Written evidence from Network Rail (TE 74)
EXECUTIVE SUMMARY
- The British economy relies on rail to transport
passengers and goods safely, quickly, reliably, accessibly, efficiently
and sustainably around the country. Of 1.3 billion annual passenger
journeys, 1 billion are by commuters and business travellers,
almost all on the key networks identified by Eddington and into
or between the urban centres in which many of the most productive
parts of the economy are located. The rail freight industry supports
economic output of £5.9 billion, six times its direct turnover;
- Looking to the future, rail's role is set to
increase further. Growth has already resumed after the recession
and, in the longer term, strong growth is predicted in almost
all of rail's markets, and in particular on Eddington's key networks;
- While economic conditions have changed since
Eddington, the relationship he identified between transport and
the economy has not. We agree with Eddington that investment
should be targeted at growing key urban catchments, inter-urban
corridors and international gateways. Rail is ideally placed
to meet these economic priorities;
- A comprehensive appraisal model is essential
to inform decision making on transport spending priorities. Current
methods lack sufficient focus on the economy, do not lend themselves
to the integrated planning of transport with related areas such
as regeneration and housing, and they do not adequately deal with
the need to reduce carbon emissions. Network Rail has just published
a discussion paper, "Prioritising investment to support
our economy" [234],
seeking to inform and stimulate this debate - suggesting
that transport schemes should be assessed according to their estimated
impact on the real economy, in terms of GDP and employment;
- In order to get the most from the limited funds
available, planning of rail spending needs to be based on a collective
vision for the future on its role, and the outputs needed from
the industry as a result. Network Rail is working together with
the rest of the industry to develop proposals for the future of
the rail network. The Planning Ahead documents [235]
set out a vision for the future to meet the challenge of meeting
growing demand while also further driving up safety and punctuality,
improving customers' experience and satisfaction and continuing
to reduce costs. New lines will function as an integral part
of the wider rail network and need to be planned as such;
- Well-targeted improvements in connectivity can
make a substantial contribution to economic growth, and should
be a priority alongside tackling congestion on existing networks.
Given the congestion apparent on many parts of the rail network,
and the continuing growth in passenger and freight demand, investment
in rail will clearly be key in supporting the economy in future.
This evidence addresses the issues raised in the
Committee's Call for Evidence, both generically and with particular
reference to rail.
Have the UK's economic conditions materially changed
since the Eddington Transport Study and, if so, does this affect
the relationship between transport spending and UK economic growth?
1. The Eddington study highlighted the compelling
link between transport and the country's economy. Eddington identified
three key types of transport network that are crucial in supporting
the economy, namely:
- urban areas and their catchments;
- key inter-urban corridors; and
- connections to international gateways (both passenger
and freight).
2. The Eddington study was written at a time
of strong, sustained economic growth and high public spending.
While these economic conditions have changed, the relationship
he identified between transport and the economy has not. The
networks he identified are still the key networks that support
the economy, and should be the priorities for investment (as discussed
in the following section).
3. Rail is ideally placed to support these priorities.
Britain's economy and businesses already rely on rail to move
large amounts of passengers and goods safely, quickly, reliably,
efficiently and sustainably.
4. On a typical weekday more than 3 million passenger
journeys are made by rail (the highest since demobilisation in
1946 after the second world war). Of 1.3 billion annual passenger
journeys, 1 billion are by commuters and business travellers,
almost all on the key networks identified by Eddington. Moreover,
most of these journeys are into or between the urban centres in
which many of the most productive parts of the economy are located.
5. Rail freight transports over 100 million tonnes
of goods worth around £30 billion every year and supports
economic output of £5.9 billion, six times its direct turnover
of £870 million every year.
6. Looking to the future, rail's role is set
to increase further. In the short term, growth has already resumed
after the recession. Figures published by the Association of
Train Operating Companies (ATOC) show passenger numbers growing
by 5% per year in the first half of 2010; while growth in deep
sea intermodal freight actually continued throughout the recession,
albeit at a reduced rate.
7. In the longer term, strong growth is predicted
in almost all of rail's markets, and in particular on Eddington's
key networks[236]:
- In key commuter markets outside the capital (e.g.
Glasgow, Manchester, Leeds, Birmingham and Bristol) growth of
over 100% is forecast by 2034, with a significant increase in
rail's market share compared to car;
- Around London, where rail already has a large
market share, commuting is still predicted to grow by up to 40%
by 2034, with off-peak growth of around 90%;
- On key long distance inter-urban corridors (such
as the West Coast and East Coast Main Lines), the two most likely
scenarios in Network Rail's Network Route Utilisation Strategy
forecast growth of some 70% by 2034[237];
- Freight forecasts point to a doubling of freight
tonne km by 2030, with an increase in rail's market share from
11.5% to 20% as its environmental, congestion, efficiency and
reliability advantages over road become even more important.
The greatest growth is forecast to be in traffic from international
gateways, particularly ports and the Channel Tunnel.
What type of transport spending should be prioritised,
in the context of an overall spending reduction, in order best
to support regional and national economic growth?
Generic priorities
8. In order to support economic growth, transport
spending should be focused on the key networks identified by Eddington,
in places where those networks are acting as a constraint to economic
growth. In practical terms, this means:
(a) relieving congestion on the key networks;
and
(b) well-targeted improvements in connectivity
of the key networks, such as reducing journey times and/or increasing
service frequencies, and in some cases providing connections
that do not currently exist.
9. Eddington rightly identified that congestion
on the key networks has a substantial effect on economic performance;
and that addressing this should be a priority, first by getting
the best out of the existing infrastructure and then, if necessary,
by investment.
10. Eddington also recognised the benefits of
connectivity to the economy. His study called them the "micro-drivers"
of productivity and described them at some length: improved business
efficiency and innovation; clustering of firms and workers in
"agglomerations"; improving the efficiency and flexibility
of labour markets, increasing competition and more.
11. However, while the Eddington study recognised
the benefits of connectivity and its historical importance in
the development of the UK economy, it very much downplayed the
importance of improvements to connectivity. It said of
today's network: "In broad terms, it provides the right
connections in the right places to support the journeys that matter."
The study concluded that only "in very limited circumstances"
would further improvements to networks stimulate economic growth.[238]
12. We believe that the Eddington study was mistaken
in taking such a view. It is, of course, true that the constraints
on economic growth are different in different areas, and that
transport is not always one of them. But there are circumstances
in which transport networks are a constraint on growth;
and they are more widespread than acknowledged by Eddington.[239]
13. Even within generally well-connected conurbations
there can be areas with very poor connections to employment opportunities,
which clearly act as an economic constraint. Improvements in
inter-urban networks - for example, reducing journey times or
improving service frequency - can also have significant effects.
For example, the strong transport connections between Edinburgh
and Glasgow enable them increasingly to function as a single economic
area.[240]
14. Businesses and other stakeholders in the
English city-regions also attach great importance to improving
the connections between them. This is a key aim of Network Rail's
Northern Hub proposal, which would unlock constraints in the Victorian
rail network around Manchester and enable a wide range of quicker,
more frequent and more direct services. It would allow 3.5 million
more passengers to travel by train every year, increasing labour
market flexibility and bringing substantial economic benefits
to the whole of the North of England.[241]
15. Research over the last five years, since
the Eddington report was published, has considerably improved
our understanding of these issues. For example, the Department
for Transport last year issued draft appraisal guidance on the
circumstances in which "wider economic benefits" could
be expected from transport schemes, and how some of these benefits
can be quantified.
16. In summary, transport is not always an economic
constraint in a particular area; and of course other factors contribute
to economic growth (indeed, we strongly support better integration
between transport planning and the planning of related spending
such as regeneration and housing, as discussed below in relation
to appraisal methods). However, well-targeted improvements in
connectivity can make a substantial contribution to economic growth,
and should be a priority alongside tackling congestion on the
existing networks.
The role of rail
17. Given rail's focus on Eddington's key networks,
the congestion already apparent on many parts of the rail network,
and the continuing growth in passenger and freight demand, investment
in rail will clearly be a key part of supporting the economy in
the future.
18. However, in order to get the most from the
limited funds available, the planning of rail spending needs to
be based on a collective vision for the future on the role of
rail, and the outputs needed from the rail industry as a result.
Indeed, Eddington highlights the importance of such long term
planning frameworks to guide the development of transport.
19. This is why Network Rail, ATOC and the Rail
Freight Operators' Association are working together to develop
proposals for the future of the rail network. The Planning Ahead
documents set out a vision for the future to meet the challenge
of meeting growing demand while also further driving up safety
and punctuality, improving customer's experience and satisfaction
and continuing to reduce costs. Network Rail's Initial Strategic
Business Plan, due to be published in June next year, will set
out more detailed proposals for the next five year regulatory
period from 2014 (Control Period 5), based on this longer term
perspective. These documents will provide government, and other
funders, with evidence-based input to guide informed decisions
about what they want from the railway. The industry will then
be in a position to deliver these priorities efficiently and make
optimal use of available funding.
New high speed line(s)
20. Plans for a new high speed line or lines
(e.g. High Speed 2) are being developed outside the five-year
regulatory cycle. However, the case for new line(s) is based
on the same investment priorities as those described above: relieving
congestion and improving connectivity. The scale of the growth
expected over the next 20 or so years is such that incremental
improvements to the existing network will not, in the long run,
be adequate.
21. It is important to recognise, though, that
the case for a new line or lines is much broader than the benefits
to longer distance inter-urban travel, important though these
are. There are also substantial benefits from freeing up capacity
on the existing network, relieving congestion and improving connectivity
on a range of shorter distance inter-urban, urban and freight
routes - all of which are part of the key networks identified
by Eddington. For example, the planned areas of housing growth
in the South Midlands will need to be well connected to London
and other conurbations (e.g. Birmingham) if they are to contribute
most effectively to economic growth, and the capacity on the existing
network that would be freed up by HS2 will be important in achieving
this.
22. In terms of transport and the economy, therefore,
new lines will function as an integral part of the wider rail
network and need to be planned as such[242].
How should the balance between revenue and capital
expenditure be altered?
23. The first priority for any expenditure must
be to improve cost-efficiency as much as possible: that is, to
get the best possible return for every pound spent.
24. In this context, Network Rail is already
committed to reducing costs by 22% between 2009 and 2014 (on top
of the 27% reduction already delivered between 2004 and 2009).
Notwithstanding these savings, we recognise the imperative to
further improve value for money and affordability across the industry.
We are working with government to re-optimise our existing enhancement
programme, for example, to reflect changes in rolling stock assumptions,
and we are introducing extensive programme of benchmarking to
inform decisions about the true scope for further efficiency improvements.
25. Sir Roy McNulty's current Value for Money
study also offers the industry the opportunity to make further
efficiencies, for example through improved partnership working
to reduce whole-industry costs.
26. Having improved efficiency as far as possible,
the best balance between revenue and capital expenditure then
depends on circumstances; there is no reason to prefer one to
the other per se. The priority should be to determine
how transport can best support economic growth; the balance between
revenue and capital expenditure will then follow. We appreciate
that revenue and capital expenditure budgets need to be set in
advance, however, so the challenge is therefore to maintain some
flexibility between them.
27. Having acknowledged that the first priority
for expenditure must be to support economic growth, we would nevertheless
highlight two other types of capital expenditure for which we
believe some provisions should be made.
28. First, there will be some investments that
reduce the long term operational cost of transport networks, often
by using new technology. Tackling the deficit - and ultimately
reducing the national debt - will be a long term exercise, and
opportunities to reduce long term costs should be taken, wherever
possible. A good example from the rail network is the electrification
of some of the main line routes, which will pay for itself over
the long term.
29. Second, there will be some investments for
which the opportunity to make them (or to make them at a reasonable
cost) arises only once in a few decades, typically at the time
when life-expired assets have to be renewed. An example from
the rail network is the replacement of life-expired signalling
layouts at a major terminus or junction. Such layouts were typically
installed out 30 or more years ago to support the patterns of
rail services of the time, and are not always best suited to today's
services, still less to the anticipated growth of the future.
The necessary improvements can often be made at relatively modest
cost if done when the assets are being replaced anyway; but making
them later on can incur much higher costs and considerable disruption
to services.
Are the current methods for assessing proposed
transport schemes satisfactory?
30. A comprehensive appraisal model is essential
to inform decision making on spending priorities. Current appraisal
methods have evolved over several decades, and in some respects
have much to commend them. However, they do not meet today's
needs, in several respects. They lack sufficient focus on the
economy; they do not lend themselves to the integrated planning
of transport with related areas of decision-making such as regeneration
and housing; and they do not adequately deal with the need to
reduce carbon emissions.
31. Current methods are focused on valuing the
benefits to transport users, mainly savings in journey time, based
on what users would be willing to pay for those benefits. They
then compare the value of the benefits to the costs of delivering
them. They essentially ask the question: How do we best spend
the tax proceeds of economic growth in order to provide things
that users value?
32. This has been the key question over the past
10-15 years, when public spending has been relatively high. However,
the most important question now is very different: How do we
invest limited public funds to deliver the economic growth in
the first place?
33. Network Rail has just published a discussion
paper - "Prioritising investment to support our economy"
- that seeks to inform and stimulate this debate. It suggests
that transport schemes should be assessed based on their estimated
impact on the real economy, in terms of GDP and employment. Given
the overriding importance of economic growth and tackling the
deficit, this assessment would be likely to be the primary criterion
for most decision-making. However, the existing appraisal methods,
focused on benefits to users, would still have value and would
sit alongside the new assessment.
34. The new assessment, estimating the effect
on the real economy, would be focused on land use and connectivity.
Such an approach should be applied not only to transport schemes
but also to regeneration or housing decisions, making it easier
to plan across all three areas in an integrated way and prioritise
spending.
35. Finally, current methods do not appear to
give adequate weight to the need for reduction in carbon emissions.
This is a wider issue than that of what monetary value should
be ascribed to each tonne of carbon. Rather, it is about the
need for a strategic view on how the UK will meet its targets
for carbon emissions, and what this means for how transport schemes
are assessed.
36. The December 2008 report by the Committee
on Climate Change proposed the (now legally binding) target of
an 80% reduction in emissions by 2050. This report also set out
- in broad terms - the way in which it believed this target could
be met at reasonable cost. For example, the de-carbonisation
of all or most of the UK's electricity supply was regarded as
essential, as was the electrification of all or most of the UK
car fleet. The feasibility of electrifying HGVs was less clear;
the report suggested that biofuels or hydrogen might be necessary
in the long term.
37. If there is a strategic view that these (and
other) objectives will have to be achieved in order to meet UK
emissions targets, then the meeting of these objectives should
be considered as part of the "base case" for assessing
transport schemes. This contrasts with current transport appraisal
guidance approach, which specifies that the "base case"
should be based on the current world "as is", plus any
other specific schemes that are either committed or very likely
to happen.
38. This could substantially affect the assessment
of some schemes. An obvious example is electrification of the
rail network, which would have even greater environmental benefits
if electricity supply were to be de-carbonised.
39. The government has started to address this
issue. In June this year the Department of Energy and Climate
Change issued guidance on the de-carbonisation of electricity
supply, and stated that this should form part of all appraisals
(in transport and other sectors). However, more needs to be done.
For example, it is not clear whether some of the assumptions
(e.g. regarding future fuel prices) underpinning the DECC guidance
are consistent with the assumptions in current transport appraisal
guidance. And there may be a case for other strategic objectives
(i.e. other than the de-carbonisation of electricity supply) to
be treated in the same way.
40. The government has stated that it will reform
the way in which transport decisions are made, so that the benefits
of low carbon schemes are fully recognised. We support this and
look forward to contributing to these reforms.
How will schemes be planned in the absence of
regional bodies and following the revocation and abolition of
regional spatial strategies?
41. The abolition of regional bodies, and associated
strategies, will have implications for both national and local
decision-makers.
42. At national level, it will be important that
policy and guidance is specific enough to give certainty to planning
authorities and developers at the sub national level. The National
Policy Statements, together with the National Planning Framework
and the National infrastructure Plan, will be important in this
respect.
43. At a local level, the government has announced
that the forthcoming Localism and Decentralisation Bill will establish
Local Enterprise Partnerships (LEPs). It is too early to specify
in detail how schemes should planned within this new structure
- indeed, it may vary from place to place.
44. However, in designing the details of the
new structure and decision-making processes there are some factors
that should be borne in mind. In his policy proposals Eddington
recommended that the government should consider:
- Sub-national decision-making structures that
reflect patterns of economic activity;
- Effective mechanisms between transport bodies
to manage shared and interlinked transport networks;
- Powers and funds to be vested in sub-national
decision-making bodies to support cross-modal decision-making
and funding and ensure both better use and infrastructure options
are considered;
- An appropriate level of flexibility between funding
streams to incentivise a cross-modal approach to funding the highest
value for money solutions;
- Sub-national bodies to have the capacity and
accountability to take any such enhanced role.[243]
45. We would add to this list that decision makers
- at both national and sub-national level - should be better able
to integrate the planning of transport with related areas such
as regeneration and housing. We hope the government will consider
how to take forward these issues in the forthcoming bill.
46. More specifically regarding rail, the nature
of the network and the services that run on it is such that planning
often naturally crosses local authority boundaries. The abolition
of the regional bodies will also emphasise the importance of Network
Rail's Route Utilisation Strategies as an integrated plan for
the industry.
47. It will also be particularly important for
LEPs to play a role in rail industry planning, and we hope that
the structures and incentives established in the forthcoming bill
will facilitate this. For example, we suggest that a duty should
be placed on Local Planning Authorities and LEPs to demonstrate
that they have had regard to published rail plans in assessing
and prioritising local needs.
48. LEPs should be able to pool planning obligation
revenue (e.g. from the successor to the Community infrastructure
Levy) to support the enhancement of rail infrastructure. We also
suggest that government should consider innovative ways to enable
and incentivise LEPs to raise money for key infrastructure enhancements
at a sub national level, such as local government bonds and Accelerated
Development Zones.
September 2010
234 www.networkrailmediacentre.co.uk/Resource-Library/Prioritising-investment-to-support-our-economy-ee4.aspx Back
235
Planning Ahead 2009 - Control
Period 5 and beyond -
www.networkrail.co.uk/browse%20documents/planning%20for%20cp5/planning%20ahead%20-%20control%20period%205%20and%20beyond.pdf
Planning Ahead 2010 - the long term planning framework, August
2010 -
www.networkrail.co.uk/browseDirectory.aspx?dir=%5CPlanning%20for%20CP5&pageid=5669&root= Back
236
Figures taken from "Planning
Ahead 2010: The Long Term Planning Framework" produced by
Network Rail, ATOC and the Rail Freight Operators Association
Back
237 www.networkrail.co.uk/browse%20documents/rus%20documents/route%20utilisation%20strategies/network/working%20group%201%20-%20scenarios%20and%20long%20distance%20forecasts/network%20rus%20-%20scenarios%20&%20long%20distance%20forecasts.pdf Back
238
Eddington Study, Vol 2. Back
239
The development of Docklands' transport networks (such as the
Jubilee Line Extension and Docklands Light Railway) would not
have happened if investment had been focused solely on relieving
congestion on existing networks. Eddington acknowledged this
but portrayed Docklands as an isolated exception. Back
240
Network Rail's Edinburgh-Glasgow Improvements Programme will improve
connections further still. It is expected to deliver a range of
benefits by 2016 including a fastest journey time of 37 minutes
on the main Edinburgh Waverley-Glasgow Queen Street route and
increased service levels on all routes between the two cities
from the current five or six services per hour to 13 services
per hour. Back
241
www.networkrail.co.uk/aspx/6472.aspx Back
242 Any
new line(s) may also be physically or operationally integrated
with the rest of the network, though that is a separate issue,
albeit one that is obviously also important for planning. Back
243
Eddington Study, Vol 4. Back
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