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Setting Regional Budgets for Rail Investment Setting Regional Budgets for Rail Investment A report by Greengauge 21 June 2021 Previous Next Contents Overview 1. The approach taken for the North and the Midlands . 1 2. Setting equivalent rail budgets for the rest of England and Wales . 4 © June 2021, Greengauge 21, Some Rights Reserved . 3. Regional budget synthesis . 8 We actively encourage people to use our work, and simply request that the use of any of our 4. Discussion . 9 material is credited to Greengauge 21 in the following way: Greengauge 21, Title, Date 5. Sub National Transport Bodies . 12 www.greengauge21.net 6. Conclusions and Recommendations . 14 Setting Regional Budgets for Rail Investment | May 2021 Previous Next Scotland Overview North East North West Yorkshire and the Humber In order to advise the Department for Transport The report can only be considered as a starting on the rail transport needs of the Midlands point for discussion. While we have drawn and North, the National Infrastructure on published NIC reports, the approach taken Commission (NIC) set out to determine what is our interpretation of that taken by the budget should be available for investment. NIC, and Greengauge 21 is solely responsible for the assumptions we make and set out East The Midlands and North account for 5 out in this report and any errors arising. Midlands of 9 English regions. The others are: East of England, South East England and South West Our view is that the NIC set out a persuasive England; London accounts for the 9th. approach to the question of rail needs that West has a wider applicability and a continuing Midlands A question arising is this: what would be the relevance. For our part, we will look to engage Wales East rail investment budget for these remaining with the National Infrastructure Commission of England English regions—and for Wales—if the same in responding to its programme of work for the NIC methodology was applied to them? In this second National Infrastructure Assessment (NIA2). short report, we set out to answer this question. This will include a new baseline assessment of national infrastructure this Autumn before the London NIA2 recommendations are published in 2023. South East South West Setting Regional Budgets for Rail Investment | May 2021 Previous Next Greengauge 21 1. The approach taken for the North and the Midlands The approach used by the NIC to establish an In summary, the NIC’s approach entailed: The result was that 57 per cent of the Strategic A key issue with this methodology is the allocation appropriate rail enhancement budget for the Transport enhancements budget from 2030/31 of the costs of HS2 and NPR . While Phases 1 and North and the Midlands was set out in a technical » Estimating planned (but not yet committed) onwards was allocated to road enhancements, 2a of HS2 now have Parliamentary Approval annex to their interim report of July 2020. It rail enhancements expenditure (for which and 43 per cent was allocated to rail . and are proceeding, Phase 2b—which is entirely was driven by the need to ensure that overall there is an expenditure line in the most within the North and Midlands—has not reached investment levels are made consistent with HM recent National Infrastructure Assessment for Next, the Midlands and North share of rail the Parliamentary Bill stage(s) that authorise Treasury guidance which sets a maximum level at Control Period 7 plus financial year 2029/30) enhancements was calculated . This used construction, nor is its funding confirmed . NPR 1.2% of national GDP. For the NIC, this is a ‘binding (ONS) projected populations for the Midlands is at a similarly early stage of development . fiscal remit’ and thus guides its overall National » Taking the Strategic Transport budget line and North regions as a percentage of total Infrastructure Assessments, which are periodically set out in the National Infrastructure projected population in England and Wales . The National Infrastructure Commission’s decision updated 1. As it says in its Interim Report: Assessment for 2030/1 onwards to 2045 . This allocated 44% of the England and Wales to allocate all of these costs, regardless of project This is a combined allocation for road budget total to the Midlands and North . approval status, to the Midlands and North we “Government should not be presented with a and rail, a portion of which needed to be questioned at the time . Their inclusion accounts proposed best option that is unaffordable or would allocated to strategic rail enhancements The full NIC calculation of annual and total for 83% of the developed rail enhancement crowd out investment in other infrastructure expenditures then added in budget lines budget for the Midlands and North . It could be priorities ”. In the technical annex on budget » This was calculated by subtracting expected for HS2 and Northern Powerhouse Rail argued that allocating the full costs of both HS2 setting, it added: “The principle of balancing future requirements for road and rail (NPR)—the two largest rail projects that and NPR to the Midlands and North is a further spending on rail against other infrastructure renewals from the total Strategic Transport benefit the Midlands and North . The overall expression of the wish to re-balance national spend remains relevant . The Commission will budget to protect maintenance spending, calculation is shown in Table 1 below . infrastructure spend . And it means that only the not reopen other sections of its fiscal remit and then sharing the enhancements budget balancing 17% of enhancement expenditure was recommendations to fund strategic rail ”. between road and rail based on their average calculated on the basis of a per capita allocation . shares of enhancements expenditure across the period 2020/21 to 2029/30 2 . Setting1 Regional Budgets for Rail Investment | May 2021 Previous Next Greengauge 21 | 1 Table 1: NIC budget set for the Midlands and North Rail Needs Assessment Average annual 2020 2025 2030 2035 2040 Total expenditure expenditure –2025 –2030 –2035 –2040 –2045 2020/21 to 2044/45 (£million, 2019/20) (£million, 2019/20 prices) HS2 4,600 3,900 900 – – 47,400 of which: Phases 3,800 400 100 – – 21,400 1 and 2a of which: Phase 2b 800 3,600 800 – – 26,000 A key virtue of the NIC budget-setting approach, Interestingly, even with the costs of HS2 and NPR Northern Powerhouse 200 1,200 1,700 1,700 – 24,400 in comparison with an unconstrained analysis fully allocated to the North and Midlands, the in which investments are ranked and selected NIC concluded that it would be right to test the Network Rail 200 800 – – – 4,600 Enhancements (Control in terms of their cost benefit ratios, is that it can implications of the resulting £86 .2bn enhancement Period 7 + 2029/30) overcome the inbuilt bias towards investment in budget total shown in Table 1 against two further Rail Share of Strategic – – 1,550 2,130 2,120 29,600 London and its surrounds, where traffic levels, budget variants: £86 .2bn +25% and +50% . Even at Transport Fund congestion and benefits are generally higher . the +50% level, the NIC determined that it would enhancements Instead, monies within the fiscal remit for strategic not be possible to implement the whole of HS2 and of which: North/ 100 300 700 900 900 14,900 rail enhancements are allocated region by region NPR . The reason for this is that there are also a Midlands share on a per capita basis—and for named projects set of other rail enhancement investments which of Network Rail Enhancements and (HS2 Phase 2b and NPR), to the regions where the would not be fully covered by the 17% of budget Strategic Transport Fund benefits of the expenditure are primarily targeted . which is neither HS2 nor NPR . These investments rail enhancements would likely have a high priority and cover: RNA enhancements 4,800 5,400 3,300 2,700 900 86,200 budgets: » Trans Pennine Route Upgrade HS2 + Northern » Midlands Engine Rail Powerhouse Rail + North/Midlands » Electrification and other decarbonisation projects share of Network Rail Enhancements and Strategic Transport Fund » East and West Coast Main Line and rail enhancements Midland Main Line enhancements Source: https://nic .org .uk/app/uploads/RNA-Interim-Report-Final .pdf (Note, RNA is » Digital signalling programmes . an abbreviation for Rail Needs Assessment for the Midlands and North) . Setting Regional Budgets for Rail Investment | May 2021 Previous Next Greengauge 21 | 2 While the National Infrastructure Commission (NIC) » What project budgets equivalent to those set reports set out the process, it is clear that it was for HS2 and NPR apply to the South and East? necessary to make key assumptions, with project cost estimates in many cases uncertain and at » Are their projects equivalent to Northern risk of significant inflation . Projects which cross Powerhouse Rail or Midlands Rail Engine arising regional boundaries were the subject of explicit in the wider south and east, or in Wales? simplifications, with 100% regional allocations designed to avoid the complications of sub-dividing budgets across regional boundaries . Overall, the NIC found that project cost estimates in many cases were uncertain and at risk of significant inflation . The assumptions used in setting budgets for the Midlands and the North pose some interesting challenges for attempts to replicate the approach for other English regions and Wales, including these: » Should part of the project spend for Phase 1 of HS2 be allocated to the South East and to London, where it will largely be incurred? Setting Regional Budgets for Rail Investment | May 2021 Previous Next Greengauge 21 | 3 2. Setting equivalent rail budgets for the rest of England and Wales Population-based allocations On this basis, using a population-based Table 2: English Regions and Wales population proportions 2020–2045 allocation, the following totals for rail A full set of regional allocations based on ONS enhancement expenditure apply to south North & Midlands South and East England & Wales projected populations over the period to 2045 are and east regions for the period to 2045: 4% North East 11% East of England set out in Table 2 opposite .
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