Last week’s funding news has wider implications.
Against the backdrop of a gleaming rail maintenance depot, the prime minister and his deputy last week forgot their Lords’ reform difficulties and enthusiastically announced some £10bn of improvements to England and Wales’ railways. Number Ten and Number Eleven made sure the latest planned infusion of cash was widely trailed over the weekend. This was for sure a “shovel ready” media project.
Much of the investment package (so-called “enhancements” - roughly half) is about continued funding of existing projects mostly to the benefit of Londoners and South East commuters.
The rest is focused on extending electrification of new and existing routes plus some flagship projects outside of London such as the excellent Northern Hub. The overall Statement of Funds Available (SoFA in regulatory railspeak) for increasing rail capacity alongside renewal and maintenance is around £15.1bn in today’s prices.
This compares with a SoFA of £15.7bn for CP4. In real terms this is a reduction of just 4% before the 2013 Periodic Review process is completed. This is more than the leaders of British Railways could have ever dreamt of receiving and is testament to a well established process of funding this vital transport sector. It won’t be all plain sailing. With the Sir Roy McNulty Report uppermost in her mind, secretary of state for transport Justine Greening will be expecting hefty efficiency savings. The McNulty report has Britain’s railway costs being about one third higher when compared to our European neighbours.
After the regulator has done its work, there will no doubt be debate around whether the final settlement is too generous or too harsh. But rail pundits should be careful about what they wish for.
The strategic road network suffers from a “stop-go” funding cycle and a high level of Whitehall interference. There are some £10bn of highway schemes many with excellent value for money waiting to be built. The railway’s £9bn or so of enhancements announced this week compares with a paltry £2bn to £3bn for the Highways Agency to 2014/15. As a recent report by Arup and the RAC Foundation noted, this is against a backdrop of increasing population growth and forecast congestion.
The railway also benefits from a comparatively stable framework for planning, regulation and delivery. The use of the so called “RAB” model provides Network Rail with an investor-friendly means for ministers (and passengers) to buy rail improvements now and pay later. The set up also avoids debt technically appearing on the government’s books. Local government is increasingly being given a voice in the shaping of services. Unpopular as it is at times (such as on a Friday evening at Euston) the railway has the ability to ‘ration’ demand through pricing. No such wide-spread mechanism is available on a road network that is projected to suffer a 54% increase in delays (compared to 2003) by 2035.
With the government review of major road governance, finance and funding arrangements due for publication this autumn, policy makers, local authorities, motorists and freight providers should encourage the government to learn from the railway model in tackling the congestion crisis and delivering improved economic competitiveness.
The rail model may not be perfect, but there are important lessons to be drawn from it.
If the government sets a path to lasting reform for our strategic road network - including some adoption of “user pays” it could perhaps be forgiven another shovel ready press campaign in September.
- Alexander Jan is Global Leader for Arup’s Transport Transaction Advice team