Railway Infrastructure in Wales Contents

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3Management of rail infrastructure

42.The management of railways in Wales is complex. Rail infrastructure and franchising are powers reserved to the UK Government. However, executive responsibility for setting the terms and conditions of, and procuring an operator (Transport for Wales) for, the Welsh rail franchise is devolved to the Welsh Government. In addition, the Welsh Government and Transport for Wales (TfW) became responsible for the Core Valley Lines infrastructure (also referred to as the South Wales Metro) in 2020. The UK Government, however, remains responsible for infrastructure planning and funding of Network Rail which has responsibility for managing the remainder of the public rail network in Wales.

43.The Williams-Shapps White Paper proposes that Network Rail be absorbed into a new public body, Great British Railways (GBR), which will own and manage the network as well as setting fares and drawing up timetables. We do not yet know the precise implications for Wales of this plan, but the UK Government’s White Paper said that the devolved government in Wales would continue to exercise its powers in relation to rail.55 As an example, the White Paper said that the devolved governments would continue to contract for services and set their own fares.56

Intergovernmental co-operation

44.Given the division of responsibilities within the devolution settlement, the relationship between the UK and Welsh Governments is central to the efficient management of Wales’ rail infrastructure. The Department for Transport (DfT) told us that there is “extensive and effective cooperation between the two governments” and that Ministers from both the administrations are in regular contact.57 Describing the working relationship that exists at official level, the DfT highlighted structures which bring together the UK Government, Welsh Government and Network Rail (NR):

At senior official level a regular Transport Director’s Strategic Forum brings together directors within DfT, the Welsh Government, Transport for Wales (TfW), and NR to set the strategic direction for the development and progression of rail enhancements.

DfT and NR are represented on the three regional Metro Development Strategy Boards in Wales, which steer the implementation of Welsh Government’s strategic objectives.

The Welsh Government and TfW are active members of the Great Western & Wales Programme Board, which serves to ensure successful delivery of projects and programmes, that business case benefits are realised, that strategic decisions are made in an efficient and timely manner, and to arbitrate between conflicting programme and/or stakeholder requirements.58

45.Bill Kelly, Route Director Wales & Borders at Network Rail, felt that at official level, and “away from the cut and thrust of politics”, the UK and Welsh governments “often work together very well”, referring to the “successful transfer” of the Core Valley Lines. He told us that there is “lively political debate” between both governments, but that Network Rail had a good working relationship with the Welsh Government and TfW, and regularly met with Ken Skates MS and his officials. To deliver “the best possible outcome for passengers”, Bill Kelly said that Network Rail informs the Welsh Government and TfW “of our plans, what we are working on and what we hope to be working on in future” and ensures that Network rail also “understands their aspirations for the future”.59

46.Ken Skates MS echoed these remarks and highlighted the positive nature of the relationship between the Welsh Government and the Department for Transport. “Based on the feedback that I get from my officials”, Mr Skates said that “the relationship between the Welsh Government and DfT at an official level is better than it has ever been”.60 This, Mr Skates said, was replicated at a political level where there is a strong relationship “between myself, the Secretary of State and other Ministers within the Department”.61

47.However, a theme of Mr Skates’s evidence was that the mindset and culture of the Treasury makes accessing funding for infrastructure projects difficult. He said that both the DfT and Welsh Government face a challenge in persuading the Treasury to fund Welsh infrastructure projects because “the mentality within the Treasury is very different to the mentality of officials and political leaders within the Department for Transport”.62 Chris Heaton-Harris MP suggested that DfT and Welsh ministers occasionally worked together to “shake down the Treasury”, although David T.C. Davies MP highlighted the “positive tension between spending departments and the Treasury”.63 Mr Davies said the Treasury do “a very good job in asking the correct questions to ensure that taxpayers’ money is being spent fairly and correctly with good value for money across the board”.64

48.James Price, CEO of TfW, observed that despite the rail network outside the Core Valley Lines being the responsibility of the UK Government and Network Rail, the Welsh Government has the capacity to invest in rail projects. He referred to the Ebbw Vale line and the line passing Cardiff airport as examples of “two big top-up schemes” by the Welsh Government but added that responsibilities are “blurred” when the Welsh Government decide to invest in rail schemes “because they cannot wait, or it is more important, so they will invest in a UK Government piece of infrastructure”.65 Bill Kelly said that Network Rail had learned that they and TfW need “to make joint representation to DfT on projects—be they enhancements, renewals or upgrades—for the benefit of passengers across the network”.66

Rail Network Enhancements Pipeline (RNEP)

49.In March 2018, the UK Government announced the rail network enhancements pipeline (RNEP), with the RNEP changing the approach for projects that require central government funding. The UK Government said that this approach would create a rolling programme of investment, focused on delivering benefits for passengers, freight users and the economy and changing the previous five-year cycle of investment. The DfT said RNEP is “used to plan and assure enhancements based on considerations of affordability and represent the best use of funding available”, adding that the process will “hold Network Rail to account in a client/delivery agent relationship”.67

50.In response, Ken Skates MS published a statement agreeing to engage with the new approach to secure investment in Welsh rail infrastructure. He added that “progress has been very slow” in relation to the investment process and that the DfT’s current enhancements pipeline process had not “served Wales well”.68

51.Simon Jones, Director Economic Infrastructure at the Welsh Government, said the RNEP is used by the DfT to satisfy the Treasury, but is hampered by slow decision making with multiple stages requiring sign off.69 Mr Jones told us that a project “from beginning to end, takes many, many years because of the bureaucracy” and explained that making “progress on developing any infrastructure proposals” is difficult because

[e]ven something as relatively straightforward as providing funding for some feasibility studies or a business case for a few hundred thousand pounds can take many, many months to approve.70

52.James Price said that RNEP has altered the way in which TfW, the Welsh Government and Network Rail work together in order to progress infrastructure projects through the new “Treasury and DfT bidding process”:

We are trying to innovate with the way that Network Rail, Transport for Wales and the Welsh Government work together, such that we have one set of asks, if you like, of that bidding process so we can do the best we possibly can for Wales out of what is now a UK system run out of the civil service and signed off by Ministers.71

53.Chris Heaton-Harris MP told us that the RNEP had some valid aspects to it but was very critical of the overall process. He said RNEP “has too many steps, and each of those steps takes too long” and commented that if “it could work efficiently, it would deliver everything that you and I would want, but it doesn’t”.72 The Minister did, however, say that work was being undertaken both within the DfT and also at 10 Downing Street to review RNEP with a view to streamlining the process.73

Network rail

54.Some changes to the local organisation of rail infrastructure management have already been introduced. Network Rail has established a devolved structure, with Wales as part of ‘Wales & Western region’. Discussing the devolved structure of ‘Wales and Western’ within Network Rail, Bill Kelly said that responsibility for infrastructure projects and support functions that were previously centralised at Network Rail “are now much closer to the routes than they have ever been before”.74 According to Mr Kelly, Network Rail can now act with speed and more autonomy “and it allows us to draw on more resources more quickly when we need them”.75

55.Growth Track 360 expressed concern that the Wales route is within a regional structure “which reaches as far east as London Paddington and as far south as Penzance” which “contrasts with the position in Scotland where the Route and the Region are coterminous”.76 Julian Glover, however, observed that investment on the route from London Paddington has directly benefited services running to south Wales.77 The Civil Engineering Contractors Association Wales (CECA) welcomed the introduction of a regional structure but were concerned that “this arrangement is unhelpful in developing an all-Wales approach to integrated transport”.78

56.Simon Jones from the Welsh Government, however, highlighted limitations to their relationship with Network Rail, observing that because responsibility for rail infrastructure is not devolved to the Welsh Government they are unable to directly intervene in the delivery of projects.79 Mr Jones said the Welsh Government’s inability “to contract with Network Rail properly” had resulted in increased costs, delays, and reduced benefits from a project that was designed to improve connections between north and south Wales.80

57.It is possible that the Williams-Shapps White Paper could alter how TfW and Great British Railways interact, although the review said that GBR would initially maintain Network Rail’s regional structure.81 The White Paper did, however, suggest that the Government would like to establish new working arrangements between TfW and GBR:

A joint working agreement between Transport for Wales and Great British Railways will be explored to improve the rail offer for passengers and freight customers in the connected network between Wales, the West Midlands and the West of England. This agreement would need to be negotiated between the UK and Welsh governments, building on existing Wales and Borders agreements for rail services.82

Devolution of rail infrastructure

58.In 2019, the Welsh Government published a report, A Railway for Wales: meeting the needs of future generations, that made the case for full devolution of rail infrastructure.83 Full devolution would mean complete control and ownership of infrastructure and assets and responsibility for funding.

59.In September 2020, Ken Skates MS called on the UK Government to fully devolve rail matters to Wales and deliver a “fair funding settlement” to improve rail networks in Wales. Mr Skates claimed that further devolution would result in increased “investment in those parts of Wales that have not seen rail infrastructure enhancements in recent years, primarily places that are more remote”.84 He also suggested that infrastructure projects could be decided “on the basis of more than just a benefit-cost ratio” (an issue we consider in the following chapter) and schemes could be appraised “in alignment with the Well-being of Future Generations Act” and “on the basis of WelTAG—the Welsh transport appraisal guidance tool”.85

60.Analysis by the Wales Governance Centre emphasised the historical financial advantage that could have been realised under a devolved model. Had the Welsh Government enjoyed full devolution between 2011–12 and 2019–20, the WGC said “Wales would have benefitted from an additional £514 million of spending under a devolved system”.86 Looking to the future, the WGC made the case that changes made in 2020 to the way the Treasury determines funding for the Welsh Government (the comparability factor) strengthened the financial case for devolution.87 The change in comparability factor is particularly pertinent when considering the implications of spending on HS2, an issue we explore further in the following chapter.

61.Sir Peter Hendy warned, however, that devolving responsibility for infrastructure would not mean that the Welsh Government could simply inherit a useable and valuable asset. He said that the Victorian rail system is, in reality, a considerable liability that “wasn’t maintained well for most of the period between the end of the first world war and probably 10 or 15 years ago”.88 Sir Peter said that “other than in a political sense” one would have to question “why you would want to get hold of this thing and what you would do if you had it”.89

62.As an example of the challenge of managing infrastructure, Sir Peter highlighted the Conwy Valley line where £17 million had been spent by Network Rail “in the last three or four years in rebuilding that railway after a series of very difficult flooding events”.90 Sir Peter said that ownership of infrastructure is “by and large a secondary consideration” and of most importance is that “the people entrusted with it have enough money to maintain it, upgrade it and run it safely”.91

63.Despite backing full devolution of infrastructure and finance, Professor Roderick Smith of Imperial College, noted that “there is a benefit in scale” and said that maintaining a relationship with Network Rail would be necessary in order for their specialised equipment and expertise to be utilised.92 The Williams-Shapps White Paper said that devolved governments working with GBR would “improve joint working on issues such as managing specialist or scarce technology and skills”.93

64.Sir Peter Hendy told us that Network Rail’s ability to respond to major incidents was a result of their status as “a national infrastructure company” which has a sufficient budget to address these problems throughout Great Britain.94 Reflecting Sir Peter Hendy’s comments, the TSSA trade union said they do not support full devolution because economies of scale can be achieved by Network Rail “in its procurement of supplies, when letting contracts for its renewals and enhancements work and when dealing with emergencies like embankment subsidence”.95

65.However, CECA, which supports the devolution of rail infrastructure to the Welsh Government, said that devolution in Scotland had improved the delivery of infrastructure projects. This was, they argued, because the Scottish Government has pursued a “more locally based approach to investment decisions” which they said had “resulted in more cost effective [ … ] schemes being delivered”.96

66.Transport Focus agreed that devolution of infrastructure in Scotland may have led to “an increased focus and delivery on infrastructure projects that deliver passenger benefits” and highlighted a range of schemes which meet a set of principles and objectives established by the Scottish Government.97 However, they suggested that the potential benefits of devolution to Wales could be limited because the “nature of the border and the infrastructure is different and far less self-contained in Wales than it is in Scotland”. They concluded that, compared to Scotland, “there is far greater interaction and crossing the border with England” and further devolution “would not resolve this and it will inevitably remain an area where co-ordination and collaboration are crucial”.98

67.Despite advocating the benefits of devolution, the Chartered Institute of Logistics and Transport Wales’ (CILT) evidence also highlighted the potential complexity that could develop if infrastructure was devolved.99 They noted the potential for conflicts of interest should TfW be the main operator and network manager and said that special arrangements would need to be put in place for the cross-border Marches line.100 Julian Glover, former special adviser at the Department for Transport, warned that integration of infrastructure and funding in Wales could risk fragmenting the cross-border network which connects north and south Wales.101

68.Rail Freight Group, a representative body for rail freight in the UK, said that the case for devolution is “often weaker” for freight flows as they are most often “pan regional, national and indeed global”.102 They said any further devolution of rail infrastructure “must therefore be within a framework that allows freight operators to continue with a single contractual mechanism and enables freight to be planned and managed at a national level”.103 CILT also highlighted concerns that, in light of the recommendations of the Burns review, the Welsh Government would place too great and emphasis on passenger services between Cardiff and Newport, leading to freight operations “being constrained to unfavourable times of the day”.104

69.Whether the devolution of the core valley lines to the Welsh Government served as a model for further devolution was a matter of debate among witnesses to our inquiry. Sir Peter Hendy said the devolution of the core valley lines had been achieved relatively smoothly in a way that did not “interrupt services to passengers and freight, and has given the Welsh Government and Transport for Wales the canvas on which they can paint their aspirations for better rail services in the valleys”.105 Ken Skates MS, however, argued that divestment of the core valley lines did not establish a model for further devolution because “the process was lengthy—far too long—and too complex and it resulted in the Welsh Government ultimately being underfunded for the ongoing maintenance of what is a largely Victorian infrastructure set”.106 Nevertheless, Professor Stuart Cole observed that devolution of the core valley lines had managed to break down “the previous rigid barriers where DfT was responsible and WG [Welsh Government] was an onlooker”.107

70.In their evidence the Department for Transport warned that the cross-border nature of many Welsh services would make untangling costs a significant administrative challenge in the event of further rail devolution:

Train operations are often cross border and there is less separate identification of Welsh rail infrastructure. Many long-distance services in Wales are delivered by intercity franchises based in English cities. Cost identification and separation would be complex and generate an ongoing administrative cost.108

The Scottish model

71.A potential model for the devolution of rail infrastructure can be found in Scotland where infrastructure has been the responsibility of the Scottish Government since 2006. However, Network Rail is not managed by the Scottish Government and Bill Kelly emphasised that there are lessons to be learnt based on the Scottish approach:

It is important to recognise that the Scottish model is based on full devolution of asset funding, with the Scottish Government funding both the train operator and the infrastructure manager, so we are talking about quite a different industry landscape north of the border. It means that one Government holds the business case for all activities, both normal operations and enhancements.109

72.James Price, CEO of TfW, suggested that the Scottish model of devolution was “possibly a mistake” as the Scottish Government has responsibility for funding Network Rail but no management authority. He said he would welcome full devolution because it could support the integration of rail with other modes of transport, but he also emphasised the importance of maintaining a good relationship with Network Rail and sharing resources and specialist knowledge.110 Ken Skates MS told us that he would not want to replicate the Scottish model in Wales because “the Scottish Government do not have the levers over Network Rail that would enable them to fully deliver against their priorities”.111

73.The Department for Transport’s (DfT) written evidence noted that the Silk Commission had recommended adopting the Scottish model in Wales, but the Department’s analysis had warned against it, concluding that devolution of Welsh rail infrastructure “would be of no immediate benefit to passengers and freight. “112 Highlighting the cross-border nature of the rail network in Wales, the DfT suggested that “the current Scottish model of rail devolution does not readily transfer to Wales, where economic integration with English cities on an east-west axis is important”. The DfT warned that it would be “challenging to untangle English and Welsh costs” and repeated their assessment that “it is not immediately obvious that the benefits would offset the higher administrative overheads likely to be generated”.113

74.Chris Heaton-Harris MP told us that the case for devolution had not been made on the basis of benefit to freight or passengers.114 Commenting on the existing settlements between the two Governments, he concluded that “the balance we have at the present moment probably works pretty well”.115 In particular, the Minister emphasised the benefits of economies of scale of Network Rail and that noted the financial risk associated with maintaining the network in Wales and across Great Britain sits with the UK Government.116

Conclusions

75.While we welcome the positive working relationship between the Welsh and UK governments on rail infrastructure projects, we are concerned that the UK Government’s Rail Network Enhancements Pipeline (RNEP) is too slow and hampers, rather than helps, the evaluation of infrastructure proposals. In response to this report we recommend that the UK Government should set out its plans to reform RNEP with a view to accelerating the delivery of projects in Wales.

76.Network Rail’s revised structure has helped Network Rail respond to incidents in Wales, build relationships with Transport for Wales (TfW) and sharpen its focus on Wales and borders services. However, Network Rail should be alive to concerns that its regional structure will lessen its focus on supporting an all-Wales approach to integrated transport. Network Rail’s regional structure must flex to afford Wales the degree of prioritisation it requires.

77.If clear benefits for both passengers and freight users could be delivered by devolving rail infrastructure to the Welsh Government then the case for further devolution would be compelling. However, few benefits to rail users have been identified and the benefits of the existing management arrangements are considerable. The liabilities associated with rail infrastructure are significant. The economies of scale available via the existing management structure are of benefit to Wales and help to limit the resource that might otherwise have to be committed to maintenance of the network rather than its enhancement.

78.However, even if one puts aside the question of affordability and liabilities, there is the issue of how closely connected and densely populated the border between Wales and England is. The mainline connecting north and south Wales runs through England and cross border routes are vital for commuters and intercity travellers alike. Wales’s geography means its rail network depends on infrastructure in England and, wherever responsibility for management resides, the successful delivery of projects would still rely on strong, interdependent relationships between multiple organisations based on both sides of the border. Of most importance is that all parties, including the Department for Transport, Welsh Government, Transport for Wales and Network Rail, come together, under the auspices of the Wales Rail Board we have recommended earlier in this report, and develop a shared vision and project pipeline for rail in Wales.

79.The Williams-Shapps review said that the UK Government wishes to establish a new working agreement between Great British Railways (GBR) and Transport for Wales. We believe that the Wales Rail Board we have recommended would be the correct setting in which to negotiate new arrangements which should support the enhancement of rail infrastructure as part of a joined-up approach to public transport across all of Wales.