Sunday 28 June 2015

Should the Tory Transport Minister resign?

The "postponement" of the Midland Main Line electrification scheme, announced last week was not the only rail related revelation. The Transport Minister, Derbyshire MP Patrick McLaughlin was also forced to make public a report which showed that in 2012 the Department for Transport (DfT - his own ministry) had grave doubts about the viability of HS2. The report, written by the Major Projects Authority, clearly stated that:
Patrick McLaughlin

“The department believes however that the costs of this project are so large, and over such a long period, that it will not be able to afford it alongside all its other likely spending commitments.”

I wouldn't advise reading it as it is a very shallow assessment of HS2 as a work in progress but it does question the economic benefit and robustness of the costings; the devil is in the detail. OK, so this is a report from 2012 and here we are in 2015 finally getting to read it after the minister tried to hide it. What is significant is that there are further reports from the MHA which the DfT has indicated will not be made public. So what is there to hide?

The proposed HS2 routes

Perhaps it's the fact that the initial cost of the 330 miles of HS2 was assessed as £33 billion (based on 2011 prices) and the current government estimate is £43 billion. There is also the 2013 report of the Institute for Economic Affairs (IEA) which puts the price at £80 billion. I have my doubts about this figure which costs HS2 at £242 million per mile when the HS1 was built for £80 million per mile. How much official agreement in the DfT is there for the IEA assessment?

The point I am making is that Patrick McLaughlin was aware of all this from 2012 and must also have been aware of the difficulties of delivering the much vaunted 5 year investment strategy on the existing rail network. Railway industry journals and other more general news media have made reports of time and cost overruns, many reports as early as 2013 so how come the minister has only now realised the difficulty of spending over £8 billion a year without a concerted, preparatory effort to ramp up the number of available skilled individuals and the manufacturing and logistical capacity to resource these plans. The record of Labour in comparison is exemplary. Whatever our disappointment might be that the Blair/Brown governments did not more effectively grasp the railway nettle by re-nationalisation of more than just the infrastructure they did seem to understand that there is a finite ceiling to investment, a limit as to how much can be achieved in network improvements in any one year. That figure was about £4 billion a year. It is to our shame that we did not exploit the chance to significantly increase rail project capacity when we were in office but we became entangled in the impossibility of trying to make a botched job of privatisation work. What follows will hopefully develop this point.

A short history of rail investment

McLaughlin lays the blame for this current failure squarely with Network Rail overspending and failing to deliver on time but seems incapable of understanding the root cause of these problems. A cynic would say that he does indeed understand the problems but chose to ignore them before the election .......... putting party before country ............ (I am stiffing a yawn as I write this).

There are only so many qualified and trained railway personnel in this country, only so many factories and equipment suppliers that can successfully translate those billion pound investments into on time, on cost major rail projects completions. Before privatisation British Rail understood this so had a rolling modernisation program that ensured a sustainable framework within which British industry could function. This provided sustainable employment, training, apprenticeships ............. in short, a secure living for communities throughout the UK. It also meant that most resources could be supplied by UK based industries with imports kept to a minimum. Privatisation did away with all that and, coming on the back of the massive loss of industrial capacity masterminded by the Thatcher/Major governments, resulted in hundreds of thousands of lost jobs. 

One element of British Rail that was lost as a result of privatisation was the BR electrification team that was based in Doncaster. This team worked year in year out on electrification projects; as one was completed they moved onto another ......... a continuous flow that provided electrification on the West Coast route to Birmingham, Manchester, Liverpool and Glasgow, Anglian routes between London to Cambridge, Kings Lynn and Norwich, St.Pancras to Bedford and the East Coast Route to Leeds, Newcastle and Edinburgh. Continuous modernisation at minimal cost spread over 30 years. Privatisation between the years of 1994 and 1996 put paid to that. The industry was initially consumed with the contractual morass which was to become the privatised norm so there was a hiatus in electrification ................ oh except perhaps for the Heathrow Airport to Paddington scheme (most still use the underground as it's much cheaper). 

Then, during the Labour term in office, there was some continuity with the construction of the HS1 which brought the Eurostar into St.Pancras (68 miles) and the West Coast Route Modernisation which effectively renewed all the overhead electric wiring and associated infrastructure between London, the North West and Glasgow/Edinburgh. These two projects effectively used up the available industrial and logistical rail resources between 2000 and 2009 at a combined cost of roughly £2 billion per year. Beside these projects there was a steady flow of improvements, maintenance and renewals on the rest of the rail network. The next project to start up was the East-West Crossrail route across London, due for completion in 2018 at an initial estimate of £14 billion ............ but costs have risen because station and train costs were not included ........ it will end up nearer £20 billion.

The proposal to electrify the Midland mainline between Bedford and Sheffield was part of a wide ranging raft of improvements contained in the Network Rail plan published in 2009. This plan proposed a number of infill projects, a similar strategy to that carried out by British Rail. Much of this has already started but both of the proposals for mainlines of relevance to the North have been sacrificed. To postpone electrification to Sheffield is very short sighted but the decision to halt the work between Manchester and Leeds seems to be absolute folly as this scheme is particularly cost beneficial as it is relatively easy to complete and has very low mileage costs (in comparison to other schemes). Both these schemes cost peanuts in comparison to the electrification of the Great Western or indeed, the HS2.

So what now?

It would be refreshing to see McLaughlin apologise to Alistair Darling because his comments in 2013 have proved to be correct. Perhaps the minister would also like to correct the assertion that only 10 miles were electrified under Labour when the combined mileage of new and renewed electrification was nearer 700 miles.

It would also be good if he explained why he thought you could double the annual amount of rail investment without first ramping up the base of skills and production capacity.

Then he could explain why he kept to the triumphalist script right up to the election when he must have know that the investment was not going to be delivered. He must have known for some time that the East Midlands and Trans-Pennine schemes would be halted and that there were serious official doubts about the HS2.

He might also like to explain why the railway network now costs 4 times as much to run as it did when it was British Rail (and that includes inflation - try reading this report from Manchester University, "The Great Train Robbery"). He and his Tory friends usually point to the increased number of passengers as vindication forgetting that railway costs are usually calculated by capacity, not ridership. On this measure the current performance is not so good.

If he feels that any of the above is impossible to explain then he can always take the easy route .......... resignation.

Chances are that McLaughlin will be backed to the hilt by his cronies as there is an emerging narrative that this all the fault of Labour: Daily Mail article that eventually manages to convince itself that it is all the fault of Labour in 2001. Yes it's the creation of Network Rail that is at the root of all the trouble. Let's forget the fact that it was the Tories that rushed through an ill-conceived privatisation in 1996 and created Railtrack, the company famous for declaring a "maintenance holiday" as a means of saving money. Many in the industry breathed a sigh of relief once that organisation was consigned to the dustbin. Network Rail was and is far from perfect but for the past 5 years the Tories, most noticeably Osborne, Cameron and McLaughlin have been singing it's praises, right up to and beyond the election. If it was so bad why did they do nothing about it within that 5 years or did they not notice. No, this is a result of Network Rail debt being transferred to the public purse as a result of the application of EU rules of accountancy in 2013. Prior to this it was considered a private debt though governments could claim credit for the investments. Now we can see the effect this change is having with the treasury digging it's heels in and refusing to accept more debt. This is the reality of Tory investment in infrastructure. Just look at the spin now being put on this article in the Telegraph urging a return to full privatisation of the railways but notice that it is written by our dear old friends the Institute of Economic Affairs in the shape of their Head of Transport, Dr Richard Wellings. He seems to be linked with the Libertarian Alliance (a link to their blog - don't go there if you are squeamish or about to eat your dinner) which has the aim of fighting "statism", the goal being a truly free society. I include this quote from Wikipedia:
"It has been suggested that their advocacy of complete free speech and the abolition of taxation and government intervention in economic and social life combines elements of liberalismconservatism, and anarchism".
It would seem that I am unlikely to bump into Richard Wellings at a Belper Labour Party branch meeting in the near or distant future. The fatal flaw in his free market approach is dealt with in "The Great Train Robbery" analysis where it is clearly shown that private investment into our railways is negligible; what private money there is has led to some amazing cash cows for the lucky investors (don't get me started). Full privatisation foundered under Railtrack because it was under capitalised so why should it be any different 14 years after the failure of Railtrack. Without the intervention of the Labour government none of the improvements claimed by the Tories as their own would have been possible. 

Is it too much to hope that this vital element of our national infrastructure could one day be run in a sensible manner ............. free from political dogma .......... a railway that provides good, affordable services for the travelling public and freight customers? All this makes you nostalgic for Clause IV.

Railways depend upon public investment so should be managed accordingly.

Bring back British Rail - a 21 century version.

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