AB

New government – same transport destination: Accounting & Business

Posted on October 1, 2011 · Posted in Accounting & Business

When Philip Hammond took over as transport secretary in May last year, he immediately stressed that the coalition Government was making a fresh start, with a new set of transport policies and priorities. “We will end the war on motorists,” trumpeted Hammond.

Yet the reality is that transport experts struggle to spot any change in approach. “I am not really sure how different the policy is,” suggests Professor Chris Nash of the Institute for Transport Studies at the University of Leeds. “They are going ahead with big rail projects, so I suppose it is not much different.”

In fact, the most important break with inherited transport policy has been the rejection of the third runway at Heathrow approved by the predecessor Labour Government. This is despite the Conservatives’ traditional association with big business and the CBI’s description of a third runway as “essential” for commerce.

Ironically, given Hammond’s initial comments, the roads lobby has been his other leading critic. The RAC Foundation’s Professor Stephen Glaister argues: “There isn’t any focus on road policy. Absolutely not! We see in the spending review, the preliminary documents and the press statements lots of very welcome stuff about investment in infrastructure, particularly transport infrastructure, to provide for economic recovery. That makes sense to us and is consistent with the Eddington review [of transport policy] accepted by the Labour government.

“But if you look at the projects that have been approved, the story is very different. Good road schemes and support for local authorities’ road maintenance projects have been cut, while there has been an increase in the money available for the railways. Bearing in mind that 93% of passenger movement and a similar proportion of freight movement is by road, there is a disconnect between what they say they want and what they are doing.”

As Glaister suggests, the big projects going forward are dominated by a few mega-sized rail investment projects – and all are a continuation of priorities adopted by the previous government and its very pro-rail transport secretary, Lord Adonis. Crossrail will provide a fast east-west London connection; a major upgrade of Thameslink improves north-south London services; the East Coast mainline service is being modernised; and the biggest, and most controversial, project of all is HSR2.

HSR2 is High Speed Rail 2 – HSR1 being the line from the Stratford International station in East London to the Channel Tunnel, sold at the end of last year to a consortium of Borealis Infrastructure and the Ontario Teachers’ Pension Plan for £2.1bn (it cost over £5bn of public money to build). But while many locals living in the Kent countryside objected to the damage to the so-called ‘Garden of England’, this was nothing to the complaints now of those living in the Chilterns. They complain that one of the country’s most beautiful (and most accessible to London) areas is being sliced apart. The service will, though, cut journey times from London to Birmingham by over half an hour – bringing the country’s two major cities just 45 minutes away from each other – and London to Glasgow by an hour. The approved route will have a leg going onward to South Yorkshire and another to Manchester and across the Pennines to Leeds, with spurs in the south to Heathrow and HSR1.

Opinions amongst transport analysts are split strongly about whether the projected cost of somewhere between – and this is a very big between – £20bn and £33bn represents value for money and also, decisively, about whether the estimates of future demand are accurate. Not surprisingly, the RAC Foundation stands on the negative side of the divide. Professor Glaister insists: “We just want the Government to apply their own assessments and measure the rate of return for investment on particular schemes. If they do that they will find the rate of return is very, very much higher in most road schemes than in the rail schemes.”

Another strong critic is Richard Allsop, professor of transport studies at University College London. Allsop declares his support for campaigners seeking to protect the Chiltern Hills and says: “I recognise that Philip Hammond seemed to get quite a good deal out of the CSR [Comprehensive Spending Review] in terms of infrastructure investment in the review period. But I am a sceptic about High Speed Rail and the present approach to it. I find the demand projections completely implausible and based on a quite exceptional period of high demand in the previous decade.”

Allsop is worried by an issue exercising much of transport academia – how to accurately predict future demand for transport. “If incomes continue to grow – and they may be flat for several decades – but if they grow at the established rate of 2% long term, then we can expect demand for travel of all kinds to increase,” explains Allsop. “I don’t think then this is a matter of road versus rail: it is a matter of properly forecasting demand for both of them.”

But Stephen Glaister believes that future growth demand will be mostly within the road network. He points to the shift in population across the British regions, with some regions expected to grow by 10% per decade for the next 20 years, concluding there is a need for significant investment in infrastructure in the growing regions, including in roads.

According to transport analyst Christian Wolmar, the argument may be superficially attractive, but it misses the reality that most of that population movement will be from areas where public transport is weakest, the North, to places where it is strongest, London and the South East, and where a much larger proportion of commuting journeys is carried out by public transport. Wolmar is an unapologetic enthusiast for the railways – he has written several books on them – and believes that increased rail investment is fully justified.

“There has been no increase in road traffic in last 10 years if you look at the figures,” says Wolmar. “Some of that is to do with pricing and there has been some transfer from road to rail. We may have come to the point where the car industry is a mature industry.” In other words, implies Wolmar, road usage may have reached its peak.

A similar view is taken by Professor Nash. “We have got some really good investment projects at present,” he explains. “The big uncertainty is whether we have reached saturation [of rail demand]. The demand forecasts [for HSR2] are in line with what has happened [in growth of rail passengers in recent years]. The uncertainty is about whether that growth will continue, which is why you would like to do an investment which you could phase. But it is difficult to do that with High Speed Rail. It’s an all or nothing project.

“There has been a marked change in trend in road use. Even before the recession, for 10 years the miles travelled per person per annum did not rise and that was markedly different from the decade before.” This probably reflects, says Nash, increased travel times by car as roads became more congestion, population redistribution to the big cities, particularly London, and higher density living. “Unless the Government went back to massive road building and building on green belt land, then this is a permanent trend,” he suggests.

But without a consensus on future demand, it is impossible to conclude whether HSR2 represents good value for money. “The case for high speed rail depends very much on continued demand for rail in the way it has been,” says Nash. “If you look at the documents, what is really important is to build the connection from Birmingham to Leeds. London, Birmingham, Leeds has a benefit to cost ratio of around five. So it looks a pretty strong project.”

Professor Allsop takes a different view and believes that growth in railway use over the last decade reflects a more commercial approach from rail operators. “If I were in charge, I would have a moratorium on HSR plans and go back to the drawing board,” he says. “I am not suggesting kicking it into the long grass, but to take a completely fresh approach regarding the best way to connect with Scotland, the North of England and Wales and to spread that out to Paris, Lille and on into Europe via HSR1. You could then end up with a route of the kind proposed. But my guess is that you would end up with a very different route.”

Allsop also challenges the suggestion that HSR2 offers a good rate of return: arguing that a higher rate of return would be achieved if the funds were spent on a large number of smaller scale projects that would improve the quality of local rail and bus services and road connections. But such schemes are less attractive than major projects when it comes to spending reviews. “It’s one of the problems with a democracy,” remarks Allsop.

Glaister argues that when it comes to rate of return, roads score easily. “The road network is actually highly profitable,” he says. According to the RAC Foundation, there is a positive contribution of £47bn from roads use, compared to an annual public subsidy to rail of £5.5bn. Yet, complains Glaister, funding for the Highways Agency is being cut by 40% to 45% in real terms over the next four years. With the risk of further steep rises in fuel costs, the RAC Foundation wants the Government to review fuel duty – the proceeds of which at present, it complains, merely go into the general tax pot.

“But we do need more road spending,” says Glaister. Consequently, the RAC Foundation supports in principle a move to road pricing on strategic routes – with the proceeds going into roads investment and funding a cut in fuel duty. Glaister points to the National Infrastructure Plan establishing the principle of user contributions to replace infrastructure for energy, telecommunications and rail – but not for roads.

Road pricing through toll roads may yet have its day, believes Glaister, though probably not in the term of the current administration. “It may well be that quietly civil servants are thinking along these lines: that this is a solution to the problem and it’s difficult to see another one.”

Box

National Infrastructure Plan

The coalition Government spelt out its plan for modernising and improving national infrastructure last October. This contained commitments to improve the telecommunications, energy, flood defence and water supply systems and pledged spending to retain the UK’s position as a science and research base. But much of the plan focused on key transport schemes: £30bn was pledged and high profile rail schemes endorsed, including London’s Crossrail, High Speed Rail between London, Birmingham, Manchester and Leeds; the East Coast Mainline upgrade, new East-West freight rail connections and a major upgrade for Birmingham New Street station. Rail infrastructure management costs would be cut by 21%. A network of electricity stations for electric vehicles would be built and a system for lorry road user charging established.