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CPCS responds to a UK Rail and Urban Transport Review Call for Evidence

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Independent Review “to examine how a future government could accelerate connectivity within and between the UK’s key urban areas.” CPCS looks forward to engaging further with the Review’s work.

Key points:

  • We believe it is important the UK Government sets clear ambitions and provides leadership for the rail the sector. This would come from developing a policy framework for the sector, establishing clear governance structures, and setting long-term, outcome-based policy objectives including targets for modal share of passenger and freight traffic, and decarbonisation objectives.

  • The lack of clear and consistent policy and funding frameworks are fundamental challenges to the delivery of improved rail and urban transport networks and infrastructure.

CPCS is a global infrastructure advisor with a particular focus on the rail and urban transport sectors. We have deep experience of rail and urban transport in the UK and internationally and advise a range of clients including governments, transport authorities, international agencies, investors, contractors, and equipment manufacturers.

CPCS is pleased to provide a response to the questions set out in the Review’s Call for Evidence. We have grouped our responses under the four themes used in the questionnaire. 

Growth opportunity through unlocking planning

The planning regime for major projects generally is very lengthy, which both imposes high upfront costs on project development and tends to cause project costs to rise as the project is developed. This is true for all sectors, but particularly applies to major rail and urban transport projects given their size and complexity. 

The Development Consent Order process was introduced to simplify the process for nationally significant infrastructure projects but in practice typically takes several years to complete, incurring significant project development costs. There is a case for looking to streamline and simplify the process.

Similarly, the Hybrid Bill process is lengthy and costly to complete. During consideration of an application, there is a strong incentive to make changes to the project to remove objections and the cost consequences may only be fully realised much later. This was seen with the passage of the High Speed 2 (HS2) Phase One Hybrid Bill resulting in commitments to additional tunnelling which have caused significant cost increases.

The development of rail and urban transport projects in the UK is almost exclusively led by government and there are very few examples of market-led proposals progressing. One prominent example would be the extension of the Northern Line to Battersea, which was proposed by the developer of Battersea Power Station.

In some countries, such as Australia, there is a more structured process for private developers to propose projects which have led to the approval of a number of projects. Although a similar regime was initiated by the Department of Transport in 2018, it has not led to the acceptance of any projects, with all market-led proposals to date failing to secure the necessary government support. A good example is the market-led Heathrow Southern Railway proposal, which offered the prospect of deploying private capital to build new rail infrastructure that would release pressure on Waterloo Station and provide direct access to Heathrow and Paddington from the South West.

It will be very rare for a rail or urban transport project not to require government support, but the mechanism is a useful tool for innovation in the sector, as the Australian experience has shown, and should be better supported by Government.

Clarity and certainty of policy and funding

Rail and urban transport projects take many years to develop and deliver, and major projects such as Crossrail or HS2 will span several political administrations.

The rail industry needs longer-term certainty of the policy framework and consistency of funding to plan and have sufficient confidence to invest. There are many international opportunities for investors and contractors, and they will tend to focus on those where a consistent policy and funding framework provides them with less risk for their investment.

This can be seen in those countries which have developed a clear pipeline of investment, such as the high speed rail programmes in France and Spain, which have reduced construction costs over time, with Spain now reporting high speed rail construction costs per kilometre that are a fraction of those experienced on HS2.

Additionally, clarity and certainty need to be maintained in project scope and funding throughout the project life. Changes to project scope, whether driven by policy or funding requirements, will almost always result in abortive costs as well as hardship for the communities affected. 

The benefits of long-term funding can be seen from successive funding settlements for Transport for London (TfL).

In 2007, TfL was given a ten-year funding settlement which allowed it to plan for the investment in the Crossrail project, London Overground and services to support the 2012 Olympic Games. Whilst inevitably the impact of the COVID pandemic has reduced fare revenues and increased its reliance on Government funding, TfL’s more recent settlements have been for just a few months at a time which has undermined investment in renewals and improvements to its network.

The funding framework for new investment also needs to take into account the costs of operations, maintenance, and renewal of the assets.

Asset maintenance underpins service reliability, which is important to support economic growth, but not properly reflected in financial evaluation. Maintenance and renewals are often cut when there are funding pressures (including in Network Rail’s Control Period 7 settlement), leading to deterioration in asset condition and longer-term degradation of services.

Devolution and sustainable partnerships

The UK has a very centralised framework for decision-making with central government generally controlling the delivery of major projects as well as regional and intercity passenger and freight services.

However, local and regional authorities are likely to be better placed to make decisions about the desired local outcomes from a project and how best to integrate with local networks.

Local bodies who manage operations in their area will also be better placed to reflect the needs of their customers and the policy objectives they are trying to deliver. Project-specific funding generally does not promote the integration of local transport services. 

Transport authorities outside London have often not been able to build organisations to manage local transport networks due to fragmented responsibilities (only recently gaining powers over bus franchising, for example) and a lack of consistent funding. Encouraging the development of wider capabilities in promoting investment projects in rail and urban transport (together with an increased openness to market-led proposals) should promote innovation, encourage solutions that address local needs and are integrated with other local services, and help in benchmarking existing organisations such as Network Rail. CPCS has worked with transport authorities in the UK and internationally to develop their capability to deliver major projects. 

A funding framework which gives local authorities flexibility in prioritising its use would be more effective in delivering services which meet local market needs and promote service integration.

It would also provide a basis for the authority to develop its capability as a client and procuring authority for such projects. As noted above, historically TfL benefited from long-term funding settlements and most funding was provided in the form of block grants, providing the Mayor and TfL discretion to make decisions about the prioritisation of investment and allowing integration of transport systems across London. More recent funding settlements have come with many conditions making it harder to integrate the London network. 

Private sector and industry capacity

It should be noted that all transport services rely on private companies, whether to deliver operations or in the construction of new projects and supply of equipment and maintenance services.

The development of domestic manufacturing capacity and service providers supports growth with a multiplier effect on the direct investment through the creation of local supply chains.

For example, the Hitachi train facility in the North East has supported over thirty Tier 1 suppliers across the country. The development of these companies has also provided new opportunities for export whether of manufactured components or of services.

There are currently few opportunities for private investment in rail and urban transport other than in the provision of rolling stock which is often leased from private sector investors.

In other countries, private investment is used to deliver new rail projects, such as extensions to the high speed rail network in France and the Sydney Metro project in Australia. The involvement of the private sector can promote innovation, particularly if engaged early enough in project development.

For example, in London Underground’s upgrade of Bank Station, early involvement of contractors and providing them with the means to evaluate different construction solutions resulted in the successful contractor proposing a significantly different design for the project, reducing both cost and disruption during the construction.

We welcome the opportunity to provide evidence to the Review as it provided a timely opportunity to consider the challenges facing the delivery of improvements to rail and urban transport services.

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