Rail Infrastructure Investment

Debate between Lilian Greenwood and Graham Stringer

Thursday 17th January 2019 Westminster Hall

[Lilian Greenwood]

My hon. Friend has been an outstanding advocate for the north and its need for rail investment. The Minister is a newish Rail Minister, but I know that he previously served in the Department for Transport. We had discussions in the past, when he was the Minister responsible for buses, and I always found him genuinely prepared to listen. I hope that he brings the same approach to his new role.

In January 2018 IPPR North assessed the Government’s analysis of regional spending and stated that it excluded spending in the pipeline for after 2020-21, meaning that the analysis omitted some £42.5 billion of planned investment, 40% of which—£19.8 billion—is earmarked for London. The Government have therefore presented, even if accurate, a rather skewed picture of how planned transport spending will be distributed across the country in the coming years.

[Graham Stringer (Blackley and Broughton) (Lab)]

My hon. Friend is doing an excellent job of presenting our Committee’s report and explaining how the Government tried to fiddle the figures to obscure the fact that London is getting about 80% of the funding. Does she agree that this will not be rectified and made fair until the methodology for deciding on investment schemes is changed? It massively over-weights time saved, which always pushes investment towards densely populated cities such as London, rather than Newcastle, Manchester, Leeds or the other regional cities.

[Lilian Greenwood]

My hon. Friend makes an important point, which I will come to in due course. He is a long-standing, experienced and expert member of the Transport Committee, and I am delighted that he is here this afternoon.

The DFT also argues that it is difficult to break down regional spending accurately, saying that where expenditure on the railway takes place is not always an accurate reflection of where the benefits are felt. The Department also emphasises the difficulty of analysing investment annually, or even five-yearly, given that railway assets typically have a lifespan of 25 to 40 years, pointing out that there was inevitably

“a cyclical nature to replacing them that does not lend itself to an even split of funding across all regions within every 5 year control period.”

Of course, there is merit in those arguments, but I simply ask the Minister, when was there a time when investment in the north exceeded investment in the south?

While the Government’s commitment to rebalancing the economy is welcome, it is clear from past experience that, as my hon. Friend the Member for Blackley and Broughton (Graham Stringer) said, current methods for making investment decisions make it much easier for highly populated, economically successful places to prove the case for schemes in their area, because the model has a bias towards schemes that exhibit strong levels of potential demand and/or high potential to relieve existing transport congestion. Witnesses to the inquiry told us that this approach inevitably drew more investment to London and unless the system could be altered to take greater account of wider economic benefits, the process would be inexorable.

Maria Machancoses, the director of Midlands Connect, told us that

“figures on the disparity of investment, no matter which formula you look at—whether by the DFT or the Treasury—they all say that outside London it is just not working.”

Her view was that this should be the starting point from which to “move forward.” However, in their response to our report, the Government did not accept the suggestion that their scheme appraisal methods did not provide a fair share of investment in rail across the UK’s regions. This completely fails to acknowledge the overwhelming feeling across the country that investment in rail is unfairly concentrated in a few small areas.

While there are undeniable complexities in accurately breaking down regional spending and identifying where the benefits of investment are felt, the Government must recognise the concerns that have been raised about the regional disparities of investment in our rail network and take action to address them. It is hard to believe that the Department will do so if it does not accept that there is a problem in the first place.

The DFT has published a rebalancing toolkit, to be used as part of the strategic assessment of future investment programmes. This was welcomed in principle by our witnesses. However, when we asked the then Rail Minister, the hon. Member for Blackpool North and Cleveleys (Paul Maynard), for examples of the toolkit’s influence on DFT’s transport investment decisions, he could not provide a single specific example. He told us that it was “relatively early days” for the approach. Our witnesses said that the Government needed to prove that what the rebalancing toolkit is meant to achieve will actually take place. I ask the Minister, over a year after the toolkit was introduced, how has it influenced the DFT’s investment decisions?

In our report, we also called on the Government to be more specific about the economic rebalancing effects they intend to achieve. We call on them to tell the regions in need of regeneration how they can prove their cases and secure investment. We argued that people in the north-east and south-west, regions that have experienced relative under-investment in recent periods, must have a clear sense of what the Government are trying to achieve in order to be able to judge their success.

We also recommended that use of the rebalancing toolkit be mandatory and that the Department worked with Her Majesty’s Treasury to explore how economic rebalancing can be made an intrinsic part of appraising transport schemes. That would put rebalancing at the heart of investment decisions, rather than it merely being an add-on. In response, the Government have told us that it would be impractical to make use of the toolkit mandatory. Why has the Department developed a toolkit that is impractical to use?

Let me turn to rail electrification. Under successive Governments since 2009, the Department has made a compelling case for widespread electrification, moving from diesel to electric traction, particularly on heavily used parts of the network, which would reduce journey times and facilitate lighter, more efficient trains, reducing long-term costs, improving environmental sustainability and enhancing capacity. The Government’s decision to cancel electrification schemes in south Wales, the midlands and the Lake district were a huge disappointment for people who had been promised improvements to their network. Following the cancellation of these schemes, there are also serious questions about the Government’s support for future electrification of the network.

It is clear that the plans for electrification were over-ambitious and suffered from inadequate planning and budgeting. The schemes were hampered by an unclear definition of responsibilities between the DFT, Network Rail and the Office of Rail and Road, and disappointment at their cancellation was compounded by poor communication by the Department for Transport.

Although the decision to cancel the midland main line and the lakes line schemes was taken in March 2017, it was not announced until July, on the day the House rose for its summer recess, limiting opportunities for scrutiny of the decision. The Government also presented the decision not to electrify these lines as a positive story about passenger benefits being delivered in other ways. The announcement, unsurprisingly, was met with scepticism by those who saw it as a pragmatic, cost-based response to overruns. The National Audit Office agreed with those sceptics, and concluded:

“The Department decided to cancel projects in 2017 because Network Rail’s 2014-2019 investment portfolio was no longer affordable.”

Passengers on the midland main line and Great Western main line should eventually see some improvements in capacity and journey time from other enhancements in control period 5, but the way that enhancement to these lines has been handled is far from ideal and has done nothing to create confidence in the Government’s approach to rail improvements.

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[Lilian Greenwood]

It is wonderful to see so many members of the Select Committee here. My hon. Friend raises an important point about what will happen if market-led proposals do not provide the opportunities that the Department hopes. I will touch on that in a moment.

In November, the Government said that they had received 30 responses to their call for ideas for market-led proposals to enhance the railway, but that they could not make an announcement about individual schemes because the proposals had been submitted in confidence. How have those market-led proposals progressed since November, and do the Government expect any of them to be delivered, including the one referred to by my hon. Friend the Member for Cambridge (Daniel Zeichner)?

There was significant support for moving enhancements planning away from the control period process, and we support the intention behind the rail network enhancements pipeline, which should ensure that the planning mistakes made over the past five years are not repeated. However, we also found a substantial risk that the rush to deliver poorly planned and scoped schemes in the current period could be replaced by a different problem—a slowdown or interregnum in new enhancement projects.

That is why we called on the Government to provide a clear set of strategic priorities for rail infrastructure investment in each region, and to outline the specific projects likely to be available for third-party investment. The Government refused to set priorities for each region, so I ask the Minister today to set out the Government’s priorities for rail enhancements over the next five years.

We were also concerned that the process outlined by the Government did not provide the reassurance and certainty on future investment that the rail industry is looking for. We said that more transparency about the enhancements pipeline and decision-making processes in the Department was needed. That is particularly true if the potential for a substantial increase in third-party investment is to be realised. The Government accepted that recommendation and said that they are

“committed to transparent policy making and intend to make clear public statements”

as investment decisions are taken at each stage of the pipeline. So far, however, we have seen no such statements.

The Railway Industry Association has said:

“The visibility of enhancements remains a major concern for rail suppliers. There is now a lack of an obvious enhancements pipeline, with no construction-ready schemes in the Rail Network Enhancements Pipeline…published in 2018.”

Last week, I asked the Department how many rail enhancement schemes were being considered as part of the rail network enhancements pipeline, and what stage each proposal was at. Again, the Minister told me that the Government

“are committed to transparent policy making”,

but failed to answer any points of my question. That means that, almost a year after it was set up, the Department has yet to reveal a single proposal being considered as part of the pipeline. We are none the wiser about what, if any, future enhancements the Department is considering, let alone planning.

In response to my question, the Minister also said:

“Network Rail…will continue to provide public updates on the progress of enhancements in the portfolio”,

but it is not clear at what stage of the pipeline proposals will enter the portfolio. Can the Minister confirm at what stage enhancements will be included in Network Rail’s enhancements delivery plan? It seems to me that it is only those that have reached the delivery section of the pipeline that will be exposed in that way, and we will not know what is in the development and design parts. Will there be any transparency of proposals before the decision to deliver them?

Although the Government have accepted a number of our recommendations, as I have outlined, their response to our report was disappointing in several regards. It seemed to show an unwillingness to engage with some of our key conclusions and recommendations.

The Association for Consultancy and Engineering agreed with our assessment of the Government’s response, telling us that the Government had

“failed to meaningfully engage with the expertise provided by industry, and the practical recommendations outlined in the report”.

It told us:

“As evidence givers, it was disheartening for ACE to see the DfT and the ORR”—

that is, the Office of Rail and Road—

“pay such little attention to the solutions proposed by the committee, including dismissing some of them outright.”

I have asked the Minister to respond today on some of the points where we felt that the Government’s response to our report was less than satisfactory. I hope that he will take the opportunity to expand on the Government’s response, for the benefit of both this House and those in the rail industry who were as frustrated as we were by the Government’s response.

To conclude, although our report welcomed much about the Government’s—

[Graham Stringer]

My hon. Friend is being very generous in giving way as she draws to her conclusion. She has already mentioned the fact that it took four months from the decision to cancel the electrification to a written statement to the House on the last day before the summer recess. The previous Secretary of State, the right hon. Member for Derbyshire Dales (Sir Patrick McLoughlin), assured the Committee that there would be no change in the investment plans when the Office for National Statistics had changed the designation of Network Rail’s public status so that it became part of the public expenditure. However, that has driven many of the cuts in the future investment programme.

Does my hon. Friend agree that the Government have not only failed to respond positively to our recommendations but failed to play a straight bat, in not presenting information to the Committee that would have enabled us to carry through properly our job of scrutinising the Department?

[Lilian Greenwood]

My hon. Friend makes a very important point. I do not know whether the previous Secretary of State was really unaware of the implications of that change, but certainly our experience as a Committee is that we have not always had the candour that we would have wanted from the Department. That is disappointing when we are simply trying to do the job of scrutiny that this Committee was appointed to undertake on behalf of Parliament.

As I have said, we welcome much about the Government’s approach to investment in the rail network. There is no argument about the importance of investment or about the fact that the Government are investing significant sums, but the issue is how they have gone about investing and how they ensure that that investment provides good value for money and strategic thought about the long term.

We agree with the increased focus on renewals and we agree that decisions about railway enhancements should be taken out of the five-yearly control period process. However, there are still outstanding questions that were not addressed in the Government’s response to our report. How will the Government meet their commitment to rebalancing the economy when it comes to investment in rail? How do they plan to decarbonise the railway network if they have completely ruled out electrification? What future enhancements to the railway network will emerge from the new rail network enhancements pipeline? I look forward to the Minister’s update on all those points.