What next for the railways?

1
What next for the railways?

• Presentation to the
• Public Transport Group
• Northern Home Counties Region
• By
• Roger Ford AIRSE MCILT
• Industry Technology Editor
• Modern Railways
• Founding Editor
• Rail Business Intelligence

2
Another four years

• Transport never became an issue in the election
  campaign
• Railways even less so
• Transport Secretary Alistair Darling did a good
  job!
• And he is staying on

3
Unfinished business

• Labours first term assumed that privatisation
  would deliver
• 10 Year Transport Plan
• Labours second term revealed the failure to
  deliver
• The future of rail White Paper
• Railways Act 2005

4
Confusing signals

• Since privatisation the cost of the railway to
  the taxpayer has increased by a factor of five.
• Costs of railway projects has increased by a
  multiple of pi
• Yet the railway supply industry is undergoing
  another order hiatus

5
What the DfT remembers
6
Record Government support

• In 2005/06 subsidies and grants will reach 6.5
  billion (excluding CTRL)
• This is
• Triple British Rails subsidy in its worst ever
  years 1982 and 1983
• More than six times what BR received in its best
  ever year 1989/90.

7
Where the money goes
8
Expenditure by category
9
Cost to the taxpayer increasing

• Proportion of railways income from the customer
  a key indicator
• Historically has gone up and down with the
  economic cycle.
• As the economy recovered after the recession at
  the start of the 90s the proportion increased.

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But then the trend reversed.
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Growth not an issue

• A common excuse is that the railway is carrying
  record number of passengers.
• But ridership grew as fast in the 1980s
• Infrastructure maintenance costs not an issue
• Nor are the decades of underinvestment

12
Diseconomies of scale

• 1989/90
• 812 million journeys
• Subsidy 985 million
• 1.21 per passenger journey

• 2003/04
• 1 billion journeys
• Subsidy 3.8 billion
• 3.80 per passenger journey

13
The long term underinvestment myth
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What decades of underinvestment?

• Consistent spend by BR on maintenance and renewal
• Health warning some double counting on renewals
  still to be reviewed
• But maintenance in line with current Network Rail
  forecasts

15
Darlings conundrum

• Record ridership
• Continuing growth
• But
• new projects to provide extra capacity
  unaffordable
• Route modernisation programme abandoned.
• And subsidy fixed until next Periodic Review

16
Network Rails future budget
17
Network Rail funding2004/5-2008/9
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Time to retrench

• What you people have got to realise is that the
  future is about service cuts and fares increases
• Senior DfT Official

19
Getting costs under control

• Regulator determined Network Rails income for
  five years in the Interim Review.
• Next Control period starts on 1 April 2009
• Railways Act means no repeat of Ministerial
  radio silence during the Interim Review

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Ministers must decide

• Under the Railways Act Ministers have to specify
  how much railway they want and what they are
  prepared to pay for it.
• ORR and Network Rail work out the present cost of
  the railway the Government specifies.
• If there is a gap - iteration

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Ministers must decide

• If the gap between Government budget and cost of
  the railway cant be closed, ORR decides on how
  much railway the available funding will buy.
• From unelected Regulator deciding how much money
  the railway needs to unelected ORR deciding
  service and quality cuts?

22
Ministers really must decide

• A knotty issue. ORR interprets Act as meaning
  that it will seek guidance from Government on any
  cut backs. We shall see

23
What will the minister specify?

• Typical objectives and standards of what the
  railways are to achieve
• Capacity (types and number of trains) of networks
• Frequency of passenger services
• Journey times
• Reliability
• Measures to prevent or mitigate overcrowding
• Fares levels and ticket types
• Quality of passenger information
• Accessibility for the disabled
• Implementation of major projects to improve
  railway services.
• Protection of persons from dangers arising from
  the operation of railways.

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What happens next?

• Periodic Review Timetable
• Informal process to determine funding and service
  levels 2006
• Formal statement by DfT early 2007
• ORR publishes draft conclusions Early 2008
• ORR publishes final determination Mid 2008

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No time to lose

• DfT Rail has to start developing specification
  this year given the detail
• Still recruiting people for the new Rail
  Directorate under Mike Mitchell
• Hopes to be fully operational in October

26
Meanwhile.

• Sundry minor issues to be taken forward
• Thameslink
• CrossRail
• CTRL Domestic Services
• Franchise replacement
• International Freight charges
• HST replacement

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Not to mention.

• Virgin West Coast renegotiation
• Conventional Interoperability
• ERTMS
• RAIB
• Plus achieving major cost reductions across the
  railway

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WCRM - Money no object

• By BR standards the 125 mile/h upgrade was
  generously funded
• Black diamond review could be accepted as
  reflecting the many inefficiencies introduced by
  privatisation and Health Safety
• But 12.4 million/mile for a 15mile/h upgrade is
  ridiculous

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Project costs 1966-2003
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Southern Region power

• Southern Region power supply
• December 2001 - tens of millions
• June 2002 - 500 million
• January 2003 Roundly a billion
• January 2004 - 780 million
• BUT

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Southern Region Power

• BUT
• Heavily despecified
• No increase in power per train
• 50 of minor overloads to be monitored and
  upgraded if necessary
• No provision for growth

32
Power - a mini case history

• Ashford-Hastings and Uckfield lines
• 1993 Ashford- Hastings 19-25 million
• 1998 Both schemes 30.5 million
• 2002 Both schemes 154 million
• 2003 New diesel multiple units ordered

33
Signalling Hidden costs
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Project cancelled (1)
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Project cancelled (2)
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Poor little rich railway

• The railway has run out of money
• Between the Strategic Rail Authoritys 2002 and
  2003 strategic plans investment in enhancement
  over the next 10 years has fallen from 25
  billion to 16 billion.
• Massive expenditure on renewals

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Record investment levels
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But money is buying less

• Ford Factor now pi
• But that is modest inflation compared with some
  cases already mentioned
• SRA and Network Rail in denial over comparisons
  with BR

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Inflated franchise costs
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So there

• Personally I couldn't care less what it cost BR.
  All that matters is what it costs now and what we
  have to do to get it under control.
• Richard Bowker
• 11 September 2002

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Funding investment 1991-2011