Investing in the railway - Transport Contents

4  Regional investment

28. Paul Plummer, Group Strategy Director, Network Rail, was clear: from Network Rail's perspective, there is "one network", covering long-distance and commuting passenger trains, high speed rail and freight.[95] Tracey Lee, Chief Executive of Plymouth City Council, and representing the Peninsula Rail Task Force, questioned whether it was a national service, asking:

    What is our expectation for different cities and areas of the UK? We talk about a national rail service, yet we are not quite clear what those national standards are.[96]

The Minister accepted that "one of the big challenges" was making sure "that every part of the country feels that it is getting its fair share".[97] David Brown, Chief Executive of Merseytravel, who represented Rail North in evidence to us, told us: "the North gets less than you would expect for a significant percentage of the population of England".[98] Treasury statistics show that there was wide variation between different English regions for on spending on rail per head in 2012/13, as below:
Region Rail spending per head for 2012/13
North East52
North West89
Yorkshire and the Humber 101
East Midlands37
West Midlands50
East of England58
London 294
South East69
South West41

29. Clare Moriarty stressed that the Northern Hub programme was aimed at "creating a railway that will serve all of the northern cities to maximise the potential for economic growth".[99] The Industrial Communities Alliance argued that "nearly a century of relative neglect now needs to be addressed" in the cross-region and local lines in the north.[100] Councillor Chris Shaw, Leader, North East Lincolnshire Council, told us how the rail infrastructure in the region "cannot cope with demand", highlighting the restrictions this has on the amount of freight that can be carried, and on the speed of passenger services, which he stated were restricted to only 42mph, despite having a top speed of 100mph.[101] The Peninsula Rail Task Force stated in written evidence that the South West peninsula railway had been "starved" of rail investment, due to a focus from the DfT on investment in the Paddington-Bristol-South Wales line.[102] The West Midlands Integrated Transport Authority noted the "lack of significant new investment" in the region for CP5, which it warned would lead to an increase in overcrowding on services.[103]

30. The investments proposed to tackle this underfunding would, we heard, deliver value for money for the taxpayer. Mark Pendlington told us that the return on the Great Eastern Main Line would be eight or nine times the investment, making the region "free to become the California of Europe".[104] The Greater London Authority called for "further significant infrastructure investment" in the capital's rail network, arguing that the Government would "get a fantastic return on this investment".[105] The One North project—led by the city regions of Leeds, Liverpool, Manchester, Newcastle and Sheffield—has called for a £15 billion, fifteen-year investment plan for transport in the north, including fast and frequent intercity rail network joining the centres of the city regions, through a new 125 mph trans-Pennine route. The economic benefits of such a scheme, it was claimed, would far outweigh the costs.[106]

31. We welcome the substantial investment in CP5, and the commitment to electrification and increasing commuting capacity in a time of austerity. We support the Northern Hub programme, and welcome the indications that the Department for Transport will listen to the case for investment in the North and East of England. We remain concerned that the Benefit Cost Ratio used to allocate rail spending has failed to give sufficient weight to the wider economic and social benefits of rail investment. Focusing simply on passenger numbers and the short-term economic return from rail investment will inevitably continue to focus investment in London and the South East. Instead, we recommend the Department for Transport adopt and publish broader criteria for allocating funding, which consider the contribution to the Government's wider policy objectives—such as long-term economic regeneration, environmental policy or social need. Rail funding must still deliver value for money for the taxpayer, with the economic case for each project subject to rigorous testing against the revised criteria. This approach, however, will result in a fairer allocation of rail investment across the country; other regions, such as the far south west, have been "starved" of investment.

The Northern and TransPennine Express franchises

32. The tendering process is currently in progress for the two main rail franchises in the north of England—the Northern and TransPennine Express franchises, which carry some 114 million passenger journeys each year.[107] The last two Northern franchises were let on an assumption of zero growth, whereas in practice there had been "significant growth" in passenger numbers.[108] We heard that this growth had occurred without any significant investment in rolling stock or infrastructure, resulting in capacity problems, significant overcrowding and people not being able to make the journeys they need to make.[109]

33. The consultation document for the Northern franchise stated that "trade-offs" may need to be made between different aspects of the North's rail services. In particular it is argued that while many fares in the Northern franchise are comparable with those in other parts of the country "some prices are significantly below the norm".[110] The consultation suggested that one option for the new franchises could be an increase in fares to help to pay for better services.[111] The DfT officials we heard from stressed the level of subsidy that the current Northern and TransPennine Express franchisees received, and argued that the Government had "to look at what is reasonable in terms of the overall money that flows into the northern region", in terms of value for money for the taxpayer, as well as the passenger.[112] Anthony Smith, Chief Executive of Passenger Focus, suggested that "trying to explain to somebody on Leeds station who cannot get on to a 25­year­old Pacer train that their fares might have to go up for a service they might never use in the future" would be "a tough sell".[113] David Brown told us that Rail North had been clear that fare increases on the Northern franchise could not considered before the frequency and quality of services and rolling stock were improved, stating that "you cannot expect people to pay more for a deteriorating level of service".[114]

34. Passengers on some Northern Rail services have already faced substantial price increases, separate from the yearly inflation increase. Northern Rail announced last year that there would be a change in the rules around off-peak tickets during weekday evenings, at the request of the Department for Transport, with the aim of reducing "the cost of the railway to taxpayers by reducing subsidy to Northern".[115] The subsidy paid to each Train Operating Company is published annually by the Department for Transport, and does show that Northern Rail receives both the largest total subsidy, and the largest subsidy per passenger mile, at 51.5p per mile. (For comparison, the subsidy paid to TransPennine Express was 16.8p per mile, and 12.4p to Southeastern. South West Trains pays a premium of 1.7p per mile.) The Campaign for Better Transport has argued that the majority of this figure is payment to Network Rail for maintenance to rails, signalling and other infrastructure, outside the control of Northern Rail.[116] The Campaign argued that the subsidy figure for the Northern Rail franchise was "misleading", as it overestimated the costs of running the franchise; for example, by allocating the same costs to a two car Pacer train travelling at 75mph, as an 11 car Pendolino train travelling at 125 mph.[117] The Campaign also noted that the more profitable routes in the north were included in the TransPennine Express franchise, rather than Northern Rail—arguing that this was "highly unusual".[118] The ORR also provides the subsidy figures per passenger mile for each of Network Rail Operating Routes, These figures report that the lowest subsidy figure is for the Wessex, Sussex and Anglia routes, and the highest figures are for Scotland and Wales.[119] The Passenger Transport Executive Group (pteg) has noted that "virtually no part of the rail network operates without government subsidy, once infrastructure spending is taken into account".[120] As we have noted in paragraph 5, our evidence raised questions over the general subsidy level, and the proportion of operating costs paid by fares and taxpayers.

35. The consultation for the TransPennine Express franchise proposed an end to the direct service between Cleethorpes and Manchester Airport: a proposal Dr Ian Kelly, Chief Executive Officer, Hull and Humber Chamber of Commerce, said would be "a failure" of policies promoting economic growth.[121] A local campaign, highlighting concerns about the impact on the region's economy, was successful in persuading the Minister to pledge to retain the direct service.

36. The franchise consultation stated that the Department expected to require bidders for the Northern franchise to specify how "driver only operation" may be introduced on suitable services. For TransPennine Express services, it is expected the bidder will have discretion to introduce driver only operation, but will not be expected to do so. The RMT argued that guards on trains were essential for keeping trains running efficiently, and for the safety of passengers, particularly in the event of an emergency.[122] In response to questioning about driver-only operation the Secretary of State said that the way staff were deployed by operators was "very important".[123]

37. The consultation for the Northern and TransPennine Express franchises has been designed in partnership with Rail North Ltd—the organisation comprising 30 northern Local Transport Authorities "working to devolve from Whitehall the responsibility for decision-making for railways in the North, in pursuit of better transport and economic outcomes".[124] Rail North will design and manage the re-franchised Northern and TransPennine Express services, but the Secretary of State will retain ultimate responsibility for all design and procurement decisions, including the final decision on the franchise.[125] The transparency of the process was questioned by some witnesses. Councillor Chris Shaw, Leader of North East Lincolnshire Council, told us that he was concerned that the "smaller areas [in the North] do not have a voice and are not sitting around the table making the decisions".[126] We heard that Rail North's meetings with civil servants were only attended by officers from the core cities, who were then forbidden by a confidentiality agreement from discussing the content of the meetings with the smaller authorities.[127] This had resulted in a "two-tier level of involvement […] those who are in the know and those who do not get to know".[128] Councillor Liz Redfern, Leader of North Lincolnshire Council, described the situation as "not collective" and "not fair".[129] Rail North accepted that the confidentiality agreement it had signed with the Department was a "constraint" on keeping all the local authorities informed on progress.[130] Rail North is currently formalising its operational structure.

38. Councillor Shaw told us that these concerns were shared by local authorities including Derbyshire County Council, East Riding of Yorkshire, Hull, Lincolnshire County Council, North East Lincolnshire, North Lincolnshire, North Yorkshire and Nottingham.[131] He called for "a more open and transparent partnership in Rail North", and warned that, without this, the outcome of the Northern and TransPennine Express franchises could be "detrimental" to parts of the north.[132] The Industrial Communities Alliance warned against focusing investment solely on the cities in the north, noting that "only 20% of the population of the three northern English regions lives in the North's five 'core cities' (Leeds, Liverpool, Manchester, Newcastle and Sheffield)".[133] In our Rail 2020 Report we stated that there was "scope to devolve control over some rail franchises to local or regional bodies", and suggested that the Northern franchise was a "prime candidate for this approach".[134] We warned, however that that the interests of rural communities and towns "must be taken into account alongside those of the big cities".[135]

39. We are disappointed that the consultation proposals for the Northern and TransPennine Express franchises have not focused on increasing capacity and improving rolling stock, but instead suggested that passengers in the north must make trade-offs between fares and decent journeys. While the devolution of the franchises to Rail North is welcome, it stops well short of devolution. The consultation document suggests that the body's powers will be limited—indeed, the Secretary of State will retain the final decision-making powers. Rail North was clear that fare increases on the Northern franchise could not be considered prior to improvements in rolling stock and services. If devolution is genuine, Rail North's stance should be reflected in the Invitation to Tender. The Department must also set out how the interests of rail passengers outside the North's city regions will be protected under the devolution to Rail North. Network Rail must also set out why its payment—which makes up part of the stated subsidy to each Train Operating Company—allocates the same costs for maintaining the rails to much smaller Pacer trains, as it does to the larger and faster Pendolino trains.

95   Q54 Back

96   Q274 Back

97   Q477 Back

98   Q195 Back

99   Q62 Back

100   Industrial Communities Alliance (IRW 62) para 17 Back

101   Q196 Back

102   Peninsula Rail Task Force (IRW0027), para 14 Back

103   West Midlands Integrated Transport Authority (IRW0021), para 2.1 Back

104   Qq306, 307 Back

105   Greater London Authority (IRW0042) Back

106   Manchester City Council, One North: Region's cities unveil joint plan for improved connections, 5 August 2014, accessed 15 January 2015  Back

107   Department for Transport, Growth and Opportunity: TransPennine Express Prospectus, June 2014, p 22; Department for Transport, Transformation in partnership: Northern Prospectus, June 2014, p 20 Back

108   Merseytravel (IRW0030), para 4,Q213 Back

109   Q213, Department for Transport, Transformation in partnership: Northern Prospectus, June 2014, p 36 Back

110   Department for Transport Rail Executive, Stakeholder Consultation: TransPennine Express Rail Franchise Northern Rail Franchise, June 2014, para 2.32 Back

111   Department for Transport Rail Executive, Stakeholder Consultation: TransPennine Express Rail Franchise Northern Rail Franchise, June 2014, para 3.41 Back

112   Qq78, 81 Back

113   Q150 Back

114   Q242 Back

115   Northern Rail, "Changes to off-peak tickets", 11 August 2014, accessed 15 January 2015 Back

116   The Campaign for Better Transport, North of England rail services: Busting the myths, August 2014 Back

117   The Campaign for Better Transport, North of England rail services: Busting the myths, August 2014 Back

118   The Campaign for Better Transport, North of England rail services: Busting the myths, August 2014 Back

119   Department for Transport (IRW0071) Back

120   pteg (IRW0036), para 2.8 Back

121   Q208 Back

122   National Union of Rail, Maritime & Transport Workers (IRW0011) para 7.2 Back

123   Q487 Back

124   Rail North (IRW0016) para 1 Back

125   Q77 Back

126   Q203 Back

127   Q256 Back

128   Q256 Back

129   Q265 Back

130   Q257 Back

131   Q206 Back

132   Qq203, 206 Back

133   Industrial Communities Alliance (IRW 62) para 11 Back

134   Transport Committee, Seventh Report of Session 2012-13, Rail 2020, HC 329-I, para 65  Back

135   Transport Committee, Seventh Report of Session 2012-13, Rail 2020, HC 329-I, para 65 Back

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Prepared 23 January 2015