2070 Commission Call for Evidence

June 2022 UK2070 Commission: Call for Evidence - An Inquiry into the Relationship of the Integrated Rail Plan to the Levelling Up agenda 1.

INTRODUCTION

1.1. This submission constitutes the response from the Railway Industry Association (RIA) to the 2070 Commission’s Call for Evidence – a UK Integrated Rail Plan, an Inquiry into the Relationship of the Integrated Rail Plan to the Levelling Up agenda.

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BACKGROUND TO RIA

2.1. RIA is the trade association for UK-based suppliers to the UK and world-wide railways. It has over 300 companies in membership covering all aspects of rolling stock and infrastructure supply and a diverse range of products and services. As well as most of the Tier 1 contractors and large, multi-national companies, over 60% of RIA’s membership base is comprised of Small and Medium-Sized Enterprises (SMEs).

2.2. RIA provides its members with extensive services, including: • Representation of the supply industry’s interests to Government, regional and national transport bodies, rail clients (eg Network Rail, HS2, TfL), and other key stakeholders; • Providing opportunities for dialogue and networking between members; • Supply chain improvement initiatives; • Supporting innovation through the Unlocking Innovation programme and UKRRIN (UK Rail Research and Innovation Network) • Provision of technical, commercial and political information every week; • Export promotion, including organising and creating Great branded UK Pavilions at key rail exhibitions overseas.

2.3. RIA recognises that equality, diversity and inclusion drive innovation, financial performance and success. Together with Women in Rail, RIA is promoting an ‘Equality, Diversity & Inclusion Charter’ for rail, which has the potential to support social mobility, grow UK STEM skills, create local opportunities, and increase the talent pool from which the future leadership of the rail sector will be drawn.

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KEY MESSAGES RIA welcomes the 2070 Commission’s interest in and commitment to a National Integrated Rail Plan. Rail is a vital catalyst for economic growth, generating £2.50 from every £1 of spend, and investment in our railway touches all corners of the country, supporting cities, towns and communities across the UK. • The Commission should support the Union Connectivity Review recommendations for UKNET – a strategic transport network for the UK – as well as the Great British Railways plans for a 30 year Whole Industry Strategic Plan, which would deliver better connectivity for the country and a long-term strategy for rail.

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In order to maximise benefits and value for money, it will be important to commit to investment now, as well as progress with already announced key projects, in order to avoid boom and bust in funding as this undermines productivity, skills and development.

Government also needs to commit to delivering existing major projects in full and on time, such as NPR and HS2.

CONTEXT

4.1. The UK2070 Commission is an independent inquiry into city and regional inequalities in the UK, chaired by Lord Kerslake. It has set out a 10-Point Plan for Levelling Up the UK. A key finding of the Commission was the need for a Connectivity Revolution for the UK. 4.2. This called for a UK-wide Connectivity Strategy, which would make the UK one of the best connected countries in the developed world. The key components of this include: a network of connected cities; sustainable mass transit systems within all major urban areas; enhanced connectivity beyond to the marginalised communities.

4.3. The UK2070 Commission has thus set up an Inquiry in support of their long-standing aspirations for a Connectivity Revolution through a national Integrated Rail Plan. It is seeking views around four key issues: • Long-term commitment: how can we best secure commitment to a long-term strategy?

• Immediate priorities: what actions need to be taken in the short term?

• Wider policy relationships: what wider policy inter-relationships need to be taken into account in promoting a National Integrated Rail Plan?

• Institutional barriers: what are the barriers to more effective future relationships between industry, government and communities? What are the implications for further devolution to local government, especially Combined Authorities?

5.

THE ECONOMIC CONTRIBUTION OF UK RAIL AND RAIL’S CONTRIBUTION TO “LEVELLING UP”

5.1. Building, maintaining and upgrading the UK’s railways supports a huge range of jobs, drives social mobility and boosts economic growth in every region of the country. Wherever a rail project is located, the economic impact is felt on a national level. It is important to highlight these longer-term economic and productivity benefits, to ensure support for an ambitious plan for UK rail.

5.2. The Oxford Economics 2021 report1 shows the UK rail sector contributes annually over £43 billion Gross Value Added (GVA) to the UK economy, employs 710,000 people and generates £14 billion in tax revenues. For every £1 spent on rail, £2.50 of income is generated in the wider economy, meaning rail is not just an important sector, but it is also crucial for UK plc, its economy and connectivity. Despite the Coronavirus pandemic, the long-term future of rail is positive – rail has been a growing industry since the 1990s and the number of rail journeys are expected to double in the next 25 years, along with significant growth in rail freight traffic.

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https://riagb.org.uk/RIA/Newsroom/Publications%20Folder/OE_2021.aspx

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5.3. The report also showed that the railway industry across the North generates £7.74bn in GVA to the economy and supports 154,156 jobs, and in the Midlands over £5.3bn in GVA to the economy and supports 103,073 jobs.

5.4. Beyond the passenger-facing jobs we all know, there is a huge supply chain which helps build, maintain and upgrade the UK’s railways. These jobs truly span the lengths and breadths of the UK. Many of the roles in the sector are skilled, well-paid and in a green industry, which benefit regional economies. Oxford Economics showed that the average economic contribution per job in the rail system in the North (incl. Yorkshire and the Humber) is over £55,500 GVA - above the average for the North’s economy of £42,800. In the Midlands, each job in rail contributes £58,000 in GVA to the economy, compared to the regional average of £44,600.

5.5. A good, recent example is London’s Elizabeth line. Its construction supported 55,000 full time jobs across the UK, which includes the trains that were built in Derby, signalling specialists in Stockport and Chippenham, station construction in the East Midlands and telecoms expertise from London, to name just a few. Whilst the railway will serve passengers travelling across the capital, its effects will benefit the entire country.

5.6. Improving railway links in any region will support the economy through providing better links to larger job markets and key services in towns and cities and attracting investment from companies – all of which are vital to improving social mobility in any given region. For example, since the HS2 link to Birmingham was confirmed in the Oakervee Review in 2020, several major companies have announced major investments and expansion plans in the city.

5.7. Overall, rail can play a key role in the economic recovery and help the Government’s ‘levelling up’ agenda. Indeed, rail features heavily throughout the Government’s recently published Levelling Up White Paper, which rightly recognises its importance as a driver of economic growth.

5.8. Rail schemes are particularly effective in generating an economic bounce back because of what RIA calls the four Gs: •

Growth: Rail projects generate significant investment – for every £1 spent on the rail network, £2.50 is generated in the wider economy.

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Geography: Rail projects support investment in all regions and nations of the UK, including areas of social deprivation where investment and regeneration is urgently needed – supporting local jobs, productivity and delivering on the Government’s ‘levelling up’ agenda.

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Green: Rail is a green mode of transport and investing in rail will ensure the economic recovery is also an environmentally beneficial one. Rail is the only mode with a ready solution to zero carbon long-distance heavy freight.

Global: UK rail exports £600 million in goods and services each year and could deliver even more with further support.

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6.

CONNECTIVITY

6.1. The economic structure of the UK exhibits a wide dispersion in regional productivity levels between the South East, including London, and the rest of the country. Connectivity is widely 3/7

recognised as a driver for economic growth. Adequate infrastructure provision would be instrumental in lowering regional disparities and balancing economic growth geographically, so that all parts of the UK can prosper in future. This supports the Government’s ‘levelling up’ agenda.

6.2. Upgrading the rail links between the major cities in the UK remains vital, despite the shortterm fall in passenger numbers due to Coronavirus. Government figures show that passenger numbers are rebounding, and we believe that will grow in the coming years as people seek to travel for business and leisure. The strong return of passengers, reaching roughly 80% of prepandemic levels in November 2021, and 90% in May 2022, showed that passengers were returning to rail services.

6.3. Clearly, investment is needed in the North and Midland’s railway network, and will come through HS2, upgrades to the Midland Mainline and Transpennine Route Upgrade. However, it will be important not to neglect London and the South East. To boost connectivity, it is vital that the Government builds on its economic strengths and commits to the funding and financing of Crossrail 2, East West Rail and the Cambridge-Oxford-Milton Keynes Growth Corridor, and to connecting Northern Powerhouse Rail and Crossrail with HS2. This would align with and help the Government deliver growth and productivity through infrastructure projects.

7.

QUESTION 1 - LONGER-TERM COMMITMENT: BOOM AND BUST

7.1. There are underpinning conditions that can help improve business productivity and efficiency.

For the supply chain, this means consistency in rail investment with visibility of a stable and smooth workload pipeline coming to market. This gives companies the confidence to invest in plant, machinery, skills and training and innovation – all of which are necessary to deliver complex projects and deliver better services for passengers and freight users. A smooth pipeline will also enable the rail supply industry to reduce costs and improve efficiency industry and to sustain and develop skilled teams and thus improve productivity to deliver more with the Government investment it receives.

7.2. However, in the current system, we have seen periods of ‘boom and bust’ in rail infrastructure investment – five-year Control Periods of allocated funding. It manifests itself in a see-saw profile in the way work comes to market, often requiring suppliers to increase their capacity at the start of a five-year funding period, only to reduce it when they see a sharp drop-off in workload near the end. This creates uncertainty for the supply chain and is a sub optimal way to run the railway both for the supply chain, for passengers, freight and taxpayers.

7.3. Boom and bust can be mitigated by agreeing a minimum level of volumes, around which suppliers can anticipate a certain level of variation.

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QUESTION 2 - IMMEDIATE PRIORITIES: RNEP AND REGIONAL PROJECTS

8.1. In order to support the levelling up agenda, including a sustainable rail sector, the Government needs to create funding certainty. For example, both Network Rail (NR) regulatory settlements and franchise terms create periods of planning certainty: to unlock full growth and productivity potential, Government needs to develop investment plans underpinned by clear and democratically accountable funding settlements.

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8.2. It should immediately start by publishing the delayed Rail Network Enhancement Pipeline (RNEP), which has now been delayed by over 950 days. RIA and our members have regularly been calling for the RNEP to be published, to provide suppliers with the visibility of upcoming work that they require to plan and invest. In 2020, the Government promised to publish the RNEP annually2.

8.3. The Government’s Integrated Rail Plan (IRP) also saw a number of schemes moved to the RNEP. The IRP’s publication means there is a greater need for the RNEP to be published and for the sector to have visibility of upcoming work.

8.4. A national rail plan should also bring forward and remain committed to schemes which have the greatest potential to benefit local passengers and regional economies.

8.5. Whilst the funding included in the IRP is welcome, RIA and our members were disappointed to see yet further major changes to plans for the railways in the North and Midlands. We highlighted that it is difficult to see the IRP as anything other than a piecemeal approach to national strategic railway planning - given it was only in 2020 that Prime Minister Boris Johnson and the Cabinet publicly supported delivering the HS2 and Northern Powerhouse Rail schemes in full, given the capacity, connectivity and economic benefits they bring. Immediate priorities should be to deliver the key projects in the IRP, such as Midland Main line electrification and commit to funding full signalling on the East Coast.

8.6. In the IRP, HS2, which will be the first major new railway north of London for over a century, has been scaled back with the Phase 2B Eastern Leg to Leeds scrapped. Instead, HS2 will run from Crewe to East Midlands Parkway, before HS2 trains join the existing network. The proposals for Northern Powerhouse Rail have also been scaled back, with a new high speed line connecting Warrington to the HS2 line into Manchester, and a new line from Manchester Piccadilly to near Standedge almost 30 miles short of Leeds. This is instead of a full new line from Manchester to Leeds city centres, as well as less ambitious upgrades for cities including Bradford and Sheffield. The Golborne Link has also now been scrapped, after being specifically included in the IRP. This connection is needed to allow adequate capacity on the planned integrated national rail network to fulfil its vital function of handling the nation’s longer distance movements of both passengers and freight.

8.7. Delivery of the IRP will require careful planning to avoid passenger disruption and is unlikely to provide the necessary capacity for freight. It is likely that HS2’s Eastern Leg and the full Northern Powerhouse Rail scheme will be required in the future, even with the proposed changes in the IRP. The Government should continue to examine the business case for both these schemes to be delivered in full if they are serious about their commitment to levellingup.

8.8. A Northern Powerhouse Independent Economic Review3 found that a transformed North could see a 4% increase in productivity, equating to an increase GVA of almost £100 billion, and

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https://questions-statements.parliament.uk/written-questions/detail/2020-09-11/88859 https://transportforthenorth.com/wp-content/uploads/NPIER-Core-Messages.pdf

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create up to 850,000 new jobs by 2050. This transformational impact should be emphasised to build support for rail investment.

8.9. Scaling back major rail projects and schemes (known as enhancements) risks the loss of multidisciplinary skillsets in the rail supply industry, including local jobs. These specialist skills could move to other sectors with fuller order books or abroad, and they are expensive to regain once momentum of rail major projects returns.

8.10. Rail businesses need the confidence to invest in the skills, training and capability to deliver complex rail projects such as in the IRP. For multinational companies, the uncertainty can mean the difference between their international HQs deciding to invest in the UK, or in moving to different markets or overseas. For small companies, it can be the difference between success and survival.

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QUESTION 3 - POLICY INTER-RELATIONSHIPS: DECARBONISATION AND NET ZERO

9.1. Rail is a clean mode of transport – in the UK it contributes just 1.4% of transport emissions despite carrying 10% of all journeys, and only 0.5% of total emissions. However, it must decarbonise further to reach net zero, and it has a key role to play in taking more polluting forms of transport off our roads. By increasing capacity and reliability, we can help drive modal shift towards rail. As such, an important wider policy inter-relationship that should be taken into account in promoting a National Integrated Rail Plan is Net Zero and decarbonisation.

9.2. A priority for RIA is to launch a long-term rolling programme of electrification. The evidence in favour is clear, it is the political challenge which remains. Only 38% of the UK network is currently electrified, well below the EU average. In 2020, NR published a strategy to decarbonise the UK’s railways, calling or 13,000km of electrification by 2050. Whilst the Government has committed to a number of electrification projects, in 2020-21, 179 track kilometres were electrified, less than half the 448 kilometres required to reach NR’s target.

9.3. This needs to be combined with orders of zero carbon trains, including battery and hydrogen powered. Both of these would help boost skills and UK capability in an industry with great exports potential.

10.

QUESTION 4 - INSTITUTIONAL BARRIERS: DEVOLUTION AND FUNDING CERTAINTY

10.1. RIA recognises the move towards devolution of funding can be an effective way of prioritising transport asks and ensuring efficient delivery which reflects local interests. Sub-national and regional strategic transport bodies, such as Transport for the North, Transport for Wales and Midlands Connect, can help to ensure that transport projects are more closely linked with local economic priorities. To be effective, however, it would be helpful if these bodies, including Transport for London, had longer term funding certainty. These transport bodies, plus Transport for the South East, need to be given an indicative long term investment budget by the Government to inform their strategic plans. That said, this funding then has to be drawn down for specific projects through the Government’s Green Book process, which is not as agile as businesses would like. Devolved decision making and ownership of projects would also likely help ensure they remain focussed on the local communities they serve, instead of a top-down approach from Whitehall.

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10.2. RIA supports regional infrastructure funding as a way to enable economic growth and levellingup. However, regional funding needs to be carefully designed – if there are too many funding pots and an overly complicated funding structure in regions, there is a risk that system-level strategic solutions and economies of scale are overlooked. Therefore it is important to get the balance between central and devolved planning and funding right.

10.3. Delegation of funding authority to Great British Railways (GBR) would enable a more efficient spend and minimise bureaucracy – especially if GBR moves to a Total Expenditure approach for accounts.

10.4. As touched on above, the RNEP also has inherent issues, as it is aligned with political funding cycles, not project readiness. These issues can be mitigated with further delegation of funding for enhancements.

10.5. The stop start nature of RNEP funding decisions is a further cause of potential costs as, whereas NR has delegated authority to prioritise OMR spending, there is no delegated funding authority for enhancements and limited opportunity to redeploy funding linked to project readiness. In some cases when only specific elements of a business case have been signed off, and that work is then delayed for example due to a lack of access over a bank holiday weekend, or weather, then the team cannot be deployed to other parts of the project or programme as these have not yet been agreed. This impacts on team productivity and efficiency. Without greater funding delegation, it is hard to see how the benefits of the RNEP programme approach will be fully realised.

11.

PROCUREMENT

11.1. RIA recommends that the Government continues reviewing public procurement policy, with a view to considering how it can incentivise local sourcing for rail procurement, including rolling stock procurement. This approach would support investment in skills, UK capability and rail supply chain growth. This procurement policy would then be implemented by the different tiers of the public sector.

_______________________ We hope this is a useful submission. RIA is happy to provide further information on any of the above issues, or to meet to discuss any matter associated with the Commission’s inquiry.

Please do not hesitate to get in touch with Francesca Lentini, RIA Senior Policy Executive, if you have any further questions or would like us to arrange a meeting – please contact francesca.lentini@riagb.org.uk and 020 7201 0777 / 07904 991067.

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