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When upgrading the WCML costs as much per mile as TGV Mediteranee, and rising, something has to be wrong somewhere
Here's an interesting graph for you to study. It purports to show two things: first that British Rail left a legacy of under investment; second that privatisation is now pouring in the money.
I say ‘purports', not to cast aspersions on the quality of the figures, but because these interpretations do not always seem to coincide with my perceptions over the last 25 years. There is a strong whiff of self delusion in the air.
Take the Chief Executive of the Strategic Rail Authority who on the Radio 4 Today programme the other morning claimed that there had been ‘no investment for 40' years. ‘Please don't swear at the radio with your mouth full of Weetabix, dear', said Mrs F, ‘you know it's bad manners'.
Or here is the Railway Forum commenting on this graph in their latest publication, Building the railway of the future. ‘Much of the (UK Railway) system is in poor condition as a consequence of years of under-investment. With the exception of relatively high rates of expenditure in the late 50s and early 60s…and the recent largely private investment of £10bn the record is poor. In most years a maximum of only £1billlion was invested on an 11,000 mile network. This is totally inadequate'.
But, back to the graph. My arrival on the Modern Railways mast head is marked by that mini-peak in 1976 after the climb up from the low point of 1968.
In his Chairman's Report for 1976, Sir Peter Parker commented on the contrast between the service introduction of the world's fastest diesel trains and the ‘crumbling edge of quality' that was threatening parts of the network because of a shortage of investment. Figure 1, the graph of rail tonnages purchased by BR, and Figure 2, the installation date of the rail in service in 1999/2000,show the subsequent response to one aspect of the crumbling edge.
But PP's great achievement was to create a climate in which the Government was happy to appoint a career railwayman, and an LNER Traffic Apprentice at that, as his successor. And as the ‘legacy' graph shows, once Bob Reid's business led railway got under way, men like Green, Prideaux and Edmonds started spending serious money, spending fast before the Treasury could change its mind.
Since it takes time to convert orders into hardware, expenditure did not peak until 1993, by which time the recession had put pressure on BR's finances, hence the ‘maintenance holiday' on the rural routes. The process of privatisation then brought new investment to a halt.
But now, money is pouring in. According to the SRA, in 1999-2000 total investment in the railway was around 2.25bn, not far short of the peak of the 1955 Modernisation Plan.
At which point, my thumbs start to prick. If so much is being spent, why doesn't it seem to be achieving much. Or, coming from the other direction, why is Railtrack ‘spending' ever increasing sums on relatively straightforward projects?
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In particular, how on earth can the West Coast Route Modernisation cost over £6billion, nearer £7billion according to informed sources. And that figure excludes Virgin's new train fleet.
As I say, something wrong somewhere. But what? A yardstick was needed so I started researching the cost of other rail projects, back in BR's decades of under investment.
Table 1 is the result. I must emphasise that this is a typical Informed Sources quick and dirty survey which is meant to illustrate order of magnitude, not provide an exact comparison.
First of all I pulled out the folder of the first major event I attended during my earlier incarnation for Modern Railways – the ‘Euston Main Line Electrification' conference in October 1966.
In the BR press release the cost of the scheme was referred to as £160m and there is a pencilled circle round the number with ‘£175?' in the margin. My notes say that BR was quoting the cost at which the scheme had been approved six years earlier and £175m was the final figure.
So there is our yardstick. In modern money, the WCML electrification cost just under £2billion – equivalent to £5million a mile. For that we got a brand new railway, including traction and rolling stock: while the track was skimped when the money got tight, the overhead line equipment, signalling and traction and rolling stock has lasted remarkably well.
Ten years later, the Great Northern suburban electrification was commissioned. Like the WCML, I have only a ball-park figure, which includes the new trains. The cost per mile in modern money is £5.9million
Where the WCML electrification was really a ground up modernisation with lots of structures (369 bridges rebuilt), the East Coast Main Line electrification two decades later was, really, just that.
When authorised at £306million in 1983, the bulk of the infrastructure work involved electrifying an already well fettled permanent way and immunising existing signalling. Subsequently two remodelling/resignalling schemes were added at York and Newcastle .
To get the ECML scheme past the Department of Transport and the Treasury, BR had to pare the scheme to the bone. Even then it made only a 5% return rather than the expected 7%.
Project Director for the ECML electrification was Don Heath, who happily survived the Great Heck accident in the front coach of the IC225 with cuts and bruises. Don reckons that if he could have done the job to the specification he and his engineers first thought of, the cost would have been 25% higher.
Rounding up we get around £1.5million a mile for the infrastructure work. Remember that, by the time Don unleashed his team, BR had got electrification down to a fine art. Electrical clearances had come down and working practices allowed the posts and wires to go up while trains ran on the adjacent lines.
With Heathrow Express we come into modern times. It involved electrification, resignalling and some chunky civil engineering in only 12 miles. But, as you see, the cost, less trains this time, is recognisably in the same league as the earlier schemes at £5.6million/mile.
Now, this is where it gets interesting. The West Coast Route Modernisation was negotiated between Railtrack and the Office of Passenger Rail Franchising in 1995/96 when Railtrack was still in old-BR mode. The Core Investment Programme (CIP) would bring the infrastructure up to modern standards at a cost of £1.35bn (1996 money). The separate Passenger Upgrade 1 (PUG1) would upgrade track and power supplies for 125mile/h tilting trains for a further £150. Subsequently, Virgin and Railtrack agreed PUG2, including cab signalling, for 140mile/h running.
And guess what? The CIP and the two PUGs came out at £6million/mile.
So why the subsequent inflation? I suspect that the ‘old- BR' costings did not allow for the multiple operational and contractual interfaces in the fragmented railway, not to mention an increasingly restrictive safety regime which limits the work you can fit into already curtailed possessions.
With profit and loss at stake, all of those interfaces between businesses started to friction. And just as in an engine friction wastes energy in the form of heat, so in the money machine that is the privatised railway friction losses are measured in pounds.
And these losses can be considerable. Take the case of the Leeds remodelling and resignalling.
This was costed at around £100m. Given the high level of civils and construction this figure is in line with the Newcastle remodelling under the 1984 ECML electrification.
Railtrack approved the scheme at £168million and it has come in at £240million. And of that final figure, at least £50million represents compensation for TOCs.
That's a lot of friction at the interfaces on a relatively small scheme, but peanuts compared with the WCRM. The latest £500million increase, which took the cost to £6.3billion, included £300million in compensation payments – no doubt on top of even more ‘friction' in the project.
Nor have track maintenance costs turned out the way Railtrack expected. In the early days Railtrack directors bragged to the construction press that when the initial contracts with the Infrastructure Maintenance Companies were re-let cost reductions of 30% were a cinch.
But in his paper to the Railway Study Association in May (p x) Jim Cohen of Balfour Beatty showed how, rather than going down, track maintenance costs had increased.
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(for an unidentified route. 1997 = 100%)
| 197 | 1998 | 1999 | 2000 |
| 100 | 107 | 114 | 135 |
Source: Balfour Beatty SRA paper
Clearly, much of this increase is down to profit, pricing for risk and more friction at the business interface. Plus inefficiency on site where, as an informed source put it ‘we are constraining ourselves to death'.
So, at the latest count, and the cost may have officially topped £7billion by the time you read this, the WCRM is costing £15.75 million/mile, without trains. This is three times the ‘old BR' cost with an integrated railway.
It is also the same as the cost per mile of the recently opened TGV Mediterranee – 155 miles of brand new high speed electric railway with some inspiring civil engineering structures.
For the record I have added Britain 's new lines to the table. The Selby diversion, without electrification, cost £10million/mile, while Phase 1 of the Channel Tunnel Rail Link is costing four times that. The Link as a whole, with all that tunnelling into St Pancras is nearly £80million/mile.
As a rule of thumb, it looks as though current schemes are costing two to three times what BR would have paid for the same project. So in the spirit of 25 th anniversary egomania I declare a provisional Ford Factor of 2.5
Confirming my theory, Railtrack has started referring to ‘legacy projects' – those schemes committed at ‘old BR prices' and now grossly inflated. They include Thameslink 2000 which was costed at around £675million in modern money and features in the latest Network Management Statement at its £150million cancellation penalty.
While Railtrack would not give a current price for Thameslink 2000, applying the Ford Factor gives £1.7billion. Remember, you read it here first!
If my simple analysis is correct, it creates massive problems for the Strategic Rail Authority, the Office of the Rail Regulator, our new Transport Secretary and the City finance houses. In particular, the Government's Ten year transport plan, which I suspect was based on ‘old BR' price levels, is not going to buy anything like the number of schemes expected.