conclusions of Eddington - the need to reduce congestion on inter-urban
corridors, to / from key international ports and in urban areas
- have changed or become less valid.
Container traffic to / from international ports and
gateways continues to be the major growth traffic for rail freight
and this underlines the continuing relevance of Eddington.
What type of transport spending should be prioritised?
14. DB Schenker believes that transport spending
should concentrate on delivering:
(a) Economic growth and regeneration.
(b) Reducing carbon, where rail is the key to
low carbon freight transport.
(c) Improving sustainable transport.
(d) Reducing costs or increasing value for money.
15. Rail freight has a track record of helping
UK PLC achieve all of these objectives, primarily through modal
switch from road transport and development of its own efficiency.
16. DB Schenker also consider that small scale
interventions, as well as major projects, should be protected
and prioritised as local initiatives can have major local benefits.
17. Examples of transport spending that DB Schenker
believe meet the above criteria include:
(a) The development of the Strategic Freight
Network (see section 6 above).
(b) The use of modal shift grants to switch traffic
to more sustainable and carbon friendly modes.
(c) The development of inter-modal terminals
to facilitate transferring traffic to more carbon-friendly and
sustainable modes.
18. DB Schenker would submit that significant
spending on rail industry restructuring (whether of the DfT, Network
Rail or other parts of the rail industry) would represent neither
good use of scarce funds nor good value for money at the moment.
Scarce funds should be used to promote services that
deliver the above objectives and improve services for customers
How should the balance between capital and revenue
expenditure be altered?
19. Rail is a capital intensive mode of transport.
For any party to invest in rolling stock or terminals is a very
considerable undertaking and this is one reason why development
of new rail freight traffics is complex and can take many years.
20. Often customers will only make such a decision
when they reach a key point in their natural product investment
cycle.
21. Government support for such capital investment
has historically been available through grants - albeit at very
low levels - but the major investments in key facilities have
been made by the private sector Operators, customers and third
parties. For them, the major contribution Government can make
is to reduce risk by providing certainty of the environment.
22. In an environment when public spending is
going to be constrained, DB Schenker would submit that:
(a) There should be as much flexibility in the
rules and classification of expenditure as possible.
(b) The key should be supporting schemes which
deliver the objectives set out in section 13 irrespective of classification.
(c) Government should ensure that the environment
is made as attractive as possible for private sector investment
that delivers these objectives through:
(i) Certainty of track access charges until the
end of CP5.
(ii) A supportive planning regime, e.g. for new
rail freight terminals.
(iii) Continuing resistance to measures that
undermine rail freight, eg longer and heavier lorries.
Are the current Assessment Methods satisfactory?
23. DB Schenker submit that the assessment methods
should concentrate on delivering the objectives set out in section
13.
24. DB Schenker believe that all external costs
of different freight modes should be treated equitably in NATA,
the model currently use by DfT.
25. DB Schenker submits that carbon reduction
should be given a higher weighting.
26. DB Schenker also submits that improvements
to operational efficiency (e.g. of rail freight operators, Network
Rail or other rail users as many projects have benefits such as
capacity enhancement or line speed improvements) should also be
adequately covered by the assessment criteria.
How will schemes be planned going forward?
27. DB Schenker has major concerns about
the proposed reform of the planning system. It has never been
easy to obtain planning consents for major developments such as
rail freight interchanges or terminals and it would now appear
to be going to be even more difficult than before.
28. DB Schenker cannot overstate the negative
impact this has on prospective clients.
29. 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.
30. 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.
31. 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.
32. Overall therefore, rail freight needs the
planning system to include;
(a) A strong National Policy Statement with clear
guidance on the national and regional need for rail freight terminals;
(b) A clear role for National Policy Statements
in the planning process for schemes below the threshold level;
(c) 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;
(d) Clarity on the legal status of documents
produced by Local Enterprise Partnerships in consideration of
planning applications;
(e) 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.
33. DB Schenker intends to submit supplementary
written evidence relating to the Comprehensive Spending Review
after it is published in late October.
September 2010
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