In June 2014, in Manchester, the leaders of six northern cities pitched their aspirations for better rail inter-connections to the wider world. The Chancellor of Exchequer was on hand to say: “the money will be found”. The new buzzword, courtesy Lord Jim O’Neil, was the ‘Northern Powerhouse’, and Transport for the North (TfN) set out to work up a suitable investment proposal for its new rail connections.
As it became clear that this entailed in effect a high-speed line from Liverpool to York, at a cost now estimated at £39bn, northern politicians were often asked: which is the priority – Northern Powerhouse Rail (NPR) or the northern parts of HS2 (Phase 2)? ‘We want both’, came the reply. ‘The M62 needs the M1 and vice versa and the same is true for rail.’
Under DfT guidance, so-called ‘touch-points’ were examined, places where the northern (and indeed, midland) sections of HS2 could join the existing network or NPR. But the premise was based on an assumption that HS2 would proceed first, with connections safeguarded for later installation. Realists recognised that ‘later’ meant the 2040s.
For TfN, it wasn’t even a question of ‘levelling up’ initially. For a while it insisted that NPR was being progressed in ‘lock step’ with London’s Crossrail 2. Unwisely it turns out. Crossrail 2 development is now on ice. So, should the same happen with NPR? This becomes the next pertinent, if chilling, question and one that nobody has answered – until now.
Step forward the National Infrastructure Commission (NIC) who in mid-December published its advice to Government on the ‘rail needs’ of the North and the Midlands, a key feed into the Integrated Rail Plan to be drafted by DfT. Having consulted widely, we might have expected some clarity around budget from the NIC – and the report doesn’t disappoint. Even if the ceiling set for economic capital spend is uplifted by 50%, the full hand of rail investments, including HS2, NPR and Midland Rail Engine, are unaffordable. At the other end of the scale, simply relying on upgrades to existing lines is judged insufficient to ‘level up’ the Northern and Midland economies.
But its most telling conclusion is this. On balance, budget spent on improving regional connectivity delivers a better economic return than spend on longer distance connectivity. John Armitt, speaking at a London First event the day after publication said that “the western leg of HS2 (into Manchester) and Birmingham-East Midlands (a modified version of the current HS2 line) were the immediate priorities; followed by Trans Pennine investments, the Midland Main Line upgrade (and electrification) and East Coast Main Line improvements; HS2 East Midlands-Leeds comes only after these more valuable measures, though that should not prevent development work continuing in the meantime.”
Connecting places within the North and within the Midlands is more valuable than better connections with London.
The Fiscal Remit
The NIC runs under a mandate to contain gross public investment in economic infrastructure to no more than 1.0-1.2% of GDP over the period 2010-2050 (its ‘binding fiscal remit’). It says that a strategic case could be made to increase it, but counsels against doing so at the expense of other already identified priorities, including a much need £5bn injection into urban transport (it cites Leeds as being the largest European city without a single metro/LRT line).
It would certainly be worth testing if cash returns to the Treasury – such as those that could be received soon after opening new high-speed lines, based on the successful precedent of concessioning HS1 – score as a valid offset to Treasury cash outlays. There is a precedent: the sale of Railtrack in the 1990s was scored in the rail expenditure budget of the year it was privatised.
In fact, the NIC report goes a lot further than many were expecting. It is a serious attempt at asking which candidate rail investments deliver most in terms of the Government’s levelling up agenda. And it hasn’t just accepted the schemes under consideration as being the best available. Where necessary, it has put forward viable alternatives that would fit the bill better. This is a serious piece of strategic regional-scale strategic planning. Not before time too.
The NIC report rises above wish-lists, asking instead what the priorities are, and assessing options against its budget cap (£86bn) and at +25% and +50% funding levels (£108bn and £129bn respectively). The task of preparing the Integrated Rail Plan just took a major step forward.
The Treasury Green Book Review
The NIC reaches its conclusions with plenty of numeric evidence but without relying on benefit:cost ratios. In doing so, it is reflecting the latest revision to the Treasury Green Book released last month. A reminder: the Green Book is technical guidance to help ‘achieve explicit policy objectives and maximise social value’. ‘Levelling Up’ and achieving net zero carbon emissions are the two dominant themes in the revised guidance.
Indeed, it admits that current appraisal practice risks undermining the Government’s ambition to “level up” poorer regions. The change is to measure impacts at the relevant geographical level rather than insist on UK-wide measurement (which can still be presented separately). This is a key shift in position. It helps overcome a previous analytical trap which meant that investments that meant any jobs attracted from London to the North would inevitably reduce GDP and productivity, because jobs in the capital are better paid (and earnings are the presumed value indicator for GDP and productivity).
The Green Book Review also down-plays reliance on Benefit:Cost Ratios. Instead it says that the strategic case – how stated aims are going to be met – is what matters more. So the NIC is well-aligned with Treasury thinking – unsurprisingly perhaps, because HMT is its departmental ‘parent’.
Moreover, HS2, as planned, manages to bypass Nottingham, Derby and Sheffield – a weakness that the NIC addresses directly, with their support for a re-defined southern part of the Eastern leg connecting into the Midland Main Line at East Midlands Parkway. Cutting Nottingham-Birmingham journey times from 72 minutes to 27 minutes is indeed transformational. Having set out four specific ways in which rail can help support and stimulate economic growth, the NIC calls for an ‘adaptive plan’ – a programme that can be adjusted going forward. It suggests that investment is most valuable where the existing network is capacity constrained. Although it doesn’t highlight this point, the rail network between the East Midlands and Yorkshire through which HS2’s eastern leg would be added, is not as congested as other railway geographies. And in following the line of the M1 motorway, it raises serious questions of significant disruption not to rail users but to M1 users, as Highways England has pointed out.
The NIC wants to see the plan as part of a wider strategy that includes urban transport too. It sees a need to invest in key city centre stations (Birmingham, Leeds, Liverpool, Manchester, Nottingham and Sheffield all feature). This overcomes a weakness of current HS2 and NPR plans across the North. Service enhancements will only work if these key city centre stations are updated and expanded. Leeds station, the NIC says, will run out of capacity (based on pre-Covid trends) by 2026.
On Covid-19, the report says that the need to travel between and into our cities (and towns) will remain. This is, of course, where rail does better than alternative ways of travelling. The bigger cities gain most: Birmingham, Manchester and Leeds in all scenarios tested, simply reflecting their scale. As the report also points out, most successful towns are close to successful cities.
On Manchester, the NIC notes there are contrasting views between the City Council and DfT over plans for Piccadilly station. It was probably wise not to wade into this issue but having backed the Crewe-Manchester part of HS2 as a priority, this really needs some of the style of the NIC’s thinking to resolve. The truth is there has been no assessment of the many factors that need consideration to generate the right strategy for the next stage of development of Manchester’s rail network. Reliance on a 4-year old study to proclaim that only the new HS2 line can possibly provide the extra capacity into the city will be questioned by informed RAIL readers.
A decision one way or the other on Piccadilly HS2 platforms will still leave many questions unanswered. The NIC was right to question the merit of terminus vs through stations in HS2’s plans. Providing better Liverpool/Preston/Chester – Manchester – Leeds/Sheffield/Nottingham/York capability, depends on providing through platforms at Piccadilly.
It is hard not to conclude that the NIC has moved thinking on rail several steps forward. Its focus on upgrades and 140 mile/h operation on the East Coast Main Line neatly side-steps the possible cut-back in the capacity of HS2’s London arm (as uncovered in Nigel Harris’s interview with Mark Thurston in RAIL 920). The report should have looked more at the scope for enhanced long distance cross country services, but this can follow.