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Business Case

Is the EWR Central Section a Boondoggle? A Sanity Check on its Business Case.

Whatever you think of the Nobel prize winning economist Milton Friedman, he did make some really interesting points. For example, he proposed that spending should be categorized according to a 2 by 2 box as follows[1]:

You are the Spender On Whom SpentOn Whom Spent
Whose MoneyYouSomeone Else
Yours12
Someone else’s34
Milton Friedman’s Spending Categories 1-4

He then goes on to give many examples of how category 1 spending is often performed much more efficiently than the other categories especially category 4. Category 4 spending can often result in a Boondoggle. This is defined by Wikipedia as “a project that is considered a waste of both time and money, yet is often continued due to extraneous policy or political motivations.”

The East West Railway Central Section (EWR CS) is definitely category 4 spending. Let’s see what we might think of it, if it were category 1.

The estimated total cost of the EWR CS rose from £1.9Bn[2] for option A in the January 2019 consultation to £5.6Bn[3] for the chosen option E in January 2020. That’s an increase of 295%. Little or no explanation of this increase is given in the EWR Preferred Option Report and shame on me for not questioning it. But hey, it’s someone else’s money, right?

Well, the government either pays for it out of taxation in which case we all pay for it now, or adds to the peacetime record £2 trillion public debt and our children or grandchildren pay for it. Another option is that we have a period of high inflation in which case, well we all pay for it. There is no escape from the cost and, since south Cambridgeshire is quite a wealthy area, we can expect to pay more than pro-rata of the UK population.

How much do we pay each? Well, there are public works going on all over the UK, so let’s generously attribute this to the to the population of the Oxford Cambridge Arc which is currently 3.7 million people. Let’s further assume that only half of these live in the Bedford to Cambridge section. Taking an average of 2.5 people per household then we are looking at a bill of 2 x 2.5 x 5.6e9 / 3.7e6 = £7,568 per household. Ouch! If you had the choice, would your household spend this on the railway?

The railway is being optimised for long distance trips rather than lots of stations to support commuting. I have been in the Cambridge area since the 1980s and I have been to beautiful Oxford 3 times, once by bus, once on the way back from a holiday in Wales and once by car. Milton Keynes, well, I’ve been to Ikea, but I needed to take the car to bring back the furniture. Bedford, Bicester, St. Neots, Aylesbury etc, sorry never been there.

I have worked in the Cambridge Tech sector for decades, travelled all around the world, but latterly found that much of the collaboration was by digital means. Am I typical? Well let’s look at the 2014 Atkins report which was one of the early studies underlying the East West Railway. Under the section “evidence-based conclusions” we find: 

“Poor east-west orbital connectivity in is apparent in long journey times by both rail and car and is also reflected in the very low demand at present between locations on this arc;”

This is a curious statement. They found evidence for poor demand and assumed that if they built an expressway and an east west railway then demand would grow. Probably true, but would it grow enough to pay for the costs? Atkins are a large consulting company are they at all conflicted in making an assessment for the case for the East West Railway? Anyway, it looks like a high-risk assumption to me. But hey, it’s not my money, right?

Even a back of fag packet calculation shows there’s a problem.

From https://cambridgeshireinsight.org.uk/economy/ there are very roughly 250,000 people in Cambridgeshire and Peterborough in classes of occupation who may be considered to do a lot of business travel (managers, directors and senior officials, professional occupations, assoc. prof. and tech occupations, sales and customer services from Occupation Type table).

Very generously, guess that 10% of these people would travel to Oxford or Milton Keynes etc once a month on average. This equates to a total of 25,000 trips per month (each way). 

Number of trains per month at say 4 trains an hour for 8 hours each way = 4x8x30 = 960, say 1,000 trains per month

Number of business people per train = 25.

OK there are some people travelling for leisure and other reasons as well and it doesn’t allow for potential growth over 100 years, but given that an 8-car train can take about 400 people and even if the demand calculations are out by a factor of 2, there is still a problem for such a line. 

At the very least the EWR CS should be delayed until the demand is properly estimated and publicised in a more stable economic climate (post pandemic and post Brexit).

Another piece of evidence can be found in this diagram in the National Infrastructure Commission report on the Oxford Cambridge Arc.

Figure 9 of NIC Report Partnering for Prosperity

This diagram shows the strong demand for commuting around all the cities in the Arc. It does not demonstrate demand for travel from end to end. Meeting commuter demand is linked to supporting housing growth which is an objective of the NIC report for the development of the Arc. 

There are cheaper ways to meet commuter demand than a heavy railway such as the EWR CS. What about busways, trams and a local light railway such as the proposed Cambridge Metro?

So that you can see the disconnect in thinking here, let’s have a look at what the EWR Co.’s route option report says about the business case for the Option E decision.

“1.19  EWR Co’s analysis has concluded that when looking across these five key criteria Route E is most likely to deliver against the strategic objectives for EWR and provide the best overall value for money from government’s investment in the railway.”

There is an imagination failure. Where is the comparison with the counterfactual, do nothing assumption? Where is the comparison with other solutions to meet the need to support commuters/housing development?

Given the current (lack of) evidence presented for the EWR CS by government, it looks like a Boondoggle to me and I’d rather my £7,568 was spent on something else.


[1] Milton Friedman “Free to Choose” 1980, p.146

[2] EWR Bedford to Cambridge Route Option Consultation Technical Report January 2019 §9.1, Table 3, p.40

[3] EWR Bedford to Cambridge Preferred Route Option Report January 2020  §15.13, Table 15.4, p.100

Categories
Business Case

Does the EWR Co. Option E Decision meet its Own Assessment Criteria?

The EWR Co. assessment is based on these 4 principles taken from page 7 of their document Connecting Communities: The Preferred Route Option between Bedford and Cambridge Executive Summary:

“• Creating connections: not just laying down steel and concrete, we are focused on designing a railway that is most likely to create connections between local communities that will support the economic growth and prosperity in the area 

• Rooted in community: at a very early stage in the design of the route between Bedford and Cambridge, we consulted local communities, asking for comments and points of view on the new route. The responses were central to the way we made our decision, and means the Preferred Route Option is fundamentally grounded in feedback from the community, stakeholders and local authorities.

• Environment at the forefront: we developed route options with environmental considerations at the forefront. Rather than being an after-thought, we used environmental data as a fundamental part of our decision-making process. Our communities can have confidence that the Preferred Route Option has been selected to support ambitions for East West Rail to increase biodiversity and acting in a way which respects important environmental and heritage sites in the local area 

• Cutting-edge techniques to develop cost estimates: taxpayers must have confidence in our ability to manage the financial side of the project and deliver value for money. To reduce the risk of cost over-runs later in the project, we used cutting edge techniques and new digital technology to produce our indicative cost estimates. Whilst there remains significant uncertainty in these cost estimates, these innovative techniques will help us to continue refining and improving our estimates, supporting better decision making now, and pointing to opportunities for potential cost savings in the future”

Three  of the five options assessed by EWR Co. went through Bassingbourn and were challenged by CBRR (Cambridge Bedford Rail Road) and Cambourne was chosen as an intermediate stop instead of Bassingbourn. We now wish to analyse that decision using the same 4 principles and the Treasury target for SCBA (Social Cost Benefit Analysis).   

We now wish to analysis the Option E based on these 5 principles :-

  • Creating Connections:
    • Passengers 
      • The volume of traffic between Cambridge and Bedford has not been proven
      • The local movements are no doubt demonstrable given local traffic issues in Cambridge and local stops (with or without passing points) are not in the initial build. So we need an analysis of a phase 2 – the inclusion of local stops. But in that case a light rail solution such as the Cambridge Autonomous Metro will be more cost effective.
      • Cambridge East (Cambridge Airport and Fulbourn) is not included.
    • Freight
      • The existing line from Cambridge onwards to Felixstowe is old, single track and has many level crossings.
      • Freight levels have not been identified in the reports to date despite planned increases to Felixstowe docks
      • Freight would have to pass through Cambridge to Ely under current published plans, probably at night.
    • Technologies
      • The proposed route passes through rural countryside – not past science parks 
      • The railway line does not connect with the expansion of Cambridge University in North West Cambridge where it has built both academic facilities and accommodation facilities 
      • The trains are planning to be diesel – hardly the latest technology.

The result is that the connections have been attempted but they are not the most efficient and neither maximise connectivity nor do they maximise or support local prosperity growth.

  • Rooted in the Community:
    • The local plan for the 3 boroughs of South Cambridgeshire, Cambridge City and East Cambridgeshire have not been followed despite an explicit plea to do so in the South Cambs consultation response and as evidenced by EWRCo.’s proposal for a station near Caxton to serve Cambourne.
    • The weightings of the various stakeholders have not been revealed
    • We have been told that certain villages would be in favour of a Northern Route into Cambridge – these villages/communities in North Cambridge were not, as far as we are aware, consulted. 
    • It is inevitable that rural communities in Cambridgeshire will be divided by the railway line –  this is unnecessary in a county that is planning to develop new villages and towns; these new communities could be developed around stopping points on the new line and be less divisive 

The result is that the decision has not been rooted in the Community and will create more disruption than is necessary.

  • Environment at the Forefront:
    • The area of Option E has been left as a green area between Cambridge and the gradual expansion of London northwards. This area that has been carefully preserved, will now be divided by putting the proposed line in the area currently identified.
    • The environment of the rural villages will be changed forever whatever the mitigation.
    • The animal life will be disturbed more than is necessary
    • A railway line that follows transport corridors would minimise the impact – this has not been attempted
    • Freight trains will go through the middle of Cambridge and possibly all night

The result is a route designed to create maximum environmental impact to rural and town communities.

  • Cutting Edge Techniques:
    • The new railway line will last 150 years; planning should work on this basis. 
    • There is no assessment of the impact of local stations that we assume would come in phase 2 with local stops at intermediate stations, nor an assessment of its impact on light rail solutions such as CAM.
    • The plan should allow for the most direct route for freight along planned transport corridors – that has been achieved in part.  But where is the assessment of completing the A428/A14 transport corridor?
    • Modern techniques will allow us to follow the corridor and hence minimise community, environmental and commercial dislocations 

To date cutting edge techniques have not been used to predict the cost benefits ratios; wider community consultation should be undertaken now.

  • Social Cost Benefit Analysis (SCBA):

Because quantitative assessment of land use changes is not included in the justification of the current decision between route options A to E or indeed routes to the north of Cambridge, the EWR Co. decision  is not soundly made based on the data presented in their Option Report.

We believe that the current justification under SCBA depends on increase in property values; however, as the basis is unknown, it is not possible to compare the decision route with the alternatives. 

We strongly believe that alignment with the Local Plan(s) will create greater value in a shorter time frame. We are not alone in thinking this, a key stakeholder, South Cambridgeshire district council said the following in their consultation response:

Uncertainty regarding growth implications of consultation.
Further to the above however, we note in the strategic objectives that the most significant relates to supporting growth, and that the business case for the railway is predicated upon such growth. We note from the consultation and other evidence that there is very significant uncertainty as to the scale of growth envisaged around potential station locations. Evidence sources and modelling assumptions referenced vary greatly, and the only certainty seems to be that the implied growth above and beyond current Local Plan commitments would be substantial.”

In addition, over a 150 year period, that should be used for analysis of a project of this sort, the impact of ongoing benefits will outweigh any additional cost of putting the proposed new railway line in the right place to minimise operating costs over its whole life and optimise benefits to the community.  

Summary

We call for a much closer co-ordination between EWR Co, the district and county councils to come up with a more complete business case. This will either prove the existing case or it may reach very different conclusions about the best route. Perhaps there is a role for a senior politician to co-ordinate the views of the parties and reach a considered opinion based on all the facts and report publicly as part of the consultation.