Insider

Who will pay for the Green Revolution?

The costs of cutting carbon.

THE cost of the further COVID wave will be a huge constraint on the Government’s ability to fund rail projects that are now in the pipeline to boost economic output and reduce pollution.

The latest estimate is that the gap between falling tax receipts and the cost of support packages such as furloughing will reach £400 billion in this financial year.

A sum of this magnitude dwarfs the cost of high-profile projects such as HS2, where the most recent estimate for construction of the complete route is £88bn. Stakeholders are desperate to ensure that Phase 2b is built in full to reach Leeds and provide connection to the East Coast Main Line, but various options are being evaluated to cut back the length of the line.

Other big-ticket projects are the Northern Powerhouse Rail proposed infrastructure upgrade, for which a budget of £39bn over 20 years has been sought, and future costs to implement findings from the Union Connectivity Review.

There is also breaking news that the delayed Crossrail project in London cannot be completed without a further £80 million injection of funds.

Various reasons have been quoted for this, including the need for social distancing on building sites and the delayed testing of train movement control safety systems. Without any injection of money, Transport for London has said the project could be mothballed. This may not be an idle threat, given the future decline expected in London and South East commuting.

In this event, new Transport Commissioner for London Andy Byford has said that if the project cannot be completed, responsibility should be transferred to the Government. Whatever is decided, it is clear that Crossrail 2 must be regarded as a non-starter for the foreseeable future.

Significant rail projects have been mothballed before in the face of changed circumstances - in particular, the LNER Woodhead project which was postponed due to wartime conditions and not revived until 1948, as money became available after nationalisation.

On a smaller (but no less important) scale we have the pledge to reopen closed routes and stations, and to allocate money to specific ‘acceleration’ projects.

Many worthwhile proposals did not make either of these lists, and it isn’t clear whether this is rationing based on the money the Government expects to have available or a reluctance to implement the market-led investment initiative launched in 2018 and which identified the potential for external funding as an alternative.

The Channel Tunnel was privately funded, as was the creation of the Heathrow Airport branch and the provision of rolling stock to run services. There is no suggestion that any operational concerns have resulted in the use of privately owned infrastructure, although there was an issue over the level of proposed track access charges for Crossrail services that will serve Heathrow in the future.

The arguments that favour public sector funding are well-known. They are headed by the ability of the Government to borrow at a lower cost, whereas funding by financial institutions must reflect a cost of capital to attract investors (although at present these returns are minimal). The caveat is that Government funding has a finite ceiling which does not apply to sources of private finance.

One of the crowning glories of privatisation is the external funding of rolling stock procurement and the whole-life management of costs by leasing companies. This has resulted in a younger fleet with high amenity standards for passengers, such as airconditioning, although there have been design weaknesses in the interior layouts with poorquality seating and the omission of luggage space.

The new imperative for investment is the Government’s objective to secure carbonneutral transport emissions by 2040. Measures announced that only electric cars and vans can be purchased after 2030 is only part of the solution, as it is not proposed that such regulations will apply to heavy goods vehicles.

Any modal transfer to rail (or to guided systems in general) will mean a change to the railway status quo, which will require significant external investment in infrastructure, rolling stock and autonomous systems.

A possible picture of things to come is demonstrated by the Cambridge Autonomous

Metro (CAM). This ground-breaking proposal offers the potential to be a template for smaller conurbations that do not justify either heavy rail investment or a conventional light rail alternative. It includes a 12km (7.5-mile) twin bore tunnel under the city centre, with a 142km (88-mile) network reaching Waterbeach, Haverhill, Mildenhall, St Neots and Alconbury (Huntingdon).

Initial funding was secured in August 2019, with the Cambridgeshire & Peterborough Combined Authority Board (which reports to the elected Mayor, James Palmer) approving a £1.7m grant to develop the Strategic Outline Business Case - the first phase of the transformational scheme.

This was approved in March 2020, as it found that the project has an outstanding Benefit: Cost Ratio with every pound invested worth up to four in the region.

Preparation of the next phase of the project was authorised for development - including a strategy for procurement, a technical study of vehicle technology (to be battery-powered), and enhanced transport modelling.

Continuing the carbon-free agenda, the Welsh Government published a new draft Transport Strategy on November 17 2020 pledging a major reduction in carbon emissions. In a refreshingly honest introduction, it recognised that the hardest part of any strategy is making it happen.

Transport currently comprises 17% of Wales’ carbon emissions, and there is a commitment to set new and stretching five-year priorities to meet decarbonisation targets.

The draft strategy, Llwybr Newydd - New Path, is intended to shape the transport system over the next two decades. It sets out a range of new ambitions to prioritise active travel (cycling) and public transport that will lead to fewer people needing to use their cars on a regular basis. It is hoped this new sustainable transport hierarchy will shape investment towards greener transport options.

The strategy recognises that current patterns of less commuting and more home working are likely to continue, reflecting a long-term ambition in Wales for 30% of the workforce to work remotely.

The risk this brings is that lower fare box income for public transport will diminish the case that can be made for future public or private investment.

“Any modal transfer to rail will require significant external investment in infrastructure, rolling stock and autonomous systems.”