Written evidence submitted by Department for Transport (CAN0017)

 

Introduction

  1. In July 2017 the Transport Secretary announced a change in the Government’s approach to improving rail services on three lines including the Great Western Main Line in south Wales.
  2. As a result of new technologies, electrification along the whole of these routes is no longer required to deliver benefits to passengers.
  3. Bi-mode trains, with their ability to switch seamlessly between electric and diesel power, have the advantage of providing flexibility of operation and our opportunities for more efficient deployments of rolling stock are greatly enhanced by their ability to work across the network.
  4. The new bi-mode Intercity Express trains, now running along the Great Western route, mean that passengers in Wales will benefit from increased capacity, faster journey times and improved connectivity for south Wales to London without disruptive electrification works taking to take place.
  5. The Government expects new battery technologies and alternative fuels to drive further innovation in the rolling sector over the next decade and become the principal energy source on the UK rail network. These developments will allow the Government to continue to deliver improvements to passengers in a variety of ways.
  6. Government has been clear about the difficulties faced in the current investment period. We have been clear that we need to learn lessons from the issues in Control Period 5 (CP5: 2014-2019). This is why we’ll be using a new approach to take forward enhancements.
  7. This new pipeline approach is designed to provide 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. This is intended to avoid the problems of 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.


The arguments for and against electrification of the railways.

  1. When investing in all rail infrastructure, including in electrification, Government needs to consider a range of factors. These include the management of capital expenditure across the whole portfolio of rail enhancements, the timescales for delivering infrastructure works and the likelihood of those being achieved in practice, as well as the disruption that any works might cause. Government has to be certain that the method of delivery offers the best way of providing passenger improvements with the minimum risk.
  2. Government has been influenced particularly by the experience of other current electrification schemes which have turned out to be far more costly, more difficult to deliver and more disruptive than originally thought. In line with the new process for enhancements, schemes will continue to be subject to ongoing consideration to ensure they deliver the best results for both rail users and taxpayers.
  3. For electrification specifically new technology – particularly the availability of bi mode trains – mean that we no longer need to electrify every part of every line in order to improve journeys for passengers.
  4. Rapid delivery of passenger benefits, minimising disruption and engineering work should always be our priority and as technology changes we must reconsider our approach to modernising the railways. The Government has been clear that it will electrify lines where it delivers both genuine benefits to passengers and value to the taxpayer.
  5. Although electrification is often associated with journey time benefits, on its own electrification does not typically provide savings to journeys. It is when infrastructure works are combined with rolling stock changes and other infrastructure works that the most significant improvements are made. It therefore important that any investment in electrification is considered at the appropriate time. By ensuring a focus on the ultimate outcome we are trying to achieve rather than the specific infrastructure interventions the Government’s new pipeline process will help ensure that we are focused on delivering benefits to passengers in the most effective way.
  6. We have been clear that we agree with the recommendation made by the Public Accounts Committee (PAC) earlier in the year that the Department should reassess the case for electrification on a section by section basis and fund schemes only where worthwhile benefits of passengers could not be achieved otherwise at lower cost.
  7. Decisions to invest are often finely balanced, involving trade-offs. The Government recognises that electrification of the track can bring long term operational savings, such as reduced fuel costs. However it also recognises that we need to ensure that these savings are balanced against the significant up front capital costs associated with electrification.
  8. It is important to remember that the delivery of passenger benefits through infrastructure and rolling stock operation – in this case electrification and bi mode operation – are not mutually exclusive. Indeed it is the Government’s view that it is when the two – track and train – work closely together that benefits to rail users can be maximised.
  9. Bi-modes may be more expensive to operate than electric trains but they provide greater flexibility for operators when developing their timetables and increase the rolling stock resilience in response to disruption. We can provide passengers with quicker, more comfortable and reliable trains sooner and reduce disruption. 
  10. Bi-modes allow us to take advantage of state of the art technology to improve journeys for passengers by reducing the up-front capital costs of infrastructure because wires and gantries do not need to be installed along entire routes. Instead we can target electrification where it delivers real benefits to passengers.

The cost of electrification of the railways in Wales.

  1. We have been clear that the up-front capital costs associated with electrification, across Great Britain, have turned out to be far higher than originally thought.
  2. As well as the delivery of benefits to passengers, ensuring value for the taxpayer, is one of the factors Government needs to take into account. The economic case of HM Treasury’s five case model, supplemented through specific transport guidance provided by WebTAG, provides the framework for this assessment.
  3. The Government has been clear that it is did not view it as a sensible approach to spend significant capital in infrastructure which would not deliver meaningful benefits to passengers. In line with the PAC recommendation we have assessed the case for electrification from Cardiff to Swansea, to determine that our approach represents the funding of a scheme where worthwhile benefits of passengers could not be achieved otherwise at lower cost.
  4. The poor benefit cost ratio associated with the section of electrification between Cardiff and Swansea, set out below, was one of the factors considered when the decision was made to change the Government’s approach to achieving passenger outcomes.

 

Benefit Cost Ratio of Great Western Electrification

 

Full Electrification London to Swansea

Incremental Electrification Cardiff to Swansea (2)

Electrification London to Cardiff (1) - (2)

Net Present Value

£m 2010 present

293

-225

519

Benefit Cost Ratio

1.07

0.28

1.13

 

Notes on the Benefit Cost Ratios

 

  1. This Government remains committed to a significant programme of upgrade work across the country, including electrification. In the current investment period alone, we are investing over £40 billion in our rail network, including around £15 billion of upgrade works.
  2. This investment, the most significant modernisation since the Victorian times, includes a programme on the Great Western unprecedented in scale and challenge, on ageing assets in constant use. Enhancing this route will benefit people along the whole route, including South Wales, reducing end to end journeys times to London, increasing capacity on the network and introducing modern, more comfortable and more reliable trains.
  3. The Government’s Statement of Funds Available (SoFA) published in October, represents a continuation of the record levels of funding provided to the railways.

How cancelling electrification will impact Swansea and Cardiff.

  1. From October 2017, passengers in Wales began to benefit from new Intercity Express trains which will each deliver over 130 more seats, faster journey times and improved connectivity for south Wales to London with 40% more seats in the morning peak once the full fleet is in service.
  2. The benefits of any infrastructure enhancements are often felt across a wide part of the network, not just the region in which the specific capital is employed. It is therefore important to ensure consider that any investment in infrastructure on the Great Western in England will have benefits in Wales and vice versa.
  3. Although the Government is no longer committed to electrification of the Great Western route between Cardiff and Swansea we are continuing to invest over £5bn to deliver faster, more reliable services and new trains with thousands more seats. This modernisation, the biggest investment in this railway since it was built by Brunel, will improve the experience of rail users and stimulate economic growth along the whole route including in south Wales.
  4. Passengers in south Wales are expected to benefit from the same journey savings with bi-mode trains that they would have from full electric trains running under wires. Journeys between Swansea and London, and Cardiff and London are expected to be 15 minutes shorter.
  5. We are committed to a cleaner rail network. Once the transformation of the Great Western is complete the new Intercity Express trains will spend most of the journey between London and Swansea in electric mode, with near-zero emissions. In diesel mode the new trains meet the highest rolling stock emissions standards.
  6. Better trains and upgraded infrastructure will take polluting cars and lorries off our roads – reducing the overall carbon footprint of UK transport – making our air cleaner than before.
  7. The Government is committed to ensuring that rail users across England and Wales benefit from our record levels of investment. At the time of the decision on electrification the Transport Secretary committed to develop options to improve journeys for rail passengers across Wales.  
  8. These include exploring options to:
  1. Investment into these schemes will be subject to their affordability and value for money and the Transport Secretary is keen to ensure that the Welsh Government is fully involved as the work progresses. We are beginning this process and we will make announcements about these as part of the new process for enhancements in due course.


The case for devolving rail infrastructure spending to the Welsh Government

  1. The Government continues to work closely with the Welsh Government on the specification and funding of Network Rail’s operations in England and Wales for each five year railway Control Period.
  2. Transfer of executive functions in relation to the specification and funding of Network Rail’s operations in Wales was recommended by the Silk Commission. This recommendation was considered as part of the St David’s Day process, but there was no political consensus to take it forward.
  3. The focus of the Government’s High Level Output Specification (HLOS) for Control Period 6 (CP6: 2019-2024) on investing in operations, maintenance and renewals will benefit communities across Great Britain, including Wales, where this investment will support improvements in punctuality and reliability.
  4. The Government has made the decision to take the commitment to specific outcomes out of the Periodic Review Process. The new pipeline process will help ensure we continue to focus on the outcomes for rail users delivered by the investment in enhancements we make across England & Wales.
  5. The Government intends to set out a Rail Upgrade Plan, in due course, to define our priorities and the steps we are taking to deliver them. As we continue to define our priorities the Government will continue to work with the Welsh Government to ensure that the needs of rail users across England & Wales are reflected.
  6. The way in which the Government considers investment in rail infrastructure is on an England & Wales basis reflecting the fact that the benefits of any infrastructure enhancements are often felt more widely than on a narrow regional basis and designed as such. In contrast to Scotland where the majority of lines are Scotland line with some exceptions that cross the border, it is difficult to identify many truly Wales only lines a notable exception being the Welsh Valleys.
  7. As part of its procurement of the Wales and Borders franchise, the Welsh Government is leading on the development of proposals for the creation of a Metro service, including responsibility for the operation of infrastructure on the Valley Lines. They have been working closely with Network Rail to agree the principles for the proposed transfer of ownership of the Core Valley Lines.  Such transfer is supported in principle by the government, subject to final agreement and recommendation of approval by Network Rail. 
  8. In contrast to the infrastructure, the benefits from the Wales and Borders franchise are felt more acutely by passengers in Wales and are more clearly distinguishable and distinct from other train operating companies utilising the same infrastructure. As such we are taking the steps to devolve those franchise activities to the Welsh Government, to give them a greater involvement in the benefits that the franchise provides. 
  9. We are pleased that we have reached agreement on arrangements for the next Wales & Borders franchise to ensure suitable cross border links are maintained and developed in cooperation between the Secretary of State for Transport and Welsh Ministers.
  10. The Government believes that the ambitious programme of route devolution underway in Network Rail, which sees both authority and accountability transferred into the organisation’s geographic routes, creating business units with far more independence than has previously been the case, will enable the organisation to be better able to work collaboratively with their customers to respond to local needs.
  11. The ORR has a critical role to play in this. We have been working with the ORR throughout the Periodic Review 2018 process to date to ensure that route devolution is placed at the heart of plans for the next control period. In particular, the ORR has committed to implementing regulation on a route by route basis, which will more closely hold Network Rail to account. This will include working with Network Rail and its customers to set targets and benchmarks that reflect the needs of each route, rather than simply applying these in a top-down way nationally. This more responsive approach should also promote healthy competition between routes, which will drive better standards across the country as a whole, as each route learns from the success of others. 
  12. Network Rail’s business process is now led by the routes, consulting with local stakeholders. The Government would strongly encourage the Welsh Government to engage fully in this process and the regulatory process to help ensure that Network Rail’s spending is best focused on local needs and prioritises and that the organisation is held to account for delivery.

 

November 2017