The cancellation of rail electrification in South Wales Contents

2The decision to cancel electrification

Background to the cancellation

7.The decision to cancel electrification between Cardiff and Swansea came after concerns were raised about large increases in the estimated costs of the Great Western modernisation programme. In November 2016, a National Audit Office (NAO) value-for-money report into the programme found that the estimated cost of electrification between Maidenhead and Cardiff alone would be £2.8 billion, an increase of £1.2 billion against 2014 estimates and £1.7 billion against Network Rail’s 2013 estimate.12 Alongside these cost increases, the NAO reported that there would be between 18 and 36 months of delays to electrification compared to Network Rail’s 2014 plans. The Department for Transport (DfT) estimated an increase of £330 million in its net costs as a result of the delays.13

8.The estimated costs of electrifying the Cardiff to Swansea stretch of line also increased dramatically. A Welsh Government business case in June 2012 estimated the costs to be £156 million.14 The NAO report stated the costs in March 2014 were estimated to be £295 million.15 By August 2016 this figure had risen to £433 million.16

9.As a result of the increase in costs, the benefit-cost ratio (BCR) of the full programme was substantially reduced. The DfT business case in 2015 suggested that the programme had a BCR of 2.4:1.17 The NAO’s assessment in November 2016 found that this ratio had fallen to 1.6:1.18 This ratio subsequently fell even further: in a letter to the Transport Committee in October 2017, Mr Grayling reported that the benefit-cost ratio for full electrification from London to Swansea was now only 1.07:1, for the London to Cardiff stretch 1.13:1, and for the line between Cardiff and Swansea, 0.28:1.19 This means that over the course of two years the value for money ratio fell, on the Government’s own measure, from ‘high’ to ‘poor’.20

10.The increase in cost estimates appears largely to be the result of poor planning and project management on the part of Network Rail and the Department for Transport, matters that have already been examined in detail by the NAO and the Committee of Public Accounts (PAC). The NAO stated that “Network Rail’s approach to planning and delivering the infrastructure programme further increased costs”, noting that it did not work out a ‘critical path’, that it had not managed the technical challenges and “did not conduct sufficiently detailed surveys of the locations for the structures”.21 The PAC, in its subsequent report, endorsed the view that “Network Rail failed to plan the infrastructure work properly”.22

11.A particular project management issue raised with us was Network Rail’s failure to establish which bridges needed to be raised to accommodate the necessary electrical infrastructure. Roger Ford, Industry and Technology Editor of Modern Railways magazine, told us:

I think they knew the bridges were there, but they did not move with sufficient alacrity to work out which bridges needed doing. […] Bearing in mind the scheme was authorised in July 2009, one would have thought that as soon as the engineers got out they would have had a list of priority bridges where it was really essential to raise the bridge where we do not have an easy way through it.23

12.Mark Carne, the Chief Executive of Network Rail, accepted that mistakes had been made. He said that the original cost estimate had been “very sketchy” and had been “based on historical data that was at least 20 years out of date, given that we have not done an electrification programme for 20 years”.24 On the issue of the bridges, he said that “the detailed costs associated with the modification to a bridge only reveal themselves when you do the detailed work” but he accepted that a lot of these costs had been “significantly underestimated”.25 Another issue had been the amount of access engineers had to the railway at night, which had reduced since the 1980s when electrification had last been carried out.26 Mr Carne agreed that this was a problem Network Rail ought to have foreseen.27

13.As well as the failings by Network Rail, the programme was also blighted by mismanagement on the part of the DfT. The NAO said that the Department “did not plan and manage all the projects which now make up the Great Western Route Modernisation industry programme in a sufficiently joined up way”. It observed that the DfT did not produce a business case consolidating all elements of what became the Great Western programme until March 2015, more than two years after it had procured the trains to run on the route. It was over twelve months after Network Rail had begun its electrification work that the business case was finally produced.28 This finding was echoed by the PAC, which also criticised the Department because it “failed to challenge Network Rail’s plans effectively despite the very significant sums of public money at risk”.29

14.Roger Ford, from Modern Railways magazine, suggested that “not many” lessons had been learnt from failings in the Great Western programme. He said that the management organisation was still the same and the costs involved were still “fairly high”. He suggested that there was a need “to start again on electrification and look at it from first principles: how do you do it? How are you going to do it?”.30

15.Mark Carne from Network Rail, however, was adamant that “huge lessons” had been learnt. He said that of all Network Rail’s projects in the control period,31 the Great Western programme had faced “by far and away the biggest cost increase and, therefore, of course, has had an enormous amount of focus on why that occurred and what we have to do differently”.32 He added:

To me the critical lessons to learn are about the early stages in the project and the engagement with the client, the funder, about what it is they want, what the best way to deliver that outcome is, and to allow enough time to allow our engineers to do the costs before political announcements, bluntly, are made that signal that something is going to happen before anybody even realises what it is going to cost or how long it will take.33

16.As a result of the failings on the Great Western Programme, the process for planning and carrying out improvements to the railway has been overhauled. The DfT told us that it had developed a new “pipeline” approach for enhancements to the railway, under which there would be “clear decision points for the progression of schemes, ensuring enhancements are only committed for the next stage (development, design or delivery) when they have been properly worked through”.34 The Department said that it intended to avoid problems that had arisen in the past “where schemes were committed to too early before we were sure of the best way of delivering benefits to rail users and value to the taxpayer”.35

17.In evidence to the Transport Committee, which is currently conducting an inquiry into rail infrastructure investment, the DfT said that, as a result of the enhancements pipeline approach, it had “more robust cost estimates and understanding of delivery timescales at the point we commit funds to the next stage”. It considered that the new approach would “allow Government to better manage the portfolio of enhancements”.36

18.The failings and mismanagement on the Great Western programme have been well documented. We fully endorse the criticisms, made by our witnesses, the National Audit Office and the Public Accounts Committee, of the Department for Transport and Network Rail, and put on record our serious concerns about the basic failures in planning and project management. These failures have led to dashed hopes for those who had been promised improvements to the railway network between Cardiff and Swansea.

19.It is encouraging that Network Rail and the Department for Transport have introduced a new approach to address some of the most serious lessons learned from the Great Western Programme failures. We want assurances that their new processes are robust and would prevent similar problems arising in the future. We recommend that the Government commit to reviewing the effectiveness of the enhancements pipeline approach within 12 months. We also encourage the National Audit Office to examine how the new process is operating.

20.In Chapter 4, we consider, in light of the cancellation, alternative means to cut journey times between Swansea and Cardiff, such as the proposal to develop a Swansea Metro system, and the re-routing of the line to reduce journey times between Swansea and Cardiff.

Reaction to the cancellation

21.Much of the evidence we received expressed concern about the decision to cancel electrification. There was particular disquiet that the cancellation came after the UK Government had made a clear commitment to electrifying the line. The Industrial Communities Alliance Welsh Region, a local authority network primarily composed of councils in the Valleys, said that prior to Mr Grayling’s announcement “various Government statements gave good reason to believe that the electrification to Swansea would be going ahead”.37 While on a number of occasions in 2016 Ministers were unable to say when electrification to Swansea would be completed,38 the Government formally remained committed to the programme until the cancellation was announced in July 2017.

22.In its March 2018 report into the cancellation of the project, the National Audit Office cast doubt on the UK Government’s ability to claim that the decision would not impact services. The report concludes that “it is too early to tell the extent to which the Department will be able to deliver the benefits of electrification without electrifying the three [Great Western Main Line; Midland Main Line; and Lakes Line] routes”.39 The same report indicated that the decision to cancel electrification gained the approval of the Prime Minister.40

23.We were told that an electrified railway could make an area more attractive to investors, and, consequently, that the cancellation of electrification could have a negative effect on potential investment and wider perceptions of South Wales.41 Stuart Cole, Emeritus Professor of Transport at the University of South Wales, suggested that potential investors from overseas might ask questions as to why the investment was cancelled:

If an international investor reads that the electrification of the line stopped at Cardiff, the first question would be, “Why did it stop at Cardiff? Why are the British Government not prepared to invest west of Cardiff? There must be something”. It becomes a criterion in their minds about, “Are we investing in the right place if this other investment is not taking place?”42

24.The UK Government said that it had not carried out a specific assessment of the impact of the cancellation on investment. Jo Johnson insisted, however, that because bi-mode trains would deliver some of the same benefits—particularly reductions in journey times—there would be little effect.43 Brian Etheridge, Director of Network Services at the Department for Transport, did not think that investors “would be wholly concerned with just the method by which the train is being propelled”.44

25.Furthermore, there are still serious questions as to why the UK Government deployed arguments relating to journey times to justify electrifying the line, if they now deny such benefits will not be lost as a result of the cancellation. If we now take Ministers at their word—and accept that journey times will not be impacted by the decision to cancel the electrification of the line—it must be concluded that Ministers used ambiguous language to justify their original decision. This is clearly in part the reason why there is such disappointment born out of their decision to cancel the project.

26.Concerns about investment decisions were brought home to us by the decision of Virgin Media, in May 2018, to close its media centre in Swansea and move a number of the jobs to Greater Manchester. The Leader of Swansea City Council, Cllr Rob Stewart, said that the announcement “deepens our concern about failure to invest in rail electrification to Swansea and the competitive disadvantage caused by HS2 in England”.45 With HS2, journey times from London to Manchester will be around one hour, eight minutes, compared to around two hours, ten minutes now.46 Journey times from London to Swansea will be reduced only to around two hours, 45 minutes, from around three hours now.47

27.We are concerned that the Government’s position on electrification has changed. The people using the line and local businesses feel aggrieved that they are not getting the electrified railway they were promised. In the final chapter, we look at other projects the Government might consider for the South Wales railways.

12 National Audit Office, Modernising the Great Western Railway, November 2016, para 10

13 National Audit Office, Modernising the Great Western Railway, November 2016,”Key facts”, p 4

15 National Audit Office, Modernising the Great Western Railway, November 2016, p 33, figure 12

16 National Audit Office, Modernising the Great Western Railway, November 2016, p 13, figure 2

17 Benefit cost ratios set out the present value of benefits compared to the present value of costs. The cost-effectiveness of transport projects is assessed using the UK Government’s Transport Analysis Guidance (WebTAG).

18 National Audit Office, Modernising the Great Western Railway, November 2016,”Key facts”, p 4

20 DfT, Value for money assessments, archived 2016

21 National Audit Office, Modernising the Great Western Railway, p 8 HC (2016–17) 781, p 5

22 Committee of Public Accounts, Forty Fourth Report of Session 2016–17, Modernising the Great Western Railway, HC 776, conclusion 2

23 Q14

24 Q56

25 Q64

26 Q59

27 Q60

28 National Audit Office, Modernising the Great Western Railway, p 10 HC (2016–17) 781, p 7

29 Committee of Public Accounts, Forty Fourth Report of Session 2016–17, Modernising the Great Western Railway, HC 776, conclusion 3

30 Q11

31 A ‘control period’ is the five-yearly planning cycle for the railways. Electrification was specified for control period 5 (CP5) running from 2014–2019; the industry is currently planning CP6 (2019–24).

32 Q80

33 Q81

34 Department for Transport (CAN 0017) para vii

35 Department for Transport (CAN 0017) para 4

36 Written evidence submitted to the Transport Committee, INV 0031, para 15, published 15 January 2018

37 Industrial Communities Alliance Welsh Region (CAN 0006) para 2.1

38 See, for example, HC Deb, 8 February 2016, col 1404 [Claire Perry] and HC Deb, 6 December 2016, col 129 [Chris Grayling]

40 As above

41 Bridgend County Borough Council (CAN 0020)

42 Q25

43 Q132 [Jo Johnson MP]

44 Q135

46 BBC News, “What do we know about HS2”, 17 July 2017

47 Department for Transport (CAN 0017)

Published: 21 May 2018