Impact of Government Budget Changes

[Ken H]

Probably this
https://www.ft.com/content/b804b37c-52c2-41b7-801a-eece63de2bb3

Realistically, it is such a big project and cost to the Treasury that it will be in their sights for budget savings, not least if they see further costs arising.

Think the attitude will be 'you have £x million. Descope the project to make it fit'

 

[Trainbike46]

If government spend gets cut in UK then the barnet formula will mean a cut in money sent to the devolved governments. So cuts in devolved areas too.

While this is true, the devolved governments have a lot of options to reduce spending elsewhere or to raise extra income, so the impacts are likely going to be less, and less directly involve thoughtless cutting than in England

But you can make cuts with low impact. East coast cut their services to Bradford FS, Skipton & Harrogate. Maybe Hull too. Less to Aberdeen unless the Scottish government cough up.
Northern cut some leeds - Morecambe/Carlisle services back to skipton.
In winter the Windermere branch is a 2 car shuttle. Maybe Barrow too.
Sad but maybe necessary.

LNER now exceeds pre-covid passenger numbers, and was returning a premium to treasury before covid. Revenue is likely still down a bit, but if they still need a subsidy it will be tiny compared to other operators and per passenger, so LNER seems like an unlikely candidate for cost-cutting

 

[stuu]

Probably this
https://www.ft.com/content/b804b37c-52c2-41b7-801a-eece63de2bb3

Realistically, it is such a big project and cost to the Treasury that it will be in their sights for budget savings, not least if they see further costs arising.

Thanks... that does say there is a 50% chance of them needing more than the contingency, which is a little less dramatic. But clearly costs are going the wrong way and aren't going to get better imminently. What could they realistically cut back on at this stage on Phase 1? Most of it is too far along to make much worthwhile savings on I would have thought

 

[zwk500]

Think the attitude will be 'you have £x million. Descope the project to make it fit'

The problem with HS2 is there isn't a lot you can descope without effectively cancelling the project. Dropping the speed to 300kph wouldn't save that much (if it's not there already) and the stations themselves are relatively small proportion of the overall budget. The only big saving you could make would be to end the line short of the urban areas, but then the whole point of HS2 is to ease capacity on the classic lines to major urban areas, so that doesn't make any sense either.

 

[JonathanH]

LNER now exceeds pre-covid passenger numbers, and was returning a premium to treasury before covid. Revenue is likely still down a bit, but if they still need a subsidy it will be tiny compared to other operators and per passenger, so LNER seems like an unlikely candidate for cost-cutting

On the contrary, the rise in passenger numbers is a good opportunity for price gouging. A small drop in demand might allow the 91+Mk4 sets to be retired which would reduce costs. Both would increase the return to the Treasury.

 

[Bletchleyite]

On the contrary, the rise in passenger numbers is a good opportunity for price gouging. A small drop in demand might allow the 91+Mk4 sets to be retired which would reduce costs. Both would increase the return to the Treasury.

An obvious one would be that Avanti never returns to 3tph, sticking at 2 instead (recast to half hourly) and that instead of a second Avanti Liverpool the LNR Crewe is extended to Liverpool.

 

[LNW-GW Joint]

The problem with HS2 is there isn't a lot you can descope without effectively cancelling the project. Dropping the speed to 300kph wouldn't save that much (if it's not there already) and the stations themselves are relatively small proportion of the overall budget. The only big saving you could make would be to end the line short of the urban areas, but then the whole point of HS2 is to ease capacity on the classic lines to major urban areas, so that doesn't make any sense either.

HS2 Phase 1 construction is still at the early stages, and is both labour- and energy-intensive (ie subject to maximum inflation pressure).
I think I saw that 28,000 jobs were now dependent on HS2 contracts.
Just as the Channel Tunnel had to be completed at whatever the contractors' cost, HS2 is now in the same state - once started you have to keep feeding the monster.
The railway contracts have not been let yet (track, signalling, OHLE) - maybe there is some descoping potential there.
Rolling stock is also uncontracted (although there is a preferred supplier).

 

[zwk500]

HS2 Phase 1 construction is still at the early stages, and is both labour- and energy-intensive (ie subject to maximum inflation pressure).
I think I saw that 28,000 jobs were now dependent on HS1 contracts.
Just as the Channel Tunnel had to be completed at whatever the contractors' cost, HS2 is now in the same state - once started you have to keep feeding the monster.

Indeed, this was my point

The railway contracts have not been let yet (track, signalling, OHLE) - maybe there is some descoping potential there.

Is there that much scope? The infrastructure needs to be capable of supporting the speeds required to run the services. I don't see dropping from 360kph to 300kph saving you a vast amount of cash. The savings in dropping the spec would have been in allowing an alignment that could avoid the most expensive engineering features. But that would have mean dropping from 300+kph to 200-250kph. That ship has sailed quite far out of the harbour now.

Rolling stock is also uncontracted (although there is a preferred supplier).

On the global market is there going to be a world of difference between the price of one 350kph train and another, especially when they have the design modifications for classic-compatible running factored in?

 

[Trainbike46]

Indeed, this was my point

Is there that much scope? The infrastructure needs to be capable of supporting the speeds required to run the services. I don't see dropping from 360kph to 300kph saving you a vast amount of cash. The savings in dropping the spec would have been in allowing an alignment that could avoid the most expensive engineering features. But that would have mean dropping from 300+kph to 200-250kph. That ship has sailed quite far out of the harbour now.

On the global market is there going to be a world of difference between the price of one 350kph train and another, especially when they have the design modifications for classic-compatible running factored in?

There might be, but then again they undoubtedly considered price quite strongly when selecting the preferred bidder

 

[stuu]

The railway contracts have not been let yet (track, signalling, OHLE) - maybe there is some descoping potential there.

The contract for the modular slab has been awarded, the factory is going through planning. The contract is "only" worth £260m, which is not much in government spending terms.

 

[zwk500]

The contract for the modular slab has been awarded, the factory is going through planning. The contract is "only" worth £260m, which is not much in government spending terms.

Especially in a project costing somewhere around £100bn. That contract is worth 0.26% of the overall budget.

 

[LNW-GW Joint]

Just a footnote that the recently ousted SoS for Transport, Grant Shapps, is now Home Secretary, the 2nd or possibly 3rd highest post in the land.
One hopes he doesn't bring his impromptu home video skills to the job.

 

[NoRoute]

Thanks... that does say there is a 50% chance of them needing more than the contingency, which is a little less dramatic. But clearly costs are going the wrong way and aren't going to get better imminently. What could they realistically cut back on at this stage on Phase 1? Most of it is too far along to make much worthwhile savings on I would have thought

Go back to when HS2 was first being promoted and the cost was being pitched at around £30 to £40 Billion, which got nudged up to £50 Billion with the rolling stock, for the whole thing all the way to the North. Now that sum will struggle to get it to Birmingham, the total cost of getting to the North is unknown but likely double that or more. So over the project's life to date, the increase in cost has been huge.

Lord Adonis defends HS2 following claims it is an 'expensive mistake'

Adonis remains committed to proposals for train connecting London to the north following criticism from Lord Mandelson

www.theguardian.com

 

[zwk500]

What's the rate of inflation in the construction industry over that time period, the rise in the value of the required land, Nd does the quoted price in that article.include all the tunneling put in on the final route to appease locals?

 

[JonathanH]

What's the rate of inflation in the construction industry over that time period, the rise in the value of the required land,

While I am not against HS2, we really ought to price infrastructure projects with much more contingency, recognising that construction inflation will run at 25% a year, contractors will price their work reflecting scarcity of their skills and generally there will be no optimism bias that work can be prepared to an ideal budget.

 

[zwk500]

While I am not against HS2, we really ought to price infrastructure projects with much more contingency, recognising that construction inflation will run at 25% a year, contractors will price their work reflecting scarcity of their skills and generally there will be no optimism bias that work can be prepared to an ideal budget.

Good luck unpicking the parts of the political process that will allow that to happen! (You are right though)

 

[Bald Rick]

LNER now exceeds pre-covid passenger numbers, and was returning a premium to treasury before covid. Revenue is likely still down a bit, but if they still need a subsidy it will be tiny compared to other operators and per passenger, so LNER seems like an unlikely candidate for cost-cutting

1) LNER costs are much higher now than Pre Covid.
2) There’s essentially 2 parts of the LNER operation that make money: London - Edinburgh and London - Leeds. Some big savings to be had elsewhere. Not very popular, obviously.

 

[Trainbike46]

1) LNER costs are much higher now than Pre Covid.
2) There’s essentially 2 parts of the LNER operation that make money: London - Edinburgh and London - Leeds. Some big savings to be had elsewhere. Not very popular, obviously.

It's good to have someone with more in-depth knowledge reply. Do you happen to know why LNER's costs are much higher? Is it just increases in staff costs and in electricity and diesel? or is something else going on?

 

[Bald Rick]

It's good to have someone with more in-depth knowledge reply. Do you happen to know why LNER's costs are much higher? Is it just increases in staff costs and in electricity and diesel? or is something else going on?

More staff, higher energy prices, and a full fleet of expensive trains being leased (and a bigger fleet)

 

[bramling]

More staff, higher energy prices, and a full fleet of expensive trains being leased (and a bigger fleet)

On the first point, presumably this is attributed to additional staff taken on for the proposed timetable changes?

 

[Bald Rick]

On the first point, presumably this is attributed to additional staff taken on for the proposed timetable changes?

yep

 

[yorksrob]

Ah those leasing costs again !

 

[Trainbike46]

More staff, higher energy prices, and a full fleet of expensive trains being leased (and a bigger fleet)

I keep forgetting that the HSTs were only fully withdrawn back in 2019, so there isn't a whole year pre-covid with the new fleet

== Doublepost prevention - post automatically merged: 20 Oct 2022 ==

Ah those leasing costs again !

I wonder whether the 802s and other non-IEP 80x trains are as expensive? and if not, why the difference?

 

[HSTEd]

What's the rate of inflation in the construction industry over that time period, the rise in the value of the required land, Nd does the quoted price in that article.include all the tunneling put in on the final route to appease locals?

Unfortunately, unless construction inflation is got under control, our society is in serious trouble.

It dramatically outstrips economic growth, which means infrastructure spending must keep growing as a share of GDP to maintain even steady state conditions - eventually our economic base will be unable to build anything new, then it will be unable to replace anything old and worn out, and then our entire infrastructure base will crumble into dust and our society will collapse.

I've made my feelings clear on the HS2 scheme management clear repeatedly, no need to repeat tehm here, but take a good long look - it will be a long time before anyone gives anyone any money to spend on a similar scheme again.

 

[zwk500]

Unfortunately, unless construction inflation is got under control, our society is in serious trouble.

It dramatically outstrips economic growth, which means infrastructure spending must keep growing as a share of GDP to maintain even steady state conditions - eventually our economic base will be unable to build anything new, then it will be unable to replace anything old and worn out, and then our entire infrastructure base will crumble into dust and our society will collapse.

I do agree with you

I've made my feelings clear on the HS2 scheme management clear repeatedly, no need to repeat tehm here, but take a good long look - it will be a long time before anyone gives anyone any money to spend on a similar scheme again.

I also agree that HS2 has been badly managed, in many ways. I was just making the point that bad management was not solely the cause of the budget doubling.

 

[Ken H]

What government????

 

[matacaster]

What would be costs and benefits of moving some west and east coast electric trains to hs2 [140 max speed] for phase 1 and cancelling new build hs2 stock at least for a while? Perhaps using refurbished spare commuter electrics on WCML and ecml in place of those transferred to hs2.

 

[zwk500]

What would be costs and benefits of moving some west and east coast electric trains to hs2 [140 max speed] for phase 1 and cancelling new build hs2 stock at least for a while?

Potentially it's a saving, but at 225kph you're going to need more units than the HS2 stock order (320kph regular service). And they'd need to be fitted with ETCS, floor height compliant, 200/400m long, etc.

Perhaps using refurbished spare commuter electrics on WCML and ecml in place of those transferred to hs2.

Are there any 125mph capable units spare? Or are you suggesting uprating existing units scheduled to be replaced as part of a refurb?

 

[stuu]

What would be costs and benefits of moving some west and east coast electric trains to hs2 [140 max speed] for phase 1 and cancelling new build hs2 stock at least for a while? Perhaps using refurbished spare commuter electrics on WCML and ecml in place of those transferred to hs2.

Are they being paid for upfront? Everything (?) has been privately financed since privatisation, and if these are too, then there is next to no saving

 

[Bald Rick]

What would be costs and benefits of moving some west and east coast electric trains to hs2 [140 max speed] for phase 1 and cancelling new build hs2 stock at least for a while? Perhaps using refurbished spare commuter electrics on WCML and ecml in place of those transferred to hs2.

Cost: that of shifting maintenance (whcih will be a lot to renegotiate the Hitschi contract), driver training, etc.

Benefit: very very negative.

Therefore a negative BCR.