More strain on rail funding.

Freight grant reduction will mean more lorries on the roads

The Department for Transport is planning to reduce the budget for freight grants in England that support the retention of traffic on rail and its transfer from road. A total of £19.9 million was awarded to freight operators in 2016-17, but it has been reported that this will be cut to £15.7m in 2017-18 and £15.2m in 2018-19.

The system was originally put in place at the time of privatisation to protect Freightliner from unaffordable track access charges, but was then changed by the Strategic Rail Authority to the current day Mode Shift Revenue Support (MSRS) scheme. This allows freight operators to claim grant if they demonstrate that traffic can be transferred from road to rail - if a subsidy is paid to reflect the difference in price a customer pays if rail is used.

In the current year 41 grants were agreed for individual flows hauled by DB Cargo, Freightliner, Eddie Stobart, JG Russell, and GB Railfreight. The largest award was worth £ 2.1m covering intermodal traffic, but for commercial reasons traffic details are not published. Eight non-containerised flows received grant, the maximum being £ 218,000 for a transit between Halewood and Southampton.

Heavy Goods Vehicles operating in the UK are permitted to have a gross weight of 44 tonnes and a length of 16.5 metres. A typical cost of operation is £ 2 per mile.

Rail bulk traffic moving in large trainloads is cheaper, particularly if there is direct loading at ports and quarries with discharge at plants where the material is used.

But as soon as a trans- shipment is necessary, the rail cost benefit is reduced. This often applies with containers because although boxes are loaded directly to rail at ports, a road delivery is often required. Shorter- distance flows such as from Felixstowe to Birmingham are likely to be cheaper by road, where a direct pointto-point delivery can be made and MSRS comes into play to meet the cost differential.

Analysts have estimated that the reduction in the amount of grant available will result in 190,000 additional annual HGV movements. This is an absurdity, given statistics that indicate the level of pollutants from diesel vehicle emissions such as HGVs is above the legal limit for particulates and nitrogen dioxide.

Enforcement is currently a matter for the European Court of Justice, and to counter potential fines the Government has indicated it will introduce clean air zones by 2020, whereby vehicles would pay a levy to enter conurbations such as Southampton and Birmingham.

The DfT has had to absorb significant spending cuts in recent budgets, and there is the likelihood of more of the same in the March budget. The previous assumption has been that funding agreed by the Office of Rail and Road for the current Control Period would be unaffected, as it has quasilegal status. Now fears are growing that the continuing Government spending deficit may bring a reduction with a slowdown or cancellation of projects.

Balfour Beatty, one of the main railway engineering contractors, has taken up this theme. It has issued a report, titled Staying

on Track, which claims the industry is

“The risk is that people will drop out of the industry to join sectors with a more secure pipeline of work.”

suffering from stop-go funding and that ministerial indecision risks damage to the condition of the network.

The theme is that uncertainty about the future structure and funding of Network Rail, after it was taken under Government control, means that contractors cannot invest in the training of engineers unless there is visibility about what the railway workload is going to be.

There had been certainty about Control Period spending, but now that a large amount of work has been put back it is difficult to retain the skilled staff needed when the work is reinstated. The risk is that people will drop out of the industry to join sectors with a more secure pipeline of work, and that there will not be the expertise to build the HS2 route.

Notice needs to be taken of these views, as the debacle that has taken place with the Great Western electrification project indicates.

Here the adoption of an untried system of installation was not challenged, despite the lack of expertise available following a long period when no significant routes were electrified. The result is that the £12 billion, five-year enhancement fund to 2019 has been exhausted on the delivery of far fewer projects than expected. It has also had to be raided to meet the day-to-day operational, renewal and maintenance costs of the network, where the ORR calculated a totally inadequate spending allowance for the task required.

The DfT has repaired some of the damage caused by providing £ 400m to develop the Digital Railway. This money, and a further £ 300m being allocated to improve Southern operational reliability, was originally expected to come from NR’s renewals budget, but there is no headroom available given the regulatory settlement. In addition, private sector funding is being sought to meet the cost of the East-West link that was also originally within NR’s budget.

The Government remains embroiled in the Southern dispute involving the transfer to drivers of safety-critical duties previously undertaken by guards. There looked to be a positive outcome after negotiations resulted in agreement of the driver’s role by ASLEF - and the vote against by drivers is unlikely to end with the deal being rejected once some detailed fine-tuning takes place.

But the RMT union remains unmovable - the cost to the DfT in terms of lost revenue and passenger compensation keeps escalating and is now past the £ 200m mark, representing a further impact on funds for the enhancements programme.

Next up is the likelihood of disputes at Merseyrail and Northern over future traincrew responsibilities. The Liverpool Mayor and City Region Combined Authority have put their heads on the block by declaring there will be no guards on the newly ordered train fleet and a prolonged dispute looks certain which will ask the question how the Local Authorities concerned will fund the revenue loss. Perversely the level of support payments is so high that more money will be saved by not running trains, although at what cost to the thriving Liverpool city centre economy?

There is not an infinite source of money for the railway, and the cost of industrial action has begun to have an impact on the well-being of the industry - as illustrated by the freight grant cutbacks.