The future of passenger rail

16 June 2016

Article by Joseph.Champion, National Assembly for Wales Research Service

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The new Welsh Government will take over as the franchising authority in time to appoint the next Wales and Borders rail operator in 2018. What are the main issues that need to be addressed?

Powers to award the next Wales and Borders rail franchise are due to be devolved to Wales from 2017. This means that the new Welsh Government will be able to procure the next operator for the largest rail franchise in Wales.

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Image Source: Welsh Government.

The Wales and Border franchise

The current Wales and Borders franchise will be operated by Arriva Trains Wales until 2018 (with an option to extend the current franchise for a short time if needed).

The previous Welsh Government ran a consultation in early 2016, Setting the Direction for Wales and Borders Rail. This called for views on the expectations for the service, and the specifications the future Wales and Border operator should meet. The document said that more detailed proposals would be developed based on the consultation’s outcome and wider engagement with the railway industry and the public.

The length of the next franchise is not yet clear, and there are mixed views on the right duration. A UK Government review has questioned the benefit of long franchises in incentivising investment and reducing risk, and cautioned against franchises of more than 15 years without break clauses. In contrast, the majority of respondents to the Fourth Assembly’s Enterprise and Business Committee’s inquiry into the Future of the Wales and Borders Rail Franchise thought that longer franchises would encourage greater investment.

There is also uncertainty about the future shape of the Wales and Border franchise. The UK Government has said that it will review cross-border services and that those primarily serving English markets are likely to be transferred to English franchises. This has caused concern because of the potential impact on passengers, who may have to change trains at the border. There are also concerns about the franchise’s affordability if the financially viable cross-border services are removed.

The UK Government’s Department for Transport told the Enterprise and Business Committee in September 2015 that the Welsh Government would not suffer financially as a result of any franchise remapping. How English services are defined is also unclear, as is the mechanism for compensating the Welsh Government for any losses arising from removing services from the franchise.

These uncertainties will need to be clarified quickly to address public concerns and to enable the new Welsh Government to move forward in procuring the new franchise.

Rail franchises with Welsh services

Aside from the Wales and Border franchise, three other franchises have services in Wales:

– South Wales to London and the south coast of England, operated by Great Western Railway;

– Holyhead to Birmingham or London, operated by Virgin Trains; and

– Cardiff to the English Midlands, operated by CrossCountry Trains.

Rail passenger traffic in Wales

In 2014-15, there were 29.3 million passenger journeys across all four rail franchises in Wales – 9.4 million more than in 2004-5. This growth is expected to continue, with Network Rail forecasting that commuter traffic into the Cardiff City Region will increase by 68% by 2023. The new Welsh Government will have to ensure that the next operator is able to deal with this increase in demand.

The Metro

The shape of the Welsh franchise will be influenced by the South Wales Metro project. The Metro is the previous Welsh Government’s project to ‘provide faster, more frequent and joined-up services using trains, buses and light rail.’ There is hope that by 2030 the Metro will support 7,000 jobs and contribute an additional £4bn to the economy.

Phase 1 of the Metro project included a range of road and rail improvements, including: extending the rail line to Ebbw Vale town centre and building a new station; enhancing capacity on the Maesteg rail line; and a new rail station at Pye Corner, Newport.

Phase 1 cost approximately £75 million and, as of 2016, its constituent projects are already complete or in progress. Phase 2 is scheduled for completion by 2023 and is estimated to cost about £500-600 million. It will focus on ‘modernising the core Valley Lines and the wider South Wales rail network’, particularly through electrification. It is still unclear whether heavy or light rail will be used on the Valley Lines. This decision will have an effect on the scale and scope of Phase 3, which will go beyond 2023.

The previous Welsh Government considered whether, as part of the Metro, the Valley Lines could be managed as a concession by a private company as part of the Wales and Borders franchise. It also discussed an innovative approach, whereby the Valleys Lines infrastructure could also be specified and operated by a concessionaire.

Rolling stock

The rolling stock used in the current Wales and Border franchise is widely considered to be poor and will require significant investment. By January 2020, rolling stock will also need to comply with new rules on disability access. In 2013, 73% of Wales and Border rolling stock would not have complied.

There are several options to secure better rolling stock, including purchasing new or refurbished stock, upgrading current stock, or leasing stock from private companies. The previous Welsh Government said that it wanted the bidding process for the next franchise to set out a rolling stock strategy.

It can take considerable time to secure rolling stock, with some indicating that the process should start four years before the stock is needed. Quick decisions will therefore be necessary.

Transport for Wales

In 2014, the previous Welsh Government created a not-for-dividend company called Transport for Wales. In February 2016, Edwina Hart, the then Minister for Economy, Science and Transport, said that she expected the company to ‘act like Transport for London’.

Transport for Wales will be the over-arching strategic body for transport, offering concessions to companies wishing to deliver transport services, including rail, and leading on franchise procurement. It is expected to lead on the procurement of the next Welsh rail franchise and for the Valley Line concession.

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