INFORMED SOURCES January 2012
This is always a disorienting time of year. Modern Railways is published of the fourth Friday of the month preceding the cover date, which means that the January issue appears immediately before Christmas while I’m already planning the February column. But someone referring to the January issue in future years won’t know this, so when writing this months column I have to make sure I refer to ‘this year’ (2011)as ‘last year’.
As always, the January Informed Sources is slightly shorter than usual because the magazine also includes the annual fleet reliability review as an Informed Sources Extra.
DfT contempt for Parliament deepens
Vital decisions slipping back
Train service provision funding struggles
Thanks to diligent back-bench Members of Parliament, we have been able to track the increasingly improbable sums of our money spent by a profligate Department of Transport on the ludicrously specified and totally unwanted Intercity Express Programme. On 23 November, Transport Minister Theresa Villiers released a new set of consultancy costs. And it got me going again.
In particular the totals are rounded to the nearest £10,000 and individual sums to the nearest £1,000. So what? Well the previous answer gave expenditure to the nearest pound. It also included costs incurred by franchised train operators. These are missing from the latest update.
Combining the answers into a single table highlights sundry discrepancies. For example, according to the January 2011 Table, Capita had been paid £431,218 up to April 2010. But in the latest Table this has fallen to a suspiciously round £300,000 up to May 2010.
Anyway, if you reinstate the omitted
Man hours
But if you can’t be bothered with my nit-picking detail, please consider the £12.8 million paid to Mott MacDonald which has been responsible for technical specification and procurement. I make that equivalent to just over 100,000 man hours.
According to one manufacturer, the development of a variant of an established EMU platform for a recent contract took a shade over 200,000 engineering man-hours. DfT will be building the train go their own drawings next
Vital decisions slipping back
Back in May, Sir Roy McNulty’s Rail value for money review, which is now sinking beneath the tide of events, referred to a ‘government White Paper’ to be published by the end of 2012.
Subsequently the aspiration was downgraded from a White Paper to a Command Paper, the distinction being that while both are published by ‘command’ of Her Majesty the Queen, the White Paper presages supporting legislation.
At the Conservative Party Conference in October, then Transport Secretary Philip Hammond said that ‘a comprehensive blueprint for reforming our railways would be published ‘shortly’. This was generally expected to mean during November.
But, on 16 November Mr Hammond’s replacement Justine Greening revealed that publication of the government’s response had been put back ‘to the new year’. The Command Paper detailing proposals on delivering a sustainable railway ‘including reform of Network Rail’ is scheduled for ‘early’ in 2012.
This delay will allow time for ‘greater consideration of other issues central to the question of rail reform’. It will also allow the Command Paper to ‘properly reflect the consequences of my decision following our consultation on a national high speed rail network’ added Ms Greening.
Whoops. On 6 December Ms Greening announced that a decision on HS2 had also been put back until ‘January’.
Why the delay? Well, since taking up office in October Ms Greening has considering the issues raised by the consultation on HS2 and has been listening to the views of fellow MPs’
Meanwhile in parallel with the Command Paper, the Government also plans to consult on the scope to devolve responsibility for some rail passenger services in parts of
And it’s not just DfT which is consulting. In her portmanteau November statement Ms Greening added that the Office of Rail Regulation expected to consult ‘later this year’ on possible changes to its role, ‘particularly in respect of future franchises’. This should be out by now I’m going to save up reading it as a New Year’s treat!
So pretty well every decision on railway policy is sliding back. This would be bad enough, were not this coming year is already packed with intense activity requiring critical decisions – not least the publication of the High Level Output Specification (HLOS) and the letting of the Intercity West Coast franchise by the December timetable.
You have to wonder how the West Coast franchise can be let in such an information-lite climate. What odds on Virgin being granted an extension to their extension in a year’s time?
Tough going on train funding
Early in December I was chatting to a senior chum at Alstom who told me he was still heavily occupied in finalising finance for Nottingham Express Transit Phase 2. What would once have been a routine Design, Build Maintain and Finance (DBMF) exercise was now a complex and time consuming task
And he was having an easy time compared with the big total trains service provision deals for Thameslink, Crossrail and the IEP. Bankers, already demanding increased returns because of the Eurozone crisis, are also increasingly concerned to lay off the risk of penalties should rolling stock fleets fail to deliver as advertised.
All this risk provision adds up, as percentages are piled on percentages at each stage of the funding structure. In a sign of the times, Transport for
On 24 November, Transport Minister Theresa Villiers confirmed what we all knew, that financial close on both Thameslink and IEP was now targeted for ‘the new year’. This was not so much vague as meaningless.
Ms Villiers added that private financing of the deals ‘will continue to be arranged up until the contracts are signed’. She later back-tracked and blamed delays on the planning process for the associated depots, particularly Hornsey. An odd claim, given that the Hornsey depot scheme was approved by the local council back in September. But Theresa’s like that
Crossrail
Further confirmation that finance is a problem, and an expensive one at that, came with the news that Transport for London is reconsidering the approach to funding ,the Crossrail train fleet. A recent TfL internal memorandum explained that ‘The recent financial crisis has resulted in a significant widening of the gap between the cost of finance under a private-financed concession compared with the public sector’. In TfL's view ‘this level of “premium” does not represent sufficient value for the Crossrail rolling stock and depot’,
How the Crossrail fleet will be funded will be confirmed in early 2012, according to a TfL spokesman. So that’s another decision slid back.
‘TPE’ electrification surprise
While the Coalition Government’s willingness to continue rail spending in difficult times, should be welcomed, we should not forget that the new schemes are being paid for through the ‘never-never’ as my mother used to call hire purchase.
The key words to look for in the Chancellor of the Exchequer’s autumn statement were ‘supported’ and ‘by July 2012’. For example, investment by Network Rail of £290m on ‘electrification of the TransPennine Express’ will be ‘supported’ by Government.
This means that Network Rail will borrow the money and add the completed scheme to its Regulatory Asset Base (RAB) where it will earn a return in future Control Periods. This return will be covered through the Direct Grant to Network Rail. Not for nothing is the RAB known as the ‘Network Rail credit card’.
‘By July 2012’ means that the scheme will be included in the HLOS for Control Period 5 which is to be published by then.
The Chancellor referred to the
According to the Statement work will start ‘next year’. This can only refer to scheme development through the Network Rail GRIP process. The Midland Main Line, was assumed was next up before
377 confusion
When it came to wheels, the #autumn Statement confirmed that the Government will ‘provide £80 million support for the Southern rail franchise’s procurement of 130 new carriages’. What does ‘support’ mean in this case?
My best guess is that it compensates Southern for the cost of leasing the 26 five car units to the end of current franchise. If we assume that (presumably) Bombardier could deliver the new vehicles by July 2013, then £80 million would cover the financial component of the lease rental over the remaining four years of the franchise.
And finally.
As it is the ‘Christmas’ issue , I have had some fun in the column offering New Year’s resolutions to some well known figures. There is also this quote for readers to ponder.
Who said this? ‘I think I can safely say that nobody understands Britain’s privatised railway. Do not keep asking yourself, if you can possibly avoid it, “but h
Now, obviously I have replaced the subject with ‘
You’ll find the answer in the magazine, which also poses a highly topical challenge.
Roger’s Blog.
Well, it’s been a lively last few weeks. My quizzing by the ORR Capability Review team kept me on my toes, while the Golden Spanner Awards were generally judged to have been better than ever – a celebration of achievement and success in these difficult times. My only ‘blooper’ as MC was to attribute Southern’s double spanner winning Class 171 fleet to Hastings rather than Selhurst, the home depot. Sorry chaps, and thanks for the gentle correction afterwards.
December began with the Railway Division of the IMechE’s seminar on the engineering response to McNulty. A super event, as we always expect from the RD, with my colleague Mr Walmsley rounding of the day with his alternative to McNulty.
At one point the Chairman asked for a show of hands from those who believed the railway’s subsidy could be reduced to £1 billion a year by 2019 – as proposed in the Initial Industry Plan. Not one of the 60-odd delegates raised their hands. It reminded me of the stage versions of Peter Pan where the audience has to clap if you believe in fairies.
Next day there was the Virgin Rail Group briefing at Euston, first an update on Pendolino with Virgin, Alstom and Angel and then a media scrum with Sir Richard and Sir Brian. At the first I got Alstom and Angel to confirm that they are talking to East Coast and First Great Western about Pendolino as a cheaper alternative to IEP.
Apropos of which, at the RD seminar I was talking to a chum about the cost differential between the two propositions – Pendolino £30,000 per vehicle per month versus £50,000 for IEP. At the mention of ‘£50,000’ a very senior person, who should know about these things, turned round from the row in front and said, with some feeling ‘and the rest’.
At the main event I got in the first question and asked whether Virgin was concerned that an imaginative bid would lose out to a minimum cost offer from one of the competing state railway backed bidders.
Sir Richard made the national press, with some typically forthright comments. According to Informed Sources these got Virgin into trouble with DfT when the civil servants opened their copies of the Times next morning, because a code of omerta is imposed on [pre-qualified franchise bidders.
From Euston it was a dash by Tube to the Rail Freight Group Christmas lunch. It was one of those journeys where a train rolled in as I reached the platform and even at Lancaster Gate the lift doors were just about to close as I arrived. So I was in time for the guest speaker Vince Cable.
So all that remains is to wish subscribers a peaceful Christmas and a happy New Year, although in the latter case, perhaps I should add ‘terms and conditions apply’.
Roger