Who should pay for the Valleys Electrification?

[mwmbwls]

Sion Barry raises the issue

http://www.walesonline.co.uk/busine...ectrification-valley-lines-could-cost-6838219

Who is going to foot the bill for the cost of rail electrification in Wales?
It was back in 2012 that the UK Government announced not only the electrification of the Great Western Mainline from Paddington to Swansea, but the Vale of Glamorgan and Valley Lines too.
There was much celebration and a widely held assumption that the cost would come out of the budget of the UK Government’s Department for Transport – after all rail infrastructure spend, via Network Rail, is not a devolved matter.
But the final cost, and critically the funding mechanism, for electrification in Wales is still to be finalised and there is increasing concern within the Welsh Government that the UK Government is not going to fund the project in its entirety.
I put to the DfT a series of questions, including whether they intend to pay for electrification.
They responded: “The Welsh and UK Governments agreed in 2012 to fund the electrification of the Valley Lines and South Wales Mainline between Cardiff and Swansea. That agreement still stands and Network Rail is developing plans for electrification."
So as it stands the DfT is looking for a significant contribution from a budgetary constrained Welsh Government towards electrification costs in Wales, which for the Valley Lines alone could be more than £600m.
The DfT would look for the Welsh Government to contribute through its co-sponsorship (with the DfT) of the Wales and Borders franchise, currently held by Arriva Trains Wales.
The 15-year franchise, subject to review every five years, runs to the financial year 2018/19.
But as part of the deal back in 2003 the Welsh Government entered in a subsidy arrangement with Arriva.
In the first year the cost to the Welsh Government, excluding bonus/malus payments, was £138.5m.
In the current financial year, 2014-15, the base cost will be £156.7m excluding performance bonus payments (forecast at £6.5m).
As a non-incremental franchise any additional rail services have to be paid for by the Welsh Government from its own budget. This year the cost of additional services is expected to be around £16m.
Arriva, as well as train leasing fees also has to pay, like all other rail franchise operating companies in the UK, an access charge to Network Rail.
In 2017/18 Arriva’s scheduled access charge will be £16.8m, but will double to £33.8m for 2018/19. The DfT will be looking for the Welsh Government to continue with this subsidy arrangement in the next franchise, where electrification costs would be met.
With the prospect of higher access charges from Network Rail, whoever runs the next franchise will be looking for a bigger subsidy from the Welsh Government, otherwise rail services might not be commercially viable, even accounting for more efficient electrified trains and higher passenger numbers.
My view is that the UK Government should pay for the whole of electrification from its budget or through Network using its own borrowing powers.
Once that is done discussions can then proceed on devolving rail infrastructure spend to Wales, underpinned by a fair settlement to cover future infrastructure costs in the Welsh Government’s block grant.
Prime Minister David Cameron talks about a respect agenda in dealings between his government and that of First Minister Carwyn Jones.
He needs to demonstrate that by taking on full electrification costs and not allowing a position where the Welsh Government has to foot part of the cost via any increased rail franchise operating subsidy commitment.
Is the UK Government looking for local authorities in England along the route of Great Western Mainline to make a financial contribution towards electrification? The answer is no.
Billions have already been spent making the case for high speed two; a rail project which according to research from KPMG will actually have a negative impact on the economies of South Wales and Bristol as it will bring cities in the Midlands and the North of England closer to London.
And oh yes there are billions in UK taxpayers’ money being invested in the Crossrail scheme in London.
We need electrification in Wales after years of under investment in rail infrastructure.
However, there is a danger that if the subsidy the Welsh Government has to make over the life time of the next Wales and Borders franchise is too onerous, it might be forced to say it simply cannot afford to see the electrification project realised.
And if that is the case the blame would only rest on the shoulders of the UK Government.

Not a mention of the Barnett formula anywhere.

 

[LNW-GW Joint]

Sion Barry raises the issue
Not a mention of the Barnett formula anywhere.

This is generally devolution nonsense.
Virtually all rail money comes from Westminster one way or another.
ATW's franchise funding was determined by the SRA and the contract (and cash for it) transferred from DfT for Cardiff to manage in 2007.
Wales (like other local authorities) does have some funding for local transport schemes and I think that some of this will be focussed on the Valleys scheme when it is finished.
All the electrification works will be delivered by Network Rail as elsewhere, from its borrowing powers ("credit card").

 

[BantamMenace]

does anyone have any figures or examples of how much track access goes down with electrification due to decreased rolling stock weight and how much additionally is paid for use of the electricity?

How much more expensive is it?

Also won't ATW's fuel bill drop hugely to probably more than offset the increased access charges? So in terms of a subsidy for operational costs wont it reduce so it's just the cost of actually building the infrastructure that they need to be concerned about?

 

[LNW-GW Joint]

does anyone have any figures or examples of how much track access goes down with electrification due to decreased rolling stock weight and how much additionally is paid for use of the electricity?

How much more expensive is it?

Also won't ATW's fuel bill drop hugely to probably more than offset the increased access charges? So in terms of a subsidy for operational costs wont it reduce so it's just the cost of actually building the infrastructure that they need to be concerned about?

The NR Electrification RUS (October 2009) gave these figures:
http://www.networkrail.co.uk/browse...ation strategy/networkrus_electrification.pdf

Diesel vehicle: 116.8 pence per mile (60p maintenance, 47p fuel, 9.8p track cost)
Electric vehicle: 74.5 pence per mile (40p + 26p + 8.5)

Lease costs per annum are £110K and £90K respectively.
You will also get higher performance and reliability from the electric vehicle.

The Valleys problem is the same as Northern's - how many vehicles do you need and what configuration are they?
The current service is largely 2-car DMUs.
If you run 4-car 31Xs instead you are doubling the fleet size so the lease cost is higher than the DMU fleet.
We are waiting for NR to update its electrification strategy RUS.

 

[Gareth Marston]

This ones hotting up both the BBC and ITV are running with stories quoting Whitehall sources as saying the Welsh a Government agreed to bear some of the initial costs of Valleys electrification, series of letters between then Ministers Greening and Sergeant as evidence.

 

[northwichcat]

The Valleys problem is the same as Northern's - how many vehicles do you need and what configuration are they?
The current service is largely 2-car DMUs.
If you run 4-car 31Xs instead you are doubling the fleet size so the lease cost is higher than the DMU fleet.
We are waiting for NR to update its electrification strategy RUS.

The business case for Valley Lines electrification assumed initially EMUs in 3 car formation cascaded from Greater Anglia (313s with a centre car removed) with the option to order new 3 or 4 car EMUs a few years later based on passenger demand.

If the North West gets 319s (as expected) they'll be expected to last 10+ years which is why options like re-engineering the trains to have faster acceleration and fitting corridor connectors are being looked at. 4 cars is expected to be too short for the Bolton corridor long term and making the 319s able to run in 6 car formations provides better value for money than lengthening a lot of platforms to take 8 cars.
--- old post above --- --- new post below ---

This ones hotting up both the BBC and ITV are running with stories quoting Whitehall sources as saying the Welsh a Government agreed to bear some of the initial costs of Valleys electrification, series of letters between then Ministers Greening and Sergeant as evidence.

The business case written by the Welsh Government referred to Network Rail funding the project as a CP5 scheme. Network Rail's CP5 programme mentioned Valley Lines electrification but referred to an external funder for the project. So what those emails contain is probably the only source of confirming the external funder and how much they agreed to fund.
--- old post above --- --- new post below ---
One thing just announced in the Budget which might be relevant:

Legislation to give Welsh government tax and borrowing powers to fund infrastructure needs, including improvements to M4

 

[WatcherZero]

Brought up in the budget with Osborne saying Wales will have tax raising powers to pay for infrastructure like this, implication of course being that it would have to come from Welsh rises rather than Westminster.

 

[LNW-GW Joint]

Brought up in the budget with Osborne saying Wales will have tax raising powers to pay for infrastructure like this, implication of course being that it would have to come from Welsh rises rather than Westminster.

Actually it's the ability for the WG to borrow money for infrastructure on its own account.
In the past the only linked project mentioned has been the M4 upgrade.
Trunk road spending has been devolved (initially via the Welsh Office) for many years.
The question, of course, is how the loan is to be funded.
--- old post above --- --- new post below ---

This ones hotting up both the BBC and ITV are running with stories quoting Whitehall sources as saying the Welsh a Government agreed to bear some of the initial costs of Valleys electrification, series of letters between then Ministers Greening and Sergeant as evidence.

What a mess: http://www.bbc.co.uk/news/uk-wales-politics-26644418
The BBC, like most people, fails to understand the structure and mechanics of the W&B franchise.

As I see it, like any other franchise, W&B will pay increased access charges after electrification.
However, this will be after the current franchise expires, and the process and funding for letting the new one has not yet been defined.
The current franchise funding was determined by the SRA and transferred to the WG to manage in 2007.
I don't see that anything has changed...
Both DfT and WG will specify the costs/subsidy for the new franchise.

PS It is worrying if the costs have gone up from £350m to £588m.
Sounds like someone is gold-plating the scheme.

 

[northwichcat]

Actually it's the ability for the WG to borrow money for infrastructure on its own account.

Osborne mentioned adjusting income tax levels locally and borrowing abilities opposed to one or the other. Regarding the former that would mean the many Welsh residents working in Cheshire & The Wirral would pay the English rate and all the Cheshire residents working for MoneySupermarket.com in Ewole would pay the Welsh rate.

 

[LNW-GW Joint]

Osborne mentioned adjusting income tax levels locally and borrowing abilities opposed to one or the other. Regarding the former that would mean the many Welsh residents working in Cheshire & The Wirral would pay the English rate and all the Cheshire residents working for MoneySupermarket.com in Ewole would pay the Welsh rate.

Well I get paid from Stevenage and am taxed in Sunderland.
It will be amusing to see how they administer that without another 1000 civil servants or IT experts...
Actually I'm not sure the WG wants to vary income tax (nor does Scotland, which already has the power).
It goes into the "too hard" box.
It's much easier to spend money that other people collect for you.

 

[transmanche]

Osborne mentioned adjusting income tax levels locally and borrowing abilities opposed to one or the other. Regarding the former that would mean the many Welsh residents working in Cheshire & The Wirral would pay the English rate and all the Cheshire residents working for MoneySupermarket.com in Ewole would pay the Welsh rate.

Why do you assume that it would be based on where people work rather than where people live?

The equivalent legislation for Scotland is based on the person's main residence, not their place of work. I see no reason why it would be any different for Wales.
--- old post above --- --- new post below ---

It will be amusing to see how they administer that without another 1000 civil servants or IT experts...

Quite simple really.

All HMRC-accredited payroll software has been able to deal with the "Scottish Variable Rate" for years. If used it would have been indicated to employers by adding an S-prefix to the employee's tax code. And HMRC would have allocated the S-prefix based on where you lived. Simples!

 

[hilly]

From what I've read it seems the problem is that the uk government will fund the gwml electrification between London to cardiff and bridgend to Swansea. For some reason they have decided that the cardiff to bridgend section of the swml is part of the valley lines and not the main route between cardiff and Swansea - as far as I know the only valley lines services that use this bit is the maesteg services.

 

[TheKnightWho]

From what I've read it seems the problem is that the uk government will fund the gwml electrification between London to cardiff and bridgend to Swansea. For some reason they have decided that the cardiff to bridgend section of the swml is part of the valley lines and not the main route between cardiff and Swansea - as far as I know the only valley lines services that use this bit is the maesteg services.

Both Cardiff to Bridgend lines? Both are being electrified as far as I know, but are the UK govt. really arguing that both are part of the Valleys project?

 

[northwichcat]

Why do you assume that it would be based on where people work rather than where people live?

The equivalent legislation for Scotland is based on the person's main residence, not their place of work. I see no reason why it would be any different for Wales.

Quite simple really.

All HMRC-accredited payroll software has been able to deal with the "Scottish Variable Rate" for years. If used it would have been indicated to employers by adding an S-prefix to the employee's tax code. And HMRC would have allocated the S-prefix based on where you lived. Simples!

Ah right so it's done by issuing a different tax code. That just moves the complication to when people relocate across the border and finish up overpaying or underpaying tax for months while HMRC catches up.

 

[transmanche]

That just moves the complication to when people relocate across the border and finish up overpaying or underpaying tax for months while HMRC catches up.

HMRC has introduced a system known Real Time Information (RTI) which means that employers file online updates to HMRC every time they process a payroll.

So providing you tell your employer your new address promptly - and the employer notifies HMRC promptly - HMRC will automatically advise the employer of the new tax code to use. (Of course there's nothing stopping the employee from advising HMRC directly.)

 

[Gareth Marston]

Actually it's the ability for the WG to borrow money for infrastructure on its own account.
In the past the only linked project mentioned has been the M4 upgrade.
Trunk road spending has been devolved (initially via the Welsh Office) for many years.
The question, of course, is how the loan is to be funded.
--- old post above --- --- new post below ---


What a mess: http://www.bbc.co.uk/news/uk-wales-politics-26644418
The BBC, like most people, fails to understand the structure and mechanics of the W&B franchise.

As I see it, like any other franchise, W&B will pay increased access charges after electrification.
However, this will be after the current franchise expires, and the process and funding for letting the new one has not yet been defined.
The current franchise funding was determined by the SRA and transferred to the WG to manage in 2007.
I don't see that anything has changed...
Both DfT and WG will specify the costs/subsidy for the new franchise.

PS It is worrying if the costs have gone up from £350m to £588m.
Sounds like someone is gold-plating the scheme.

How long will the work last before it needs complete renewal? 30,35,40 years payback at today's prices means an extra £14 to £20 million track access per year. However there should be a wires effect boost in passengers and revenue to offset against it, the operating costs for the franchise will be lower than a DMU fleet and providing they use cascaded EMU's the lease costs may not be too different to today. It may not be far off a neutral effect on WG subsidy for the franchise.

 

[jones_bangor]

Ah right so it's done by issuing a different tax code. That just moves the complication to when people relocate across the border and finish up overpaying or underpaying tax for months while HMRC catches up.

I think that would be a minor administrative anomaly!

I could see some people "switching" to gain the lowest rates!

 

[edwin_m]

The business case for Valley Lines electrification assumed initially EMUs in 3 car formation cascaded from Greater Anglia (313s with a centre car removed) with the option to order new 3 or 4 car EMUs a few years later based on passenger demand.

I think you mean 315s.

 

[northwichcat]

I think you mean 315s.

Yes it was a typo.

 

[LNW-GW Joint]

After watching David Jones talking about this this morning on BBC Breakfast,
I wonder if the "deal" was not about the electrification project roll-out, but simply the cost of the GRIP process to get it to a contract?
For example the DfT has just released £2.5m to take the Hull scheme to GRIP 3, which NR will spend on design and consultancy, and will no doubt come out of revenue funds.
Without that the scheme will stall.
I can well imagine the Valleys scheme will need the same up-front funding before a contract is subsequently let on NR's "credit card".
Maybe we're talking a cost of, say, £10m from the current WG budget for their share of this (Valleys plus Cardiff-Bridgend).
Just my thoughts.

 

[WatcherZero]

PM was saying the Government always understood the deal to be Westminster would pay for GWML improvements in Wales while the valley lines investment would always come from higher track access fees.

 

[LNW-GW Joint]

PM was saying the Government always understood the deal to be Westminster would pay for GWML improvements in Wales while the valley lines investment would always come from higher track access fees.

But all electrification schemes (and other improvements) are paid for by higher track access charges on NR's Regulated Asset Base, even the GWML.
I'm not sure how NR's planning process is funded though, and I think this is where the dispute lies.

The Valleys scheme went from unfunded, through a stage where DfT believed a case could be made for a couple of lines (without saying which), to the final "do it all" statement in the HLOS.
I think the final leap was on the assumption that WG would fund the extra planning work to do the lot.

 

[northwichcat]

But all electrification schemes (and other improvements) are paid for by higher track access charges on NR's Regulated Asset Base, even the GWML.

The higher track access charges for electric is down to the operator paying Network Rail for the fuel not just to access the track, as is the case with DMUs.

 

[LNW-GW Joint]

The higher track access charges for electric is down to the operator paying Network Rail for the fuel not just to access the track, as is the case with DMUs.

I think we have different things here.
Given, say, the WCML before the upgrade, the access charges for different vehicles would be charged according to wear and tear, weight etc, and a charge for power for electric trains as you say.
But the overall access charge regime would increase for all types of train after the upgrade (track, signalling for everybody, 125mph running for Virgin etc), to pay back NR's £8billion (unless DfT wrote it off, which I doubt).
It will be the same for all new electrification schemes.
We end up paying for it in higher fares or higher subsidy (or reduced costs).
Unless I'm wrong of course...

 

[edwin_m]

The 2009 electrification strategy concluded that the Midland Main Line and Great Western electrifications would be justifiable on financial grounds without the need to consider other benefits as in a normal BCR business case.

Assuming this is true, it means that for the railway as a whole the reduced costs of running electric trains pay back the capital cost of installing the OLE. For the train operator, this should mean that their net costs reduce despite having to pay Network Rail more, and Network Rail uses the increased income to pay off the "credit card".

Most of the other electrifications won't be financially justifiable but should have sufficiently good BCR for the Government to put in some public money. This could be done as a capital lump sum but I guess it's more likely it will go onto the credit card again, paid off by increased subsidy to the TOC in future years which is hopefully justified by the social benefits arising from a better train service.

 

[WatcherZero]

The issue seems to arise from the way NR accounts for investment through fixed track access charges by route rather than line with the GWML investment through Wales being put on the Western Route cost base so FGW would be predominantly picking up the increased track access charges whereas the Valley lines would be on the Wales Route track access charges.

 

[gareth950]

http://www.bbc.co.uk/news/uk-wales-26831410

He also warned the row could leave the Valleys lines without electrification if the Welsh government decided it had other priorities.

So if as suggested in this article, the Valleys electrification does NOT go ahead, then surely DFT, or whoever is in charge, will have to order new DMU's for the South Wales Valleys? And could we have a situation where the SW Mainline is electrified from London - Cardiff and Bridgend to Swansea, but not in between Cardiff - Bridgend as that is classed as part of the 'Valley lines'?

As someone who has an interest in the railways and uses the Valley lines several times a week, but isn't an expert on the intricacies of how the railway system in the UK works, this funding row is madness! Would we be in this situation if there were not opposing political parties in power in Westminster and Cardiff Bay? I think not. :roll:

 

[NotATrainspott]

http://www.bbc.co.uk/news/uk-wales-26831410



So if as suggested in this article, the Valleys electrification does NOT go ahead, then surely DFT, or whoever is in charge, will have to order new DMU's for the South Wales Valleys? And could we have a situation where the SW Mainline is electrified from London - Cardiff and Bridgend to Swansea, but not in between Cardiff - Bridgend as that is classed as part of the 'Valley lines'?

As someone who has an interest in the railways and uses the Valley lines several times a week, but isn't an expert on the intricacies of how the railway system in the UK works, this funding row is madness! Would we be in this situation if there were not opposing political parties in power in Westminster and Cardiff Bay? I think not. :roll:

It doesn't make a vast amount of sense for the electrification not to go ahead. There are a lot of EMUs needing a home after being displaced from Liverpool Street by Crossrail and I don't see the ROSCO (Eversholt) being too chuffed about writing them off. Then there's the problem that if you don't electrify you'll have to buy new diesels and it wouldn't be particularly easy or economical now to order a train design which doesn't exist because all the manufacturers had been told they wouldn't need to design one. The diesel-only IEP was canned because Network Rail said that it would be cheaper overall just to electrify the GWML than it would be to operate a custom design of diesel for the next thirty years and I can see a similar thing happening with the Valleys. As with so many things, the cost of not doing something is not zero and so I'm sure that a deal will be arranged eventually before it is too late.

 

[Class 170101]

It doesn't make a vast amount of sense for the electrification not to go ahead. There are a lot of EMUs needing a home after being displaced from Liverpool Street by Crossrail and I don't see the ROSCO (Eversholt) being too chuffed about writing them off.

How about the ROSCO paying for some of the electrification if they want to keep their assests working?

 

[47802]

It doesn't make a vast amount of sense for the electrification not to go ahead. There are a lot of EMUs needing a home after being displaced from Liverpool Street by Crossrail and I don't see the ROSCO (Eversholt) being too chuffed about writing them off. Then there's the problem that if you don't electrify you'll have to buy new diesels and it wouldn't be particularly easy or economical now to order a train design which doesn't exist because all the manufacturers had been told they wouldn't need to design one. The diesel-only IEP was canned because Network Rail said that it would be cheaper overall just to electrify the GWML than it would be to operate a custom design of diesel for the next thirty years and I can see a similar thing happening with the Valleys. As with so many things, the cost of not doing something is not zero and so I'm sure that a deal will be arranged eventually before it is too late.

Really I'm sure the scrap yard would make a good home, its one thing cascading late 80's MK3 based stock, but cascading MK2 stock that will be nearly 40 years old is another.