By Professor Stephen Glaister, director of the RAC Foundation.
This decision (like all rail franchising decisions) was always going to be subject to fierce scrutiny. Officials knew that the stakes were high and any weakness would expose the decision to judicial review. Equally, they must know that we all make mistakes, so a rigorous system of internal scrutiny and audit ought to have been in place to weed out the errors.
What is this episode going to do to the Department for Transport’s credibility over the planned new high speed line from London to Birmingham and beyond? Its route is similar to the west coast mainline. The commercial and economic justification for spending £20bn of taxpayers’ money on HS2 (for the full scheme to Manchester and Leeds) depends critically on a view of the passenger traffic it will carry up to 2026 and beyond. Several judicial reviews of the government’s decisions on HS2 are due to be heard soon.
Assessing commercial risks over 13 years is fundamentally difficult, especially in passenger rail markets. These have shown themselves to be sensitive to the state of the economy, the size and location of the population and changes in industrial structure. This is a disadvantage of the government’s recent decision to increase the terms of rail franchises from seven years.
Risks and uncertainties are intrinsic to all infrastructure investments however they are procured and funded. Dealing with this in a sensible manner is the bread-and-butter of the task facing the UK utility regulators.
So if, as seems to be the case, governments are going to continue to take a strong hand in the planning of our roads and railways they need to recognise this. They need strategies that are long term enough to reflect the fixed nature of these investments (ie decades) and which are resilient to the unexpected.
The government does have the basics of a five-year plan for the railways (not long enough) and it is currently developing a strategy for the strategic road network. This is overdue and most welcome. An important test will be its sophistication in dealing with risk and uncertainty.
But this does pose the question of whether the DfT has adequate professional and administrative resources.
Wednesday’s hitch is not the first. The public-private partnership for the London Underground was a catastrophic and hugely expensive failure. It was due to a toxic mixture of technical failures in contracting; inadequate appraisal of engineering, commercial and political risks; unrealism about the ability in practice to transfer those risks to private investors; all overlaid with political directives made in the face of evidence that they were a bad idea.
The DfT once had a world-leading reputation for the quality of its analysis. White papers used to be serious documents with supporting evidence. It is increasingly looking as though decades of running down of the quantity (if not the quality) of professional and administrative resource, together with an increasing reliance on external consultancy and a culture on the part of ministers and others to find evidence-based analysis “unhelpful” may be taking its toll.
Arguably, the transport secretary and the DfT now has more direct, administrative and policy responsibility for running Britain’s railways than in its whole history. Civil servants are purchasing trains, designing and procuring services, setting fares and determining investment. The failure of this procurement certainly does not lead to the conclusion that government should become even more directly involved: rather it reinforces the old adage that governments are not good at running railways.