Welsh Affairs Committee - Minutes of EvidenceHC 95

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Oral Evidence

Taken before the Welsh Affairs Committee

on Tuesday 16 October 2012

Members present:

David T. C. Davies (Chair)

Guto Bebb

Geraint Davies

Jonathan Edwards

Nia Griffith

Mrs Siân C. James

Karen Lumley

Mr Robin Walker

Mr Mark Williams

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Examination of Witnesses

Witnesses: Mark Barry, Consultant, M&G Barry Consulting, and Jim Steer, Director, Greengauge 21, gave evidence.

Q132 Chair: Mr Barry and Mr Steer, we have about half an hour. Would you like quickly to introduce yourselves and say a few words about your organisations? We will then have a few questions for you. As you are probably aware, I am David Davies, the Chair of the Welsh Affairs Select Committee, the members of which are present. Would you like to take a moment or two for an introduction?

Mark Barry: Thank you. My name is Mark Barry. I have my own consulting business and represent a number of organisations in south Wales in a transport capacity. Last year I gave evidence to the Transport Committee on behalf of the Cardiff Business Partnership, so I am following up the evidence I submitted last year. I am also a member of the Great Western Partnership, which is a coalition of organisations along the Great Western corridor that have been articulating and making the case for further investment in the Great Western Main Line beyond what is currently planned. Jim’s group, Greengauge 21, has done a lot of work for that team. I think it has had an impact in terms of what is important economically as regards transport in south Wales.

Jim Steer: I am Jim Steer. I am here as a director of Greengauge 21; there are just two directors. It is a not-for-profit organisation, supported by a public interest group and, more recently, an industry leaders group that we have established, which is more private sector. I am also a director and, indeed, founder of Steer Davies Gleave, which is an independent transport consultancy.

Q133 Chair: Mr Steer, your report raised concerns that the High Speed 2 network could have a negative impact on Wales. Is that correct? When you talked about the potential loss for Wales, did you mean that Wales would lose out from the fact that High Speed 2 could be built or just that it would not receive as much economic benefit as the rest of the United Kingdom?

Jim Steer: Thank you for the question. The report in question was this one, which was produced for Greengauge 21. I am happy to make a copy available.

Q134 Chair: You are quoted as saying that there will be 21,000 fewer jobs in Wales and a £600 average lower income. That is 21,000 fewer than what?

Jim Steer: That is a good question. I don’t know that I can turn up the figure straight away, but I can give you the difference in terms of annual wage growth rate, just to put it in perspective. This is the difference between two big numbers, looking over the long term-basically. It is an analysis of the impact on the rest of the country of making big connectivity improvements between London, the midlands and the north. The difference in average wage growth rate is that in Wales, instead of being +1.83% per annum, it would be +1.79% per annum. It is a small but real difference-indeed, Mark Barry was the person who drew it to people’s attention-that this research, which was looking at the proposed north-south high-speed line and a high speed rail network, identified.

Q135 Chair: If we believe these figures-we are assured that they are accurate, even though they point to quite a small difference and are based on a large engineering project that has not yet gone ahead-and take them as read, as good, patriotic Welsh men and women, we should oppose High Speed 2. These Committee members should go back and be totally opposed to High Speed 2. Is that what you are suggesting?

Jim Steer: First, the figures in this report come with a very heavy caveat. Nobody else has attempted to assess this distributional effect-I think that is unfortunate-because you are right on the edge of anybody’s analytical capability. I stress the fact that the effect is reckoned to be small. In any event, there are then questions of what you can do about it, which you may want to come on to.

Q136 Chair: One thing we could do is spend £30 million a mile on a motorway network, instead of spending £150 million a mile on a rail network. Wouldn’t that make more sense, even though it is probably difficult for you to agree, since you are getting quite a lot of funding from the train companies and the rail industry?

Jim Steer: I wish that were true. I am not sure where your two numbers come from.

Q137 Chair: I have sourced them all from the web but generally from Government figures.

Jim Steer: I see. The evidence that I have seen-produced not by Greengauge 21 but by work done for the Department for Transport-compares and contrasts the value of investing in rail and the motorway network. This is the work done by Atkins, which was completed in 2002 and put on the Department’s website in 2004. It was the first study of north-south high speed rail in Britain. It compared and contrasted the investment and returns and came to a very clear conclusion that high speed rail was the better investment.

Chair: Thank you very much.

Q138 Mrs James: I want to look at the work you did on your conditional output statement and your proposals to improve the Great Western Main Line over 25 years. Can you explain how you arrived at the proposals and tell us how the Government have responded to them?

Jim Steer: We developed this for the Great Western Partnership. Basically, we set out to look at all of the evidence that existed. The partnership was very clear that it did not want to set off on some new research exercise, but it did want to make sure that all of the information that was available was used. We found that a surprisingly productive route to follow. In particular, although this research related to south-west England and not Wales, it is the same railway and the same economic principle, which showed that the further you get from London the lower the productivity per head; it is quite dramatic. It also showed that businesses really did perceive there to be a two-hour threshold of accessibility to London. "London" you can take in a general sense-its airports, its City, its business connections. That led us to conclude that the journey times offered on the Great Western Main Line-to Bristol as well as to Cardiff, Swansea and so on-were indeed very important.

We then looked at the draft train timetable that had been drawn up for the Great Western Main Line when it gets its new inter-city trains. We noted that that draft timetable is not mandatory on anybody; it is a provisional plan associated with the new rolling stock. It does bring about a significant reduction in journey times; I think the reduction in journey times from Cardiff and Swansea to London is 18 minutes, for instance. Some of that is brought about simply by removing intermediate stops; some of it is because you have a new train fleet. We thought that was a good start.

The one thing that we really wanted to emphasise in this document was the fact that it is not mandatory on anybody. The new franchise bidders could come along and say, much as train operators tend to do over time, "Well, I could do a bit better by putting an additional stop on this train. It will slow it down a bit but-you know what?-it won’t make that much difference." It may not lose them passengers, but it will affect economic performance and the ability of south Wales, in particular, to attract inward investment and retain investment that it has already had.

That was the key message we were trying to get into this document. We then wanted to point out that that should be viewed just as the beginning, because here is a railway that is very capable of development and further enhancement-more, faster and more reliable services. We tried to set out how that could be done.

Q139 Chair: What do you think, Mr Barry? I thought Mr Barry might want to come in.

Mark Barry: I just want to make some general points. Jim has given a good analysis of the Great Western line. From a business perspective, when I approached this problem 18 months ago, I was looking at what businesses need and how, being in Wales, they perceive the investment in high speed rail and where that leaves Cardiff and south-east Wales. In principle, anyone who believes in the economy of the UK would support investment in infrastructure, rail included. I think the key issues are capacity, connectivity and then speed. In the current proposals for high speed rail, we may have sacrificed connectivity and capacity on the altar of speed and missed opportunities to develop a more strategic route.

The bottom line is that it is a UK scheme-a £32 billion scheme-that Welsh taxpayers are paying for and it really doesn’t address connectivity to Wales and south-west England. The real concern is that, even after electrification of the Great Western Main Line, which takes journey times between Cardiff and London back to where they were in 1980-1 hour 45 minutes-which is great and most welcome, places such as Leeds, Manchester, Liverpool, Nottingham, Sheffield and so on will all be significantly closer to London than Cardiff.

I talk to businesses. If you are looking at foreign direct investment in south Wales and ask what their consultants advise, they say, "We may set up in the UK. How far away are you from Heathrow and from London?" Electrification of the Great Western Main Line is very welcome, but, if by 2032 every major conurbation in England is much closer to London, we will be disenfranchised.

Q140 Chair: Would you rather it was not built?

Mark Barry: No. Ultimately, the UK has been very poor at investing in its key infrastructure; we have an issue on power generation coming up in the next 10 years. I consider that the route is wrong. It should have gone via Heathrow and been looking to integrate strategically with other corridors in the UK. We should have developed a rail strategy for the UK that linked up the major conurbations with its major transport hubs. What we have is a high speed rail project that is trying almost to follow a straight line between London and Birmingham, without much consideration of the wider benefits of wider connectivity.

Q141 Mrs James: Recently we had the announcement of the £500 million investment in the Heathrow spur. Do you think that will help us in south-west Wales? Let’s remember south-west Wales as well.

Mark Barry: Absolutely. Anything that gets us closer to Heathrow is very welcome. I was a big fan of the alternative Heathrow hub scheme that High Speed 2 would have been part of had it gone via Heathrow, but that is not happening. Anything that improves rail access to Heathrow from the west is hugely important for visitors in Cardiff, Swansea, Bristol and south-west England, so I am a big supporter of that. It is not committed; an indicative amount of money has been put on the table and exploration projects are in progress. We need to make sure that that or a scheme like it is progressed.

As the study that Jim undertook says, the ultimate objective is that we want to see faster journey times to London so that we do not fall behind Manchester and Leeds. We want to see direct access from Heathrow so that we can compete with major cities around Europe for international footloose investment.

Q142 Mrs James: I come back to what Mr Steer said, which was a clear message. Do you see a time when the Government should be much stronger about what is in the franchise bid? Often we leave these very major decisions to the franchisees, when we really need to be a little bit more pointed about what we require of them.

Jim Steer: This is a very topical issue, isn’t it? I think that this is an important issue for Wales. I talked with people in Cardiff just a month or two back, some of whom said, "Yes, but we could lose these connections. For instance, we would have only one train an hour starting in Cardiff with a direct service to Swindon." There is usually some kind of trade-off. Fine-if that is more important to you, you lose a lot of the journey-time benefit. The assessment and evidence I have seen suggests that it is not worth that sacrifice and you need a very clear message. I am sure that message would be listened to.

May I add one rejoinder to Mark’s comments, much of which I agree with, but I do not agree with his view that Wales is losing out badly because HS2 is being built? The reason I don’t is that, provided that all of the investment comes to pass, the GWML electrification will bring huge benefits in itself. We have already talked about some of them. If access to Heathrow can be implemented, it will give Wales a direct rail link-I would argue that direct rail services are important, and it will be another little battle to achieve those-by, let’s say, 2022. I have to point out, as was implicit in what Mark said, that Birmingham, Manchester and all these other places are not due to get a direct link to Heathrow until 2032. Inevitably, there are beneficiaries among the regions-if you will allow me to call them that-given the geography of Britain from particular schemes, but they are by no means all against Wales’s interests.

Chair: We will take some quick follow-ups.

Q143 Geraint Davies: It has been said that the Barnett consequential of High Speed 2 should be that Wales gets an extra £1.9 billion. Do you agree with that? Do you agree that some of that money should be used to ensure that the Heathrow-Wales link is done sooner rather than later?

Mark Barry: Over the last 20 years, Wales has probably been poorly served on rail investment compared with the rest of the UK. We have seen the West Coast Main Line upgrade, the Manchester metro link, High Speed 1, station enhancements and, going back to the ’80s, the East Coast Main Line upgrade. Until the recent announcements, which are very welcome, all we had in Wales was the Severn tunnel, in 1880.

For some reason, Barnett and apportionment of funding do not affect the rail industry-I do not understand why that is-so there is no Barnett effect on rail spend. We just have to fight our corner for a piece of the pie-and I think we have a small piece of the pie. If £32 billion is being spent on High Speed 2, let alone the other projects that are in progress, Wales should argue, rightly, for a proportionate share that could go towards investing in a really important part of our economy, which is our rail infrastructure.

Q144 Mr Walker: I have a quick question for Jim Steer. In your conditional output statement for the Great Western Partnership, you set out a 25-year period for investment. Do you think that we would be better with longer franchises that are more like that 25-year period, in which it is clear that the train operating companies have to invest more in order to grow their business and support rail? Do you think that, with the opportunity that the Government have to take another look at franchises, they ought to be looking at longer than 15 years?

Jim Steer: It is a very big question. Personally, my short answer would be no, the reason being that the investment that is needed in the first instance in infrastructure is basically funded by Network Rail to an incredibly large extent; compared with that, the train operating companies, whether or not they have had a long franchise, are investing rather small amounts. Even the Chiltern upgrade that is often quoted is actually funded by Network Rail, and they pay back additional access charges. The critical thing is that that opportunity continues. I would have thought there is quite a good case for saying, and I have always argued this, that the evidence for long franchises producing investment is not very strong, and there are quite a few disadvantages-some of which, arguably, we have seen. I am afraid I am not persuaded on that point.

Q145 Mr Walker: To follow up on that, do you feel that Network Rail has the resources and capability to make the investment it needs to make?

Jim Steer: I think it has shown that it is able to do that. It would point to much more efficient track replacement equipment in which it has invested. It now has a programme of electrification, so it is investing in the kind of efficient equipment you would expect. Incidentally, it is not involved, or planned to be, in the construction of HS2. It is the existing network in which I would say it is getting very much better at making an investment.

Q146 Jonathan Edwards: I have a question on the Barnett consequentials. Clearly, HS2 is an England-only scheme. If the Barnett formula is to work properly, there has to be a Barnett consequential, and the Barnett consequential is £1.9 billion. If the Welsh Government had that pot of money, what infrastructure projects would you spend it on?

Mark Barry: The headline items around Wales are comprehensive electrification, Wrexham-Bidston, the north Wales line, a south Wales metro and a Swansea metro system. You could do an awful lot.

Q147 Jonathan Edwards: So you could revolutionise transport in Wales if Wales had the Barnett consequentials.

Mark Barry: Bear it in mind that, traditionally, we have probably had about 2% to 2.5% of UK rail investment in Wales. The figures are impossible to get; you have to infer them from what public information is available. If we had a Barnett kind of figure of 4% to 5%, we could do a hell of a lot more with transport, especially rail. We don’t, and it is for politicians around the table and in Wales to make sure that the case is made very clearly and that we do get a fair slice of the UK rail investment pie.

Jim Steer: We made very clear in another document on the benefits of HS2 in freeing up capacity on existing lines that there are some benefits to Wales there to be had. I am not arguing your Barnett formula point, but it is important not to lose sight of them, because you can press for them. You can say that it is over in England, but what happens is that the West Coast Main Line gets freed up. I know it is the smallest constituency, in effect, of the three big parts of Wales, but mid-Wales has not had-for a very long time now-a proper train service to London. That is given to you on a plate with HS2 if you put your hand out and ask for it.

Q148 Chair: Mr Steer, freeing up capacity sounds quite good, but doesn’t that just mean fewer people using the existing rail network, which means less money available for the upgrade?

Jim Steer: With respect, I don’t think it does. At the moment, the West Coast Main Line is so constrained that you can’t run on it services that various operating companies would like to run. For example, the only way that the short-lived Wrexham service had a fighting chance of surviving or getting the right to run was by using the Chiltern line, which is a slower line to London. If it had been able to use the West Coast Main Line and get a fast train path from Birmingham to London, it would probably have made a success out of Wrexham. Arguably, it could have made a success out of an Aberystwyth service too.

Q149 Chair: I am being a bit ruthless because of the time. Could High Speed 2 ever make a profit?

Mark Barry: I really don’t know. We all like to think it could. I believe the figures produced in the business case suggest it can, based upon the passenger numbers anticipated over the next 20 years.

Q150 Chair: So why the need for the Government to get involved at all? Why not just go out to private investors and get them to build it? Mr Steer, do you have any thoughts on that?

Jim Steer: Yes. I don’t believe it can be profitable in the sense of paying for all of the up-front capital costs. I do think it will be possible to let the railway on much the same basis as HS1-on a long-term concession-to recoup a lot of the outlay, but you still have to have public expenditure up front in my view.

Mark Barry: This is the philosophical issue we have in the UK. We spend billions on roads in the UK.

Q151 Chair: Do we?

Mark Barry: Over the last 50 years, we have. The rail network is viewed very differently, and I don’t know why that is. In Europe, a much more strategic view is taken of the rail network-that it supports and is an essential part of the country’s economic infrastructure and that Government should therefore be prepared to put something down to invest in the up-front capital required.

Q152 Karen Lumley: Moving away from HS2, what is your view on how productive the dialogue between the Welsh Government and the Department for Transport is in relation to high speed rail?

Mark Barry: Until two or three years ago, there probably wasn’t enough dialogue. The work that was undertaken on the business case for extending the Great Western line electrification to Swansea and the valley lines resulted in much greater interaction between transport officials in Cardiff and those in the DFT. There is a richer relationship now than there perhaps was previously.

However, on high speed rail we were late coming to the table. As someone from the business community, I was always frustrated and wondering why our officials-and even our politicians, I have to say-weren’t aware of what was happening on high speed rail in the UK, what the arguments were and where the debate was. There were massive groups like Greengauge, which need sponsorship, articulating the case for connectivity, yet nobody in Wales seemed really to be on the ball. I think that we arrived late at this debate; as a result, we will be a bit behind the curve in terms of what happens and when it happens.

Q153 Karen Lumley: Mr Steer, do you think the same?

Jim Steer: On that last point, I point out that, regardless of the level of representation and speed of take-up, Greengauge has always seen the link between London and south Wales as an integral part of a high speed network. As to the Department point, if there really is a good, close relationship, I would expect to see some kind of swapping of careers-people spending a couple of years in one organisation and then going back. That kind of thing helps build understanding.

Q154 Karen Lumley: Does that happen now?

Jim Steer: I don’t believe so; I have not heard of it. I am not saying that it doesn’t happen, but it doesn’t strike me as being a typical feature.

Q155 Mr Williams: You mentioned Aberystwyth; I am very grateful to you for doing so. I think you would agree that, historically, the biggest impediment to those who have been campaigning for a long time to re-establish a direct route between Aberystwyth and London-or, currently, the hourly service between Aberystwyth and Birmingham International-has been the blockages from Wolverhampton down. You made the point that High Speed 2 would free those up so that the dreams of many people could be a reality again. That has been the case, hasn’t it? Historically, it is one of the main reasons why we have not been able to advance that to date.

Jim Steer: Yes. There has also not been the kind of train that you would need. Until the Aberystwyth line is electrified-I am sure you will think this is a good idea-you really want a train that can run sensibly both on an electric network and on diesel. The IEP train, which was much criticised for various reasons, could do exactly that.

Q156 Chair: That is very interesting. Now that I have sped everyone along, we have three minutes left. In that case, may I ask a question about the trans-European network-the TEN-T proposal? I forget what the "T" stands for. One might argue that High Speed 2 is simply the Government carrying out the edicts of Europe, which is expecting this to happen. Very coincidentally, the line that is being proposed looks similar to the one that the European Union wants us to build. Am I right in thinking that?

Jim Steer: The TEN-T network now has quite a long history. Initially, at least, it was basically a set of corridors linking the capitals of the member states of the European Union. So London-Dublin is a key corridor and has always attracted TEN-T support. It begs an important question about electrification of the north Wales main line, of course.

Mark Barry: I have a more general observation. I am not sure whether or not there is a European project. The bottom line is that the number of passengers on the UK rail network has doubled over the last 15 years and is projected to continue growing. There needs to be investment in new capacity. High Speed 2 probably addresses some of that in terms of what it is doing. I do not think that there is any way that we can get away from addressing the need for serious investment in the UK rail network.

Q157 Geraint Davies: Do you think there is a case for a high speed electrified rail network right the way across to Milford Haven, linking up by boat, as it were, to Ireland?

Mark Barry: My gut feel is probably not that far, no. You could probably justify going as far as Swansea because of the population and demographics. Beyond that, you would upgrade the existing infrastructure and make sure the services were regular, cost-effective and so on.

Q158 Geraint Davies: What about engineering works between Cardiff and Swansea to make the line straighter so that you could go faster? Is that a possibility?

Mark Barry: If money were no object, yes, you would do that.

Q159 Geraint Davies: How much would that cost?

Mark Barry: If you built a whole new line, it would again be £130 million a mile. It is £4 billion, if you do it that way, but I do not think that is a realistic way forward. We have to be pragmatic. I have always been very keen on looking at the Great Western corridor as it is currently configured and at what we can do to that. It is pretty straight from Bristol to London; okay, there are some bends between Swansea and Cardiff. What can a sensible investment programme over a period of 15 years do to service and our economic well-being?

Q160 Geraint Davies: Finally, what about connectivity from Swansea and Cardiff to Cardiff airport, to attract low-cost airlines and therefore make the airport successful?

Mark Barry: An airport link to Cardiff airport would certainly help increase its catchment area for public transport. There are wider issues around Cardiff airport-I don’t think they are being covered here-that need to be addressed at the same time. You can’t just say, "Here’s a rail link; that’ll fix it." There are other issues as well as part of a package. For now, Heathrow access, for the business community, is still the most important form of access we need.

Chair: Gentlemen, thank you both very much indeed. I am sorry time is so short today, but we really appreciate your coming along and answering questions.

Examination of Witnesses

Witnesses: Right Hon Simon Burns MP, Minister of State, and Stephen Hammond MP, Under-Secretary of State, Department for Transport, gave evidence.

Chair: Ministers, it is very nice to see you. Congratulations to both of you on your new appointments; we look forward very much to working with you. As we all know one another quite well, shall we just begin by asking a few questions? I turn to Mark Williams.

Q161 Mr Williams: Minister, what specific mechanisms are in place to ensure that Welsh interests are well represented within your Department, notwithstanding the fact that-rightly-many matters are devolved to the National Assembly Government?

Mr Burns: I hope you will be reassured to hear that we enjoy good relations with both the Government of Wales and the Wales Office. My officials are constantly in touch with the Government of Wales, where we are working together in the interests of transportation policy, whether it is on the railways, the roads or whatever. In the short time that I have been a Minister at the Department for Transport, I have been in touch with Carl Sargeant on two occasions. At the moment, a meeting is being arranged so that we can meet up in person rather than down a phone line to have the opportunity to discuss a wide range of transport issues.

Q162 Mr Williams: Does the Department for Transport have specific targets for spending within Wales?

Mr Burns: You are aware of the way the system works. On a wider scale, of course, money is made available under the Barnett formula. The UK Government also fund some capital projects. The electrification from Bridgend to Swansea is an example where the UK Government, rather than the franchisees or the Welsh Government, will be funding that project.

Q163 Mr Williams: So it would be characterised as taking a case-by-case approach rather than having a specific target in mind over and above the Barnett formula commitments.

Mr Burns: Up to a point, but, as you will appreciate, the money that is given to the Government of Wales is an overall amount. It is up to the Government of Wales to break down how they distribute that money within their spending priorities and Government Departments.

Chair: Jonathan Edwards has a quick supplementary.

Q164 Jonathan Edwards: Do you recognise that, for the Barnett formula to apply properly, English-only schemes have to be identified as English-only rather than UK-wide, because if they are identified as UK-wide schemes, as is the case with HS2, there are no Barnett consequentials?

Mr Burns: Certainly, if you take that example, it is a UK scheme. All of the projected phase 1 and phase 2 at the moment is within England, though, bearing in mind the announcement by the Secretary of State last week, we are now looking-at this stage it is a question of looking-at whether to extend HS2 up to Edinburgh and Glasgow so that it would become cross-border. I don’t know whether your Committee, Mr Davies, will raise this during the course of their questions, but of course we see HS2, for example, as a spine-a start. In time, in the future, we expect the possibility of development beyond that spine; whether to Wales or to other parts of England remains to be seen.

Q165 Nia Griffith: Welcome to both of you. Obviously, having a fast link from London to south Wales is what everybody wants, and certainly our predecessor Committee had identified that. When plans for High Speed 2 were being drawn up, was it ever seen as the first of many, or was it only ever seen as a one-off project? Were areas other than the West Coast Main Line route considered?

Mr Burns: It was seen as a first stage, building on High Speed 1 from Dover to London. At that stage, it was seen as a spine that went up to Birmingham and would go on in the upper part of the Y, with a possible spur down to London Heathrow. However, it was envisaged that, in time, there would be other potential spurs off it, because we want to deal with capacity issues-particularly, in the first instance, on the West Coast Main Line, as serious capacity issues are emerging on the existing line-because we have to be able to compete with our international competitors in Europe, and because we want to reduce journey times.

High speed is the future. We have to embrace it-preferably, early in the process. If at a later stage there is a desire to branch out to Wales-whether it is the south, mid-Wales or north Wales-or across to the east of England or the south-west, that is a matter that will have to be looked at by those who believe it is the right way forward and can produce a business plan that makes it viable.

Q166 Nia Griffith: Was the Welsh Assembly Government involved in any way with your Department in talks about High Speed 2?

Mr Burns: I can say that we have constant discussions with the Government of Wales, as do officials and Ministers. No doubt, at the time of the announcement, particularly of the preferred route, there would have been ample discussions.

Q167 Nia Griffith: You talk about making a good business case. Has there been an impact assessment on the impact of High Speed 2 in general but also particularly on Wales?

Mr Burns: On the latter point I do not know, to be quite frank. On the specific point of the impact on Wales I think the answer is no, but I would not like to mislead you. If you are talking about the project as a whole, the answer is yes. There has been considerable assessment and analysis, not just by the Department for Transport but also by High Speed 2 and by independent consultants, to make sure that it is being put together and developed in the most business-oriented and compelling way to make sure that it meets the Government’s objectives.

Q168 Chair: On the issue of business cases, it is never going to make a profit, is it?

Mr Burns: If you are talking about the generality, I have always been reluctant ever to say never in politics, but I get the point that you are making, Mr Davies. I think that, just as with the channel tunnel, for example, there would be a considerable time scale to break into a profit situation, where the financial costs of the project had been paid off. However, it would be a mistake to look at it-

Q169 Chair: In other words, you build the railway and it might just make a profit, minus the capital costs. The maintenance and running of it might just become profitable, but, if you include the capital costs, this thing is never going to make a profit.

Mr Burns: One hopes that contributions towards the capital cost will also be taken into account, as is done with the channel tunnel. I believe, on the projected plan since it was opened, it will take 100 years, so it is a long-term thing. What I think that misses is the benefits, which far outweigh simply the financial arguments. I refer to the benefits to this country of being competitive with France, Germany and other countries in Europe that are investing and have invested in high speed rail; dealing with the capacity problems that have emerged on the West Coast Main Line; and also the ability when dealing with that capacity to use the West Coast Main Line further to develop the transportation of freight and so on.

Q170 Mrs James: I have a supplementary on that theme, Minister. You have talked about the economic impact of the investment. Has any specific work been done on the impact in Wales? Obviously, we are a bit concerned because it is a longer-term plan for HS2. I must ask you this, given the current debate on the Department. Are you confident that any evaluation that your Department makes will take everything into consideration and that we won’t have a repeat of any errors, shall we say, in the calculations?

Mr Burns: First, on the question of an impact assessment in Wales, the answer is no, simply because at this stage HS2 is from London to Birmingham and then along the Y, with the spur, which will benefit Wales because of the Great Western line. At this stage it is not intended that there should be a spur into Wales, so we have not done that work; we have been concentrating on the original plans and route.

You asked whether I am confident that problems of the sort to which you alluded will not emerge. Yes, I am. This is a completely different project and set of circumstances from the franchising arrangements. As you will appreciate, franchising is very different from putting together a project, with a business case, for developing capital investment. It has involved different civil servants from the ones who are responsible for franchising. It has had the input of HS2 and people independent of the Department for Transport to monitor and to help to put together the projections, whether that is on the environmental or financial side or the physical planning of the routes to be considered for the preferred route.

Q171 Geraint Davies: A 2010 study by KPMG, commissioned by Greengauge 21, showed that HS2 would lead to 21,000 fewer jobs and 0.04% lower annual growth in Wales. You mentioned that HS2 is a UK scheme. I understand that the Barnett consequential of the £32 billion would be £1.9 billion for Wales. Will you at least consider the case for that £1.9 billion to be provided for Wales and partly used to provide the spurs off the spine that you mentioned sooner rather than later?

Mr Burns: First, I am not familiar with how Greengauge came to that conclusion and those figures.

Q172 Geraint Davies: You are happy to look at that, obviously.

Mr Burns: I will look at the figures, certainly. On the question of the £1.9 billion, no, I think it would be very unwise for me to sit here and make a commitment of that nature, particularly as I do not know the basis on which Greengauge had come to those figures. As I said, I will look at Greengauge’s figures, methodology and proposals, but it is not for me, a lowly Minister in the Department for Transport, to give that commitment.

I turn to the second point that you raised, which is rather important-the question of Wales and a spur. That is something for the future, given the whole concept of High Speed 2. This is the template to start with. I suspect that in 20, 30 or 40 years’ time, as needs must, there will be a development of it because we want a network of high speed rail. Wales is an obvious place for it to be extended to, but that is a matter for the Government of Wales and others to look at in due course. It is for them to assess a business case for that and to move ahead accordingly. It is something for the longer term, not the immediate short term, which must be to build phase 1 of High Speed 2.

Q173 Geraint Davies: We have just heard evidence that, historically, Wales has about a 2.5% share of rail investment when it has about 5% or 6% of the population, which would be reflected in Barnett. Given that, on top of that, we have HS2, which is £32 billion, and we are not getting the £1.9 billion share, will you ask your officials again to look at a fair share for Wales so that we don’t lose out at a time when, clearly, we need inward investment from rail investment?

Mr Burns: That is an important question. I notice, though, that for 13 of the last 15 years it wasn’t my party actually in government, so the responsibility was with the last Labour Government. I don’t share your slightly despondent view that Wales is not getting its fair share.

Geraint Davies: I am hopeful-

Mr Burns: May I just finish? I think that Wales will see its rail network and communications improved significantly by the commitment by this Government to continue the electrification of the line from Cardiff to Bridgend and from Bridgend on to Swansea, and the electrification of the network in the valleys, which will play a significant role for the communities and businesses there. I also think that the commitment to build the spur, probably from somewhere between Langley and Iver, into terminal 5 at Heathrow will significantly help those using the Great Western who want to come to London, to Heathrow, and the Welsh economy. To say that, in effect, Wales is being forgotten, is not getting its fair share and is not getting what it should is not justified by the circumstances.

Q174 Geraint Davies: Will you undertake to seriously evaluate Greengauge’s 25-year proposal to link the Great Western Main Line to HS2? I presume you will look at that anyway.

Mr Burns: Linking up the main line to HS2? I thought its proposal was for a spur to Heathrow.

Q175 Geraint Davies: It proposes to improve the Great Western Main Line over a 25-year period so that it eventually joins the high speed rail network. Basically, it has done a study to do what you have said you want to do anyway, so I assume you will look at that.

Mr Burns: Yes, but the Great Western line goes through Old Oak Common in the west of London, so there will be a link there.

Q176 Mr Walker: You have mentioned some of the investment in electrification, but in the autumn statement last year a number of projects were announced-£6 billion went into infrastructure nationally and 35 road and rail projects. None of those seem to have been in Wales or cross-border into Wales. The one commitment from the Government with regard to Wales was to talk to the Assembly Government about improvements to the M4. What level of consultation was there with the Welsh Government before the autumn statement? Will there be more consultation before this autumn statement?

Mr Burns: I can tell you that my officials are constantly talking with the Government of Wales. We keep in touch at ministerial level. Obviously, we want to work together, because we want to improve the transportation system within Wales, as we do in the rest of the United Kingdom. We want to invest to help to develop businesses, to assist in the development of economic growth, which is crucial to this country, and to improve the transportation of citizens. That is why we have discussed and worked with the Government of Wales and will continue to do so. If they come up with projects that we can assist them to put together or for which we can provide some of the knowledge or know-how, we will do so, because it is important in the interests of Wales and the UK interests to improve communications for the reasons I have given.

Stephen Hammond: I am sure Mr Walker will be aware that there was a relatively small but still very significant announcement on the pinch point fund last week. We have funded the A55-A483 junction to support Chester business park. The idea that, whenever these schemes happen, communications either by rail or road into Wales are being missed off is certainly not true in terms of what we did last week.

Q177 Mr Walker: Following up on the road point, in the autumn statement and the infrastructure plan, there was mention of improvements to the M4 and discussions that would be had with the Welsh Assembly Government. Is there any update on how those discussions have gone? Has there been any progress on that front?

Stephen Hammond: There are continuing discussions. Our officials have been speaking to them about a number of issues they wish to raise, not only in terms of the work they are doing specifically on the M4, but, as you know, the Welsh Government is doing a study on economic generation from the M4. I would not want to prejudice exactly what that says.

Chair: Thank you very much. We now have a few questions on the interesting topic of the Severn bridge.

Q178 Mrs James: What is the Department’s current position on the Severn bridge toll crossings, the fact that ownership will be changing and who will take ownership of the bridge in 2018? Has any consideration been given to how those moneys will then be distributed?

Stephen Hammond: As you know, the Severn bridge is currently let on a concession basis. The tolls that are collected are to pay off the infrastructure investment. As a result of one or two minor changes, there was a slight extension to the concession. We expect the concession to end at the end of 2018. Thereafter, the Government still have their own debts to recover from building and maintaining the crossing. Even at the time of handover, that will amount to several hundred million pounds. Some of that still reflects the costs of construction, while some reflects work that has been done on cable maintenance and cable strengthening works carried out during the 1990s. The whole process of repayment is likely to go through into the early 2020s1. Thereafter, we will look at the ownership structure, but it won’t be before then.

Q179 Mrs James: We have heard evidence previously from organisations such as SEWTA-the South East Wales Transport Alliance-where they have suggested that some of the income from the bridge tolls could be reinvested in transport infrastructure in Wales. Has any consideration been given to that?

Stephen Hammond: First, that will be extremely difficult prior to the concession ending because of the structure of the concession and what was set out when a 30-year concession was agreed. Therefore, that would be very difficult. Secondly, as I said, the Government are keen to ensure that, as part of the promise, there is some repayment of the debts that the Government incurred as a result of the initial construction costs. That may be something for consideration, but it won’t be until the mid-2020s2.

Q180 Mrs James: The other big issue is VAT. When it comes back into public ownership, VAT will no longer have to be collected. In the light of that, have you considered or will you consider what to do with the VAT saved?

Stephen Hammond: I think it unlikely that the prices will drop because there may be other factors why prices may move. The removal of the VAT may just be able to absorb some of the other pricing pressures. I am not anticipating that you will see a drop in the price on removal of the concession.

Q181 Mrs James: Were you aware that motorcyclists don’t pay any of the tolls?

Stephen Hammond: I was aware of that.

Q182 Chair: Minister, you surprise me there. At the moment, we are paying VAT because a private company runs the bridge. Are you saying that, when it goes back into public ownership in around 2018, we will not see a decrease in price?

Stephen Hammond: Given the modelling work that the Department has done, I would be very surprised if that were so.

Q183 Chair: We have also established-more or less accurately, I think-that a cost of around £1.50 per driver would be enough to cover the maintenance costs of the bridge. For that reason as well, we were assuming that there might be some sort of discount when the bridge comes back into public ownership at the end of the concession.

Stephen Hammond: As I already explained to the member who asked about this previously, in the period after the concession ends, there will be substantial Government debt that will need to be repaid.

Q184 Chair: When those substantial national debts have been repaid-we hope that we will be able to see the figure and how it is calculated, but if we all accept that there is a debt and that it has to be repaid-what will be the position? Can we expect to be able to travel across the bridge for nothing or for the cost of ongoing maintenance, or will it for ever be used as a cash cow?

Stephen Hammond: No. Your colleague asked whether it might be possible at that stage to consider the reinvestment of those moneys in infrastructure schemes. I wouldn’t want to prejudice that decision, but we are talking about something at least 12 years from now.

Q185 Chair: That is true, but we have been talking about High Speed 2, which has a much longer time frame than that. People in Wales feel angry about the costs that they currently pay, but some of that anger might be alleviated if they knew there was some end in sight. It does not look as though you are able to give us that end.

Stephen Hammond: I can’t reassure you about the precise time, nor can I reassure you about the precise amount, because it is likely that some further repairs will potentially be required even between now and the end of the concession. It would, therefore, be wrong of me to set out a very clear date.

Q186 Chair: At the very least, can we have a look at the figures that the Department is working on so that we can assess them ourselves as a Committee?

Stephen Hammond: I am happy to ensure that your Committee gets the information it requires.

Q187 Geraint Davies: There is a view in the business community, which I certainly share, that the toll is a tax on inward investment and trade in Wales. When you add the enterprise zone in Bristol and so on, it is a major brake on inward investment, job creation and, therefore, tax revenues for the Exchequer from Wales. You have insinuated that, basically, after you have paid off all this debt you could use the money on other transport infrastructure. Is that your strong view, because we would want a position where the tax-namely, the toll-would be minimised? That would signal or herald to the business community a new era of inward investment, which is currently being constrained by the tax that you seem to be suggesting will continue and be used on bits and pieces of transport infrastructure.

Stephen Hammond: It is not a tax; it is a charge. I would like to be clear on that.

Geraint Davies: I know that, but it is seen as a tax on trade.

Chair: Order. It is a very interesting subject; we will have to come back to it.

Q188 Nia Griffith: Can I return to the M4 discussion? There are two issues that concern us in particular. First, what will be the way forward in terms of funding any improvements that are recommended? What will be the Department’s involvement? How do you see funding going forward? Secondly, what is the Department’s view on the idea of having a major relief road built south of Newport?

Stephen Hammond: As my colleague said, there are continuing, ongoing discussions between the roads department of the DFT, the Highways Agency and the Government in Wales. As you know, highways in Wales have been separately managed and funded in a different way since 1965. For that period of time, roads on the Welsh side of the border have been funded from Welsh budgets and English schemes from English budgets. We have been active in trying to promote cross-border links, ensuring that the main roads are working well and we maximise people’s ability to move into Wales, but there is a fairly clear precedent that schemes should be funded by the nation in which they are located. That is the basis of the discussion going forward.

Q189 Guto Bebb: As the only Committee member with a constituency in north Wales, I will be very parochial. You have already touched upon the improvements to the Chester business park junction, which is a major drawback for links on the A55 and the A483. Can you give us a time scale for those improvements, which are important for transport links in north Wales?

Stephen Hammond: The works will commence in the first quarter of 2014 and finish by the end of the year.

Q190 Guto Bebb: Excellent. My second question relates to rail. Obviously, as a Committee member, I welcome the Government’s decision to invest so significantly in electrification of the railway lines in south Wales. What work has been done by the Department to assess the viability of improvements to the north Wales main line, looking first at the signalling, which needs to be improved, and secondly at the potential, ultimately, for electrification, given that the north Wales main line is an important link to the Irish Republic?

Mr Burns: I can fully appreciate your interest, given where your constituency is and the importance of the communications network from north Wales into the rest of the network. Clearly, at the moment, the priority for Network Rail investment has to be electrification of the main line from Swansea to Cardiff, via Bridgend, and in the valleys. Current cost estimates for the Wrexham to Bidston electrification scheme, in particular, are high, but the Government will consider any business case submitted on this scheme for the next stage of Network Rail investment. We welcome the thought that Merseytravel is giving to lower-cost solutions such as station upgrades and enhanced diesel frequency, but I understand your desire to get electrification. As I said, Network Rail will look at any business plan that is put forward.

Q191 Guto Bebb: On the specific issue, we have been given some evidence that one of the main drawbacks for improved speeds on the north Wales main line is the signalling system. If you can’t answer today, is it possible for you to write to the Committee in relation to any work that has been done looking at improvements or potential improvements to the signalling on the north Wales main line?

Mr Burns: Absolutely. I will certainly write both to the Chair and to all of you to give you a complete update on what the situation has been and where we anticipate moving towards in the future.

Q192 Chair: I appreciate that, Minister. I should add that, by an almost unanimous decision, members want to be in the Chamber at 12.30 to hear an important statement, so we are going to rattle through this now. We will send you some written questions that we will not have time to ask, if that is all right.

Mr Burns: That is absolutely fine. My officials will do anything they can to help you.

Q193 Jonathan Edwards: In her airport strategy, the former Secretary of State announced the link between Heathrow and the main line. What work has been undertaken since the announcement, and what timelines are you working to for completion?

Mr Burns: Basically, you are talking about the spur from Great Western into Heathrow. A considerable amount of work has been done. We have not yet got to the stage where there is a preferred route, although it is anticipated or assumed-I am slightly hedging with this, because no preferred route has yet come forward and been approved-that it will come from somewhere between Langley and Iver and that most of it will be underground, going into the existing Heathrow rail network at terminal 5. I think I am right in saying that the estimated cost is about £500 million and the earliest that it could start-provided that everything goes to plan-is between 2020 and 2022.

Q194 Jonathan Edwards: The high level output specification did not include much detail on rail freight between England and Wales. What plans does the Department have to improve capacity for rail freight?

Mr Burns: As you will appreciate, one of the overriding objectives is to encourage more and more rail freight, to relieve the pressure on our roads. That is subject, up to a point, to commercial considerations. There is the issue of the gauges, although having low-level transport gets around the 9 feet 6 issue. That is being done. It is up to the rail network to respond to any increasing demand by industry and commerce to use more capacity on the rails. I accept this is for the longer term, but one of the important things about High Speed 2 is that having the railway on the very busy West Coast Main Line will ease capacity levels on that, which will give advantages to using the capacity for increased freight use.

Q195 Karen Lumley: In the light of the Department’s decision to postpone the competition for the West Coast franchise, how long will it be before the people of Wales see the benefits that they were promised under the First franchise?

Mr Burns: You have alluded to the fact that, as soon as the Secretary of State became aware that there were significant problems with the franchise process for the West Coast Main Line, he suspended it. At the same time, there were three franchise processes in motion at varying stages. One was Great Western, which, I appreciate, is of particular interest to this Committee and the constituencies of many members around this table. The decision to freeze the processes was the right one to make. The Secretary of State set up two inquiries. One, led by Sam Laidlaw, one of the non-executive directors of the Department, will look into what went on at the Department. The other, led by Richard Brown, the chair of Eurostar, will look at the franchise process within the terms of reference that he has been given.

The Brown inquiry has to report to the Secretary of State by 31 December with his findings and any recommendations he may wish to make. In the light of that, we will then move forward, but I cannot anticipate what the inquiry will say and what may or may not need to be done. What I can say to this Committee is that, obviously, we want the process to move forward as quickly as possible, but we are not going to cut any corners to achieve that and get it wrong. I cannot anticipate what recommendations the Brown inquiry will come up with, which may then affect the process.

Q196 Geraint Davies: I have a brief question about the trans-European transport network proposals. In Brussels, we were told that the ports of Swansea and Neath Port Talbot were not regarded as core ports that would enable connectivity. Would it be possible for those ports to be taken together as Port Talbot and Swansea and for the Department to support core funding status and, therefore, TEN-T funding?

Chair: Either Minister may answer.

Geraint Davies: Would you be prepared to look at this in a positive way to try to access the TEN-T transnational funding?

Mr Burns: I was hesitating about which of us would respond-although having consulted my colleague, I see that we agree on it-because the problem is that the ports you have identified are not part of the core network; they are on the comprehensive network3.

Q197 Geraint Davies: Exactly. That may be because they are viewed separately; the idea is to look at them collectively.

Mr Burns: I am sorry. I thought you said in the question that they were part of the core network, but they are not.

Q198 Chair: If you put them together, they could become network ports, could they not? Would you support that, Minister?

Stephen Hammond: The difficulty we have is that a number of other ports are already on that network. The case needs to be made for moving them up, but I think there is some reluctance in Brussels at the moment to redefine them.

Q199 Chair: So, sadly, we can’t count two ports that take more than 1% of traffic as a network port.

Stephen Hammond: I will ask my officials to look at how Europe is defining it, but my understanding is that there is a problem with this.

Q200 Geraint Davies: Swansea Bay city region, which covers Neath Port Talbot and Swansea, is now being established by the Welsh Government; it includes Carmarthenshire. In that context, the port facility could be regarded as a core port, which would trigger European funding. That is the argument I am putting.

Stephen Hammond: The short answer is that I have just had inspiration on this point. It simply does not meet the Commission’s definition of the threshold of throughput. It needs to meet that definition of threshold of throughput before we could even progress it through the Commission.

Q201 Geraint Davies: Could you provide more investment to help that throughput, to enable cruise liners and more freight to use the facility?

Stephen Hammond: I don’t think it is the job of Government to provide more commercial activity. It is for the ports themselves to develop it and to make the commercial decisions that will encourage people to want to use their port as the port of entry into the United Kingdom.

Chair: We will take the briefest of questions from Jonathan Edwards.

Q202 Jonathan Edwards: The key question is, why aren’t the UK Government-and the Irish Government, to be fair-making the case for a southern corridor link? There is only one link at the moment, going through Liverpool. Why isn’t the case being made for a southern corridor linking Milford Haven and Rosslare? Milford Haven would definitely qualify, because it is one of the busiest ports and energy connectors between both states are being developed.

Stephen Hammond: There are a number of other issues around Milford Haven on which we are working with the port at the moment, not least the port security area and that definition. A number of very positive things are happening at Milford Haven that the Government are supporting.

Chair: Thank you very much.


[1] Please see supplentary written evidence from the Department for Transport for further information.

[2] Please see supplentary written evidence from the Department for Transport for further information.

[3] Please see supplen tary written evidence from the Department for Transport for further information .

Prepared 5th March 2013