Northern Rail conference
Speech discussing rail advancements, spending and future plans.
Thank you Anton
It’s good to be back in Leeds to take part in Northern Rail’s conference today (20 October 2011).
I’d like to congratulate their parent group, Abellio, on winning the Greater Anglia short franchise today (20 October 2011).
If they are half as successful with this new contract as they have been with Northern, I’m sure passengers in East Anglia will be in for a really high quality service.
And of course it’s been all change at the Department for Transport over the last week and this is a welcome opportunity to pass on the good wishes of the new Secretary of State for Transport.
Like her predecessor, Justine Greening fully recognises the crucial role rail plays in our economy and the vital importance of improving rail infrastructure in the north of England.
And so today (20 October 2011) I propose to take you through some of our key goals and ambitions for rail in the north.
Context: three years of change
It’s 3 years since Northern hosted its first Rail Summit in Manchester.
Those of you who were at the inaugural summit may remember the theme that day was the role of rail in delivering growth - a well chosen theme, considering the crisis in our economy in 2008.
We knew then that the road to recovery would be long and tough.
We’re still paying the price for Gordon Brown’s reckless decision to borrow excessively during the boom years leaving the cupboard absolutely bare when the bad times arrived.
Let’s not forget that it was only May last year when the coalition inherited the largest deficit in our nation’s peacetime history.
And across government, we are taking the tough action needed to tackle the deficit, support growth, and cut carbon.
With tight control on spending, combined with a robust plan to stimulate enterprise and jobs, we’re taking the right route - the only credible route - to a brighter future.
Every department and every industry has a contribution to make, including the rail sector.
For nearly 200 years, the railway has been bringing prosperity to the north.
Connecting people with the workplace, and goods with the marketplace.
Providing the links on which businesses rely.
And we believe that rail can play a vital role in spurring growth in modern Britain.
That’s why the coalition is today overseeing the biggest rail upgrade programme since the Victorian era.
For decades, British governments have responded to the need to rein in spending by reducing capital investment - typically in large scale infrastructure schemes.
Certainly not because it makes economic sense.
Far from it.
The truth is that capital projects traditionally lose out during times of fiscal retrenchment because cutting other areas of public spending is more politically difficult.
Today, though, our priorities are clear.
We’ll do what’s best for our economy, and what’s best for our country.
Despite severe pressure on budgets, we have made a strategic choice to increase capital investment in those parts of the infrastructure that best deliver sustainable economic growth - including rail.
That is why rail was allocated £18 billion of funding in last year’s ‘Spending review’.
That has come with a downside - an RPI +3% increase in fares for 3 years to help fund the vital improvements we need.
But even taking that into account, rail came out of the spending review far more strongly than anyone expected.
And I think the outgoing Secretary of State deserved all the many accolades he received for his part in securing that result in the CSR.
Rail investment in the north
There are a number of reasons why the Chancellor chose to prioritise investment in rail.
Not only can rail deliver growth. It can deliver more balanced sustainable economic growth across the country, helping to tackle the prosperity gap that continues to divide north and south.
So £300 million will be invested in rail electrification in the north west over the next 6 years, upgrading crucial routes between Manchester, Liverpool, and Wigan.
This will deliver significant environmental, economic and passenger benefits.
It will also allow these lines to benefit from the rolling stock cascade triggered by the Thameslink programme and allow existing diesel trains to be used on other routes.
Thirty years after it was first proposed, the Ordsall Chord has finally got the go ahead.
Phase one of the Northern Hub programme, the Ordsall Chord project will tackle a major bottleneck in the network, and enable faster and much more frequent services to run across the north of England - including between Liverpool, Manchester, Leeds, Newcastle, and Hull.
Real investment in rail in the north.
And real support for the northern economy.
We also recognise the benefits that the remainder of the Northern Hub programme could offer.
We’ll be looking very seriously at the whole proposal in the run up to next July’s HLOS 2 statement.
But there’s no doubt that the package as a whole is an expensive one.
Affordability issues will need careful consideration, and it will be necessary to make a judgment on the different components individually.
This is unlikely to be an ‘all-or-nothing’ decision.
Alongside measures to improve the infrastructure, we’re also modernising our rolling stock.
The next generation of Intercity Express trains is due to be built by Hitachi at a new assembly plant in county Durham… creating at least 500 jobs directly, plus thousands more in the supply chain.
In total, we’re investing in 2,700 new carriages across the rail network to ease overcrowding on many routes.
Right here in Leeds commuters are set to benefit from an extra 2,000 seats a day.
Now I know that talking about rolling stock in the north of England can be risky if you’re the rail minister.
I know that many passengers would like to see the Pacers heading into retirement.
But you here in this room will know that building a business case for new rolling stock is always going to be difficult when fares in much of the north of England lag so very far behind the rest of the country.
And let’s not forget the growing importance of light rail in the north.
We are investing up to £350 million over the next 10 years to upgrade the Tyne and Wear metro… the largest renewal project since the metro was built more than 30 years ago.
And the Metrolink extension is going ahead in Manchester.
The network was built under a conservative government - and this conservative-led government continues to recognise the great benefits trams and light rail can bring.
The Tram Train Project between Sheffield and Rotherham is also progressing.
And we are currently considering proposals to develop the trolleybus scheme here in Leeds.
High speed
Despite our very significant commitment to updating and improving the existing railway, we also recognise its inherent constraints.
It is a 19th century network - valiantly struggling to support a 21st century economy.
It simply will not be able to absorb the growth in demand that we expect to see over the next few decades.
That’s why in 2008, in opposition, I championed high speed rail - at a time when the Labour government had dismissed it as an option and ruled it out of their 30 year strategy for the railways.
I said then and I continue to believe that this is a project which can transform the economic and social geography of Britain.
Contrary to the allegations made by its detractors, HS2 is not, and never has been, about shaving a few minutes off the journey time to Birmingham.
It is about meeting the long term transport needs of our economy.
It is about delivering the intercity transport links that are absolutely crucial for future economic success
I firmly believe that high speed rail will do more to tackle the economic imbalance between the north and south than any policy tried by long the succession of governments that have grappled with this seemingly intractable problem.
Although we are clear that the scheme will deliver benefits to the whole country, it is the north that stands to get most from HS2 - in the same way regional cities around Europe have flourished when connected to high speed rail.
High speed would not only transform journey times, reliability, and choice on our railway.
It would also free up huge amounts of capacity on existing lines, providing space for more commuter, regional and freight services on the West Coast, East Coast and Midland Main lines.
So after one of the largest and most complex public consultations in government history, we are currently analysing thousands of responses from passengers, local communities, environmental groups, businesses, local authorities, and many others.
And we will publish our response towards the end of the year.
Value for money/devolution
The improvements I’ve outlined this morning will deliver more capacity, better connectivity, and better services for rail passengers in the north.
But on their own they’re not enough to meet the challenges faced by all of us who care about the UK’s railways.
I’m sure you know the issue I’m coming to.
That is, of course, value for money.
Sir Roy McNulty’s study set out the scale of the challenge - with his conclusion that Britain’s rail network is now up to 40% more expensive per passenger mile than those of our European competitors.
This has contributed to increasing public concern about the level of rail fares in many parts of the country, particularly the south east.
It has also led to some of the highest levels of public subsidy in Europe.
This high-cost status quo is neither acceptable nor sustainable.
So we are carefully considering carefully the detailed recommendations that Sir Roy produced.
That includes assessing the scope there is to devolve more responsibility for commissioning local and regional services from the centre to local bodies.
As we do in so many areas, this government recognises the benefits localised decision-making can bring to transport. Strengthening accountability to local communities and passengers, deploying local knowledge and understanding of the consequences of different choices.
The success of community rail gives us a hint of the benefits local input and commitment can bring.
The refranchising process for Northern and TPE will provide a real opportunity to test the case for devolving more decisions to local authorities and PTEs.
Discussions are ongoing between the DfT and the PTEs, with a number of options on the table.
There are many issues to resolve, not least of which is whether to devolve right down to a very local area or try to create a consortia of local authorities to input into decisions across more of the Northern franchise network.
But as well as a more localist approach, we also want a more transparent one.
Providing the public with more visibility over where rail subsidy is being spent won’t be without controversy - but it is an important part of our strategy for reducing costs.
In the department’s business plan, we have made a firm commitment to greater transparency.
We have already started to publish information about where subsidy is allocated, on a franchise by franchise basis.
This includes direct TOC funding from the government and an estimate of how much of Network Rail’s grant can be attributed to the infrastructure used by each franchise.
And we’re moving towards breaking down performance data by line rather than just the overall figures for the franchise.
But we want to go further.
And in due course we want passengers to know the real cost of the services they are using, and how much their fares are contributing to them.
Another key area for reform is franchising.
We pressed ahead with this from the early days of the coalition.
The coalition agreement commits us to longer more flexible franchises and a departure from the excessive micro-management that characterised the approach of the previous government.
By introducing longer, less prescriptive franchises, we want to give the industry more freedom to innovate, and a stronger incentive to invest in better services and address passenger needs.
For example, our draft specification for the West Coast franchise published in the summer represents a significantly more flexible approach than the rigid timetable and service specifications of the past.
The draft ITT set out a framework which continued to mandate key elements of service, such as minimum numbers of station stops per week and per day but give the winning bidder greater scope to organise services in a more commercial way and to respond to peaks and troughs of passenger demand.
We’re replacing the ‘cap and collar’ revenue support system with a GDP risk-sharing arrangement.
This will continue to offer train operators some protection from the big macro-economic risks that it’s expensive for them to take on; but it avoids some of the perversities of the cap and collar regime.
We will build on these changes in future franchise competitions.
In many ways, West Coast is a staging post in a progressive reform we will roll out as our major programme of refranchising moves forward.
And of course in the future we propose to include in franchises the sort of aligned incentives that Sir Roy McNulty identified as a key way to address the high unit cost of the railways.
Much work remains to be done but Network Rail is already devolving its operations to give route managers more autonomy.
And work is actively underway between Network Rail and operators such as Scotrail and SWT to develop the alliances that could play an important part of delivering the strong shared incentives needed to get costs down.
And perhaps most difficult of all, we’ll be reviewing fares regulation to see if we can eliminate some of the many anomalies it contains, smooth out the most extreme cliff edges, and better incentivise off-peak travel.
And let me make it absolutely clear that as part of this process I will be expecting the rail industry to step up to the plate to ensure that they deliver a more user-friendly system for passengers.
A modern fares system that helps fill up empty trains and spends less on transport thin air is bound to involve some complexity.
So an important component of a successful reform should be aimed at ensuring that when passengers buy tickets, they can navigate the choices available and find the best ticket for their journey without too much uncertainty and too much hassle.
Conclusion
In conclusion, ladies and gentlemen, I genuinely believe that the measures I have outlined today represent a serious and credible programme to generate growth and strengthen the competitiveness of the north of England by improving its transport infrastructure.
I think they give us the chance to deliver a real shot in the arm for the northern economy.
A chance to deliver the improved capacity and connections that cities and communities across the north need to grow and prosper.
None of us should underestimate the scale of the task on which we have embarked.
Delivering the change we need will require a huge effort from both industry and government.
I am confident that an industry that has achieved so much in recent years - an industry that has reversed a long term trend of decline - will be equal the challenge.
Thank you.