UK Rail Finances, EWR and Northern Powerhouse Rail

In addition to the financial black hole that is HS2, Jeremy Hunt mentioned two other rail schemes in his autumn budget. EWR and Northern Powerhouse Rail (NPR). In this post I want to make a few comparisons between these schemes to see what it tells us about EWR.

Passenger numbers for these intercity railways will be driven by the size of the cities that they serve. Let’s compare the 6 largest cities on the NPR (Leeds, Sheffield, Manchester, Liverpool, Newcastle and Hull) with the 6 largest on the EWR (MK, Bedford, Oxford, Cambridge, Bletchley). Population figures are taken where possible from the 2021 census.

I draw two conclusions from this a) passenger demand on EWR will be around three times lower than on NPR b) spending per head of population is three times higher for EWR than for NPR. We should also consider how well developed the public transport is around these stations. I suspect NPR wins there as well because the NPR cities are better developed with regard to local transport, and the railway has been there a long time.

I don’t recall any specific Conservative manifesto commitment to restore EWR in 2019, but there was something about levelling up in the north of England, wasn’t there? And no, I don’t believe in Cambridge exceptionalism despite it being my hometown.

If these schemes were going to be privately financed or profitable, that would be one thing, but their capital costs are huge, and they will suffer a loss for every year that they operate. All funded by the taxpayer or national debt.

The government should publish a business case for EWR and allow public scrutiny. Currently it looks like a few mandarins in the treasury believing vague promises in smoke filled rooms about wider benefits and economic growth. We have no objective or publicly understood measure to compare one rail scheme with another and the result will be be that truly awful white elephants get funded.

The Office of Road and Rail recently published their UK Rail finances for the year to 2022. They are still awful.

Year to March	Costs	Income: Passenger Fares	Income: Government Subsidy	Income: Other
2020	20.2	11.6	6.5	2.0
2021	21.0	2.5	16.9	1.3
2022	22.8	6.5	13.3	1.5

The 2022 figures were clearly still affected by COVID 19 even though the final lockdowns started to be lifted at the start of the period on the 29^th of March 2021. It’s also worth noting that the rail subsidy had been running at above £5Bn for 15 years before the year to March 2020.

The average UK railway ran at a 33% loss before COVID, it’s 58% with the latest figures and despite significant increases in rail fares this does not seem to be improving. EWR will be a below average railway. Passenger numbers will be lower than average because of the small cities which it connects. It also needs to recoup the capital costs.

There is very little hard evidence that EWR will trigger wider benefits and economic growth. Surely that would require people to be using it in significant numbers. Please, EWRCo., show us the passenger forecasts and their justification. Also tell us why we need an intercity railway to solve local commute problems that are being solved more cheaply and flexibly with busways. How about some light rail? We could have funded that with just the design costs of CS3.

Remember that EWR was part of the OxCam Arc. There was a big consultation about the spatial plan for the OxCam Arc in 2021.  That’s important because it could help the first and last mile problem from hitting EWR passenger numbers more than it needs to. After a recent FOI request, the government (DLUHC) refused to publish the results of the consultation, because they are planning to do so at some unspecified time in the future. Without a spatial plan the first and last mile issue will kill the EWR passenger demand. Beth West of EWRCo. said recently that a spatial plan would be good, but they could be waiting a long time for that and we should just do the best we can without it. Is that an acceptable approach to spending billions of taxpayers’ money? (No).

We have asked EWRCo. about first and last mile repeatedly. EWR Co.’s Will Gallagher said he was talking to England’s Economic Heartland about it. At their recent EEH conference, EEH’s Naomi Green said that first and last mile was a hard problem and that perhaps the private sector could do something about it. Good grief.

Meanwhile it has been announced that EWR have appointed a consortium of WSP and Mott Macdonald to be their technical partners. If this is the main development partner contract, then information on the Department for Transport website indicates that the contract value is £676.5million. They seem to be full steam ahead on their part of the “decide, announce, defend” path. Don’t worry about the local people. Or logic for that matter.

Let’s have another look at those capital costs.

Capital Costs

You may have noticed that railway construction contracts tend to increase in cost over time. This is not all down to bad estimation. Part of it is around the careful control of project scope. The idea is to get to the smallest cost possible, get it signed off and then add to it after that.

Consider the following for EWR:

Electrification is excluded the current cost estimates based on a continually changing story about hydrogen trains or more recently battery-operated trains, but full electrification is not excluded as a possibility. Importantly, there is no line item in the capital budget for any means of getting to an operationally net zero railway. The cost of electrification of the comparable Transpennine Rail Upgrade (TRU) grew from £2.9bn to £11bn billion. Defenders of rail say there were a lot of tunnels on the TRU. I say let’s see a conservative estimate included in the costs.

Freight. The current commitment is to maintain the existing freight traffic. That’s a few trains per week on the West Anglia Mainline, perhaps something on the Midlands Mainline through Bedford, but certainly nothing like the 50 freight trains per day that Network Rail would like to see running on the whole EWR. That means freight loops and a full freight specification for the railway. EWR Co.’s Beth West says discussions continue about that. And I predict nothing will be put in the cost estimates until it is signed off. Maybe you are getting the pattern now?

Mitigations. EWR Co. have been talking about reducing the height of viaducts and embankments, going under roads instead of over them. I asked them for a cost estimate of all these mitigations. They don’t have an estimate. So, guess what? There is nothing in the capital budget for it. Will mitigations get implemented. Who knows?

Grade Separated Junction at Great Shelford. This is the busiest point on the currently proposed EWR route into Cambridge. There is traffic from King’s Cross, Liverpool Street, a bit of freight and EWR. There is no station to hold trains to make the timing fit. The Department for Transport revealed an additional £499.6m cost for 4-tracking into Cambridge even though the staff at the recent Haslingfield drop in event said they did not know about it. After a few months EWRCo. did respond to a question which confirmed that this huge sum of money did not include the Grade Separated Junction. Something else to look forwards to in future estimates then.

Mick Lynch of the RMT

I am going to say something about the recent rail strikes, just because they illustrate how far from economic reality the UK rail system really is. Mick Lynch argued today that pay rises for train drivers (who currently get paid £60,000 a year or more) would not contribute to inflation. That’s because they would not necessarily be passed on to passenger fares. He suggests that the money could be taken from the guaranteed profits of the private rail operators. There will come a point where these rail operators will hand back to their franchises to the government. This has already happened. Meanwhile the government can complain about how the rail industry needs to become more efficient. No one takes responsibility for the broken system that we have, and yet the government wants to add more railways which will perform even worse than the existing ones. And to be fair, in the main, the opposition parties seem to support them.

But Aren’t Railways Green?

You might be thinking that we should build railways anyway because they are greener than all those fossil-fuelled cars.  Consider the following:

By the time EWR CS3 starts operation in the 2030s, the only available new cars to buy will be electric and the costs will come down. Yes, there are enough raw materials to make the batteries (consider Sulphur and Sodium batteries).

The CO₂ emissions from the construction of the railway will be significant and operationally, trains running at less than capacity are not efficient. We only see a benefit if people prefer to give up their cars and take the train. Perhaps people should be forced to do this? That depends how authoritarian you feel the government should be.

The economic growth used to justify the railway comes with large scale housing development on green field sites near new stations. That creates huge amounts of CO₂.