In­sider

What might the post-elec­tion Govern­ment have in store for rail?

Rail (UK) - - Contents - WHAT’S YOUR VIEW? Email: rail@bauer­me­dia.co.uk

Rail pol­icy changes.

There are no cer­tain­ties about elec­tion re­sults, but I imagine there are few who do not think that a Govern­ment led by Theresa May will be re­turned to West­min­ster on June 8. This may be viewed as likely to re­sult in a con­tin­u­a­tion of the cur­rent rail­way struc­ture, but there are straws in the wind that may bring change to fu­ture pol­icy in pas­sen­ger and freight mar­kets and in­fras­truc­ture pro­vi­sion.

If there is no sub­stan­tial change the in­dus­try struc­ture will have con­tin­ued, by the end of the next Par­lia­ment, for more than 25 years - as a com­par­i­son, this ex­ceeds the life of the ‘Big Four’ pri­vate rail­way com­pa­nies prior to na­tion­al­i­sa­tion.

The pe­riod has been a re­sound­ing suc­cess for rail in terms of cre­at­ing prod­ucts that both pas­sen­gers and freight for­warders want to use in ever in­creas­ing num­bers. But de­spite this, many com­men­ta­tors con­tinue to yearn for greater op­er­a­tional in­te­gra­tion (although this style of rail­way or­gan­i­sa­tion re­sulted in past decline, as it was fo­cused on pro­duc­tion rather than mar­ket ex­per­tise).

This sen­ti­ment has re­sulted in var­i­ous for­mats be­ing tried that re­tain cus­tomer­fac­ing ben­e­fits while in­te­grat­ing ser­vice de­liv­ery. The lat­est is the Western Route Su­per­vi­sory Board, es­tab­lished to ‘im­prove the pas­sen­ger ex­pe­ri­ence’.

In truth, such mea­sures are nec­es­sar­ily shal­low as they can­not re­place the statu­tory du­ties of the par­ties - on the one hand to share­hold­ers and on the other to the Depart­ment for Trans­port, both of which rep­re­sent an im­mov­able ob­ject in the way of rad­i­cal man­age­ment change.

A dif­fer­ent way of do­ing things has been pro­moted for the pro­posed East West Rail link­ing Ox­ford and Cam­bridge, for which the Bices­ter-Bed­ford sec­tion is ex­pected to be op­er­a­tional by 2025. The line will be built and op­er­ated in­de­pen­dently of Net­work Rail, but will be part of the na­tional net­work avail­able for use by pas­sen­ger and freight op­er­a­tors.

It will be an in­te­grated com­pany oper­at­ing its own train ser­vices, which will in­clude links to Mil­ton Keynes. There is a prece­dent with the man­age­ment of Heathrow Ex­press, which owns the air­port rail in­fras­truc­ture and sta­tions and has track ac­cess rights to reach Padding­ton.

Amid all-round protest the Civil Avi­a­tion Author­ity, which reg­u­lates the air­port, ruled that the his­toric cost of pro­vid­ing rail in­fras­truc­ture was part of the reg­u­la­tory as­set base, and as such was re­cov­ered in the level of land­ing charges that air­lines pay for us­ing Heathrow. The cur­rent po­si­tion is that the cost of track ac­cess re­mains sub­ject to con­sul­ta­tion, with the In­vest­ment Re­cov­ery Charge now set at £464 per train with fur­ther fixed and vari­able costs based on the type of ve­hi­cles used.

Such pit­falls can also emerge with dif­fer­ent struc­tures, but that is not to say they shouldn’t be at­tempted. Govern­ment de­part­ments have gen­er­ally used a fig­ure of 4.93% as an ap­pro­pri­ate rate of re­turn for pri­vately funded as­set cre­ation, which would be ap­plied to the build­ing of a pri­vately owned rail route and the cost of track ac­cess.

The re­cent award of the South West fran­chise on the ba­sis of qual­ity, rather than a fi­nan­cial prom­ise in terms of fu­ture pre­mi­ums, is a sig­nif­i­cant break from past prac­tice. The DfT is also re­ported to have come round to the view that com­pe­ti­tion from open ac­cess op­er­a­tors drives a bet­ter jour­ney ex­pe­ri­ence which max­imises rev­enue, although the trade- off with the re­duced value of mo­nop­o­lis­tic fran­chises has yet to be re­solved.

The cur­rent Govern­ment is un­der huge pres­sure to pub­lish pro­pos­als for a re­duc­tion in ve­hi­cle pol­lu­tants. Some tough de­ci­sions are com­ing that will have an im­pact on car users, and for that rea­son there is an at­tempt to put off what is in­tended un­til af­ter the elec­tion. It is widely pre­dicted that there will be some form of con­ges­tion charg­ing in pol­luted ar­eas, which will be un­pop­u­lar if there is no suit­able al­ter­na­tive public trans­port.

The big­ger im­pact for rail could be curbs in the use of road haulage, which is es­ti­mated to be re­spon­si­ble for 35 mil­lion tonnes of an­nual car­bon emis­sions. The UK Govern­ment has agreed to a UN cli­mate change pro­to­col that re­quires cur­rent an­nual emis­sions of 500 mil­lion tonnes to be cut to 120 mil­lion tonnes by 2050.

Af­ter the elec­tion, poli­cies that bol­ster rail freight ac­tiv­ity will be needed - these should start with restora­tion of the bud­get for Mode Shift Rev­enue Sup­port grants, which has threat­ened a num­ber of do­mes­tic in­ter­modal ser­vices. An al­ter­na­tive is an emis­sions levy on road trans­port, sim­i­lar to that used in the power in­dus­try that has all but elim­i­nated the use of coal for elec­tric­ity gen­er­a­tion.

The next leg­isla­tive step fol­low­ing the Ar­ti­cle 50 no­tice un­der the Lis­bon Treaty to leave the Euro­pean Union will be the Great Re­peal Bill. This is in­tended to re­turn all items of EU law and di­rec­tives to the ju­ris­dic­tion of the UK Par­lia­ment, which can then de­cide the el­e­ments that will re­main on the statute book and those to be re­pealed.

For rail, the le­gal di­rec­tives are cov­ered by three rail­way pack­ages dat­ing back to 1991 that cover the sep­a­ra­tion of ac­count­ing be­tween in­fras­truc­ture pro­vi­sion and train oper­a­tions, and open ac­cess to net­works for in­ter­na­tional oper­a­tions. Mar­ket lib­er­al­i­sa­tion has been ac­com­pa­nied by the im­ple­men­ta­tion of Tech­ni­cal Stan­dards for In­ter­op­er­abil­ity, over­seen by the Euro­pean Rail Agency and which ap­ply to na­tional net­works oper­at­ing do­mes­tic ser­vices.

In­fras­truc­ture tech­ni­cal stan­dards have been in force since 2015, which in­clude trac­tion power sup­ply sys­tems. It has dis­rupted the elec­tri­fi­ca­tion pro­gramme in Bri­tain by re­quir­ing greater clear­ances for over­head wiring un­der bridges and ad­ja­cent to plat­forms (one of the rea­sons for the de­lay to projects and higher costs). In the fu­ture, such safety reg­u­la­tion can re­turn to UK con­trol.

In the past decade, the rail in­dus­try has steadily re­duced - and now elim­i­nated - the need for rev­enue sup­port as fran­chise pre­mium in­come ex­ceeds sub­sidy re­quire­ments for re­gional ser­vices.

For in­fras­truc­ture projects the Govern­ment ’s High Level Out­put Spec­i­fi­ca­tion (HLOS) is due to be pub­lished to­gether with the State­ment of Funds Avail­able (SoFA). At this stage, what will be in­cluded is un­known and will de­pend on the fi­nan­cial pri­or­i­ties of the new Govern­ment.

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