Sunak’s Spending Review and its impact on rail
Chancellor Rishi Sunak has delivered his 2020 Spending Review, stating that his immediate priority was to protect people’s lives and livelihoods as the country continues to battle the outbreak – allocating £55 billion to tackle the virus next year.
He also set out how the government would deliver stronger public services – honouring the promises it made to the British people with core day-to-day departmental spending growing by £14.8 billion in cash terms next year compared to 2020/21. From 2019/20 levels, that is an average growth of 3.8% a year, the fastest rate in 15 years.
The Chancellor also announced how the government would deliver the next stages of its record investment plans in infrastructure to drive the UK’s recovery and level up for a greener, stronger future with £100 billion of capital spending next year and a £4 billion Levelling Up Fund.
The National Infrastructure Strategy, published alongside the Spending Review, states that the government will seek to address the long-term issues that have held back UK infrastructure. These issues include ‘stop-start’ public investment, insufficient funding for regions outside of London, slow adoption of new technology, policy uncertainty that undermines private investment, and project delivery plagued by delays and cost overruns.
To underpin infrastructure investment, a new infrastructure bank is to be headquartered in the north of England. It will provide a range of financial services to support infrastructure investment and will lend to local and mayoral authorities. The new bank will replace some of the support provided by the European Investment Bank following the UK’s departure from the European Union.
It also states that the government wants to transform the way infrastructure projects are delivered in the UK. This will be achieved through wide-ranging reforms from speeding up the planning system, to improving the way projects are chosen, procured and delivered, and greater use of cutting-edge construction technology.
Setting out the budgets for government departments and devolved administrations’ block grants for 2021/21, the Chancellor of the Exchequer Rishi Sunak said: “Today’s Spending Review delivers on the priorities of the British people. Our health emergency is not yet over, and the economic emergency has only just begun; so our immediate priority is to protect people’s lives and livelihoods.
“But today’s Spending Review also delivers stronger public services – paying for new hospitals, better schools and safer streets. And it delivers a once-in-a-generation investment in infrastructure. Creating jobs, growing the economy, and increasing pride in the places people call home.”
His announcements covered government spending across all departments. Some observers criticised the Review for not being strong enough on the green agenda, and for cutting overseas aid from 0.7% of gross domestic product to 0.5%, saving £4 billion the Chancellor could then use elsewhere.
Environment
The Spending Review supports the previously announced ten-point plan for Britain to lead a Green Industrial Revolution. This includes plans to quadruple offshore windpower capacity to 40GW by 2030 and the provision of a £1 billion Carbon Capture and Storage (CCS) Infrastructure Fund to establish four CCS clusters. The ten-point plan provides £525 million for the development of nuclear technologies. Nuclear power and natural gas with CCS will ensure net-zero generation of electricity when the wind isn’t blowing.
Greener transport measures include £1.9 billion to support the transition to zero-emission road vehicles through the provision of charging infrastructure and customer incentives. £257 million is to be spent on cycling and walking this year as part of a £2 billion commitment to support active travel over five years. £120 million is also to be spent to support the delivery of 800 zero-emission buses this year.
Other transport decarbonisation initiatives supported by £81 million of R&D funding includes new initiatives on sustainable aviation fuels, clean maritime demonstrations, zero emission HGV trials and funding a Hydrogen Transport Hub in the Tees Valley. The review notes that the UK’s aim to develop 5GW of low carbon hydrogen production capacity by 2030 is supported by a £240 million Net Zero Hydrogen fund. The intention is to use hydrogen for both heating and transport.
Rail decarbonisation is not mentioned in either the Spending Review or the National Infrastructure Strategy. However, the expansion in wind power and CCS provision will eventually enable Britain’s electric, hydrogen and battery trains to provide zero carbon transport.
Rail
Looking at his comments on rail, the Chancellor said that the economic recovery from Covid-19 must work for everyone in the UK and the Spending Review (SR20) will target investment to support regional cities as engines of growth through the Transforming Cities Fund and intra-city transport settlements; rejuvenate towns and communities in need in England through the Towns Fund; and ensure each place is well connected through increased investment in road, rail and broadband.
He said that he would create a new infrastructure bank, to catalyse private investment in projects across the UK, and bring in a comprehensive set of reforms to the way infrastructure is delivered.
He pledged £12.8 billion to keep the country’s transport networks moving, so that those who need to travel can do so safely and reliably. This includes an estimated £8 billion for rail passenger services in England and £4.8 billion of further support, including for buses, light rail, cycling, and Transport for London. He deemed it essential that the country’s transport system continues to allow people to make their journeys safely and reliably, and will provide funding to support public transport services, including allocating over £2 billion to the Department for Transport to ensure continued operation of the railways in 2021-22.
Regarding capital expenditure on infrastructure, he confirmed over £58 billion of investment for road and rail, levelling up across the country. A new Levelling Up Fund, worth £4billion for England, is expected to attract up to £0.8 billion funding for Scotland, Wales and Northern Ireland. This will invest in local infrastructure that has a visible impact on people and their communities and will support economic recovery, and specifically will invest in a broad range of high value local projects up to £20 million, including railway station upgrades.
The Spending Review also confirmed that the government will finance the completion of Crossrail and fund East West rail as far as Bletchley, but it has agreed with Transport for London to stop development on Crossrail 2. The money saved will be put towards improving transport networks in the regional cities.
Regional connectivity
As part of its plan to ‘level up’ the country, the government reiterated that it is fully committed to improving connectivity between northern cities. During 2020, the government has been drawing up an Integrated Rail Plan for the Midlands and the North of England, which will be published shortly. In line with the terms of reference, the Plan will ensure that Phase 2b of HS2, Northern Powerhouse Rail and other planned rail investments in the North and Midlands are scoped and delivered in an integrated way. This will bring transformational rail improvements more quickly and to more places and will be informed by the NIC’s assessment of the rail needs of the Midlands and the North.
In its National Infrastructure Strategy, the government has pledged to deliver on its manifesto commitment to create a £500 million “Restoring Your Railway Fund”, part of which is intended to be used to restore transport services previously lost in the Beeching cuts of the 1960s. Based on previous re-opening costs, this would provide about 30 miles of new railway. This funding is generally for feasibility studies rather than new infrastructure and includes:
£300,000 for an Ideas Fund to support proposals to reinstate axed services;
Advanced Proposals to accelerate the development of lines and stations being considered for restoration;
Proposals for new and restored stations.
To date, it has provided £1.5 million to support reopening of the Ashington-Blyth line in Northumberland (i.e. one per cent of its projected £162 million cost) and is supporting restoring rail links to Okehampton in Devon. By June the fund had received 50 proposals to reopen lines and stations of which 25 were successful bids. There is to be a further funding round for which details have yet to be announced.
The third round of the New Stations Fund is being expanded, to £32 million. This will fund the opening of railway stations at Edginswell and Thanet Parkway in Kent and St Clears in Carmarthenshire. It will also provide funding to further develop proposals for stations at Haxby in York and Deeside in Flintshire.
Industry response
The railway industry was quick to respond. Darren Caplan, chief executive of the Railway Industry Association, said: “It is positive to see the continued commitment by Government to transport infrastructure, with the announcement today of a new infrastructure bank, the publication of a National Infrastructure Strategy, the commitment to publish an updated infrastructure pipeline, and a £4 billion fund for local improvements. In the coming years, investing in rail will be vital and, as outlined in our recently published ’10 reasons to invest’ report, we should be confident that following the Coronavirus pandemic, passenger and freight numbers will return to the network.
“We look forward to seeing the National Infrastructure Commission’s Integrated Rail Plan on HS2, Northern Powerhouse Rail, Trans Pennine Route Upgrade and Midlands Rail Hub, and the outcomes of the Williams Review into the structure of the industry. In this time of such uncertainty, clarity and visibility from Government is essential, so publishing these plans and updates on key projects will ensure the rail industry is able to prepare and deliver, ultimately supporting the ‘Build Back Better’ agenda and the economic growth and investment the UK needs right now.
“However, the Railway Industry Association and its members will be concerned today that the Spending Review didn’t provide an update on specific rail schemes, particularly those in the Rail Network Enhancements Pipeline. We have been campaigning for Government to ‘Speed Up Rail Enhancements’ as part of our SURE initiative, but we have now been waiting over a year to hear news about what enhancements projects are going to be taken forward and when. Despite supposedly around 80 schemes on this list, we are still no nearer knowing which ones are to be progressed. We urge the Government to publish its update on the RNEP as soon as possible.”
Colin Wood, AECOM’s chief executive for Europe, commented: “On funding, it’s encouraging to hear plans for a dedicated Infrastructure Investment Bank, something that we and many voices in our industry have been championing for some time. The government must be open to creating and attracting new ways of financing our infrastructure, and detail depending, this should go some way in helping us drive more private cash into our projects.
“What we need to see between now and the Chancellor’s next fiscal statement are the details and decisions that are buried in the National Infrastructure Strategy. How is procurement going to change for the better, details on changes to the Green Book, how is the infrastructure bank going to work and confirmation and swift adoption of key recommendations such as the integrated rail plan.”
The trade unions also had their say. Mick Cash of RMT commented on proposals to reopen closed lines: “Supporting new railway lines is always welcome, but suggesting this will somehow reverse Beeching cuts is pure spin.
“There is no definite decision, funding or timetable to open new lines and, instead of a national direction to begin railway reopenings, this leaves local projects and councils to compete for funding.
“This proposal is lacking in ambition, when more than ever we need new ambition that supports a nationally planned and funded programme of guaranteed line reopenings to boost local economies and connectivity and meet the climate change challenge.”
Debbie Dore, chief executive of the Association of Project Management, was concerned about whether the industry has the skills to deliver what is being asked of it. Noting that the Chancellor’s announcement “will provide the long-term pipeline of infrastructure and other strategic projects needed to turbo-charge recovery and a sustained future pathway for successful delivery” she commented: “As the Chancellor said, ‘projects must have real impact’. We agree, but this commitment must be backed by investment in the skillsets and training essential to underpin this. Greater investment as well as focus on project professionalism will be required to support the proper inception, delivery and completion of projects both now and in the future.”
In short
The Spending review is a long document (116 pages), as is the National Infrastructure Strategy (100 pages). They, of course, cover more than just rail, but there is a lot of content and sorting out what is new from what was already known is a challenge.
For rail, there is some good news. Crossrail will be completed and HS2 Phase 2b to Leeds will go ahead – some people feared it might not. However, Crossrail 2 will be cancelled (or suspended – TfL has pledged to safeguard the route anyway). There is no mention of an electrification programme or other rail decarbonisation measures and no recognition that it offers significant carbon savings by taking passengers and freight from less carbon friendly modes.
Reopening lines closed under Beeching gets a big mention, but that was already being discussed and there is nothing really new in these documents.
‘Levelling up’ the country is also a big topic, with investment in the North and on the Okehampton route in the West Country. However, the National Infrastructure Strategy is at pains to point out that “Levelling up the rest of the UK does not mean levelling London down”.
Still, it gives everyone lots to talk about…
