House of Commons Committee of Public Accounts Modernising the Great Western Railway Forty-fourth Report of Session 2016–17 Report, together with formal minutes relating to the report Ordered by the House of Commons to be printed 22 February 2017 HC 776 Published on 3 March 2017 by authority of the House of Commons The Committee of Public Accounts The Committee of Public Accounts is appointed by the House of Commons to examine “the accounts showing the appropriation of the sums granted by Parliament to meet the public expenditure, and of such other accounts laid before Parliament as the committee may think fit” (Standing Order No. 148). Current membership Meg Hillier MP (Labour (Co-op), Hackney South and Shoreditch) (Chair) Mr Richard Bacon MP (Conservative, South Norfolk) Philip Boswell MP (Scottish National Party, Coatbridge, Chryston and Bellshill) Charlie Elphicke MP (Conservative, Dover) Chris Evans MP (Labour (Co-op), Islwyn) Caroline Flint MP (Labour, Don Valley) Kevin Foster MP (Conservative, Torbay) Simon Kirby MP (Conservative, Brighton, Kemptown) Kwasi Kwarteng MP (Conservative, Spelthorne) Nigel Mills MP (Conservative, Amber Valley) Anne Marie Morris MP (Conservative, Newton Abbot) Bridget Phillipson MP (Labour, Houghton and Sunderland South) John Pugh MP (Liberal Democrat, Southport) Karin Smyth MP (Labour, Bristol South) Mrs Anne-Marie Trevelyan MP (Conservative, Berwick-upon-Tweed) Powers Powers of the Committee of Public Accounts are set out in House of Commons Standing Orders, principally in SO No. 148. These are available on the Internet via www.parliament.uk. Publication Committee reports are published on the Committee’s website and in print by Order of the House. Evidence relating to this report is published on the inquiry publications page of the Committee’s website. Committee staff The current staff of the Committee are Dr Stephen McGinness (Clerk), Dr Mark Ewbank (Second Clerk), Darren Hackett (Senior Committee Assistant), Sue Alexander and Ruby Radley (Committee Assistants), and Tim Bowden (Media Officer). Contacts All correspondence should be addressed to the Clerk of the Committee of Public Accounts, House of Commons, London SW1A 0AA. The telephone number for general enquiries is 020 7219 4099; the Committee’s email address is [email protected]. Modernising the Great Western Railway 1 Contents Summary 3 Introduction 4 Conclusions and recommendations 5 1 Delivery of the Great Western modernisation programme 8 Electrification of the Great Western Railway 8 Network Rail’s cost estimation 9 2 The Department and Network Rail’s approach to planning and management of infrastructure programmes 11 The Department’s case for investing in infrastructure programmes 11 Network Rail’s planning of infrastructure work 11 The Department’s management of complex infrastructure programmes 12 Formal Minutes 14 Witnesses 15 Published written evidence 15 List of Reports from the Committee during the current session 16 Modernising the Great Western Railway 3 Summary We reported in November 2015 on the staggering and unacceptable increase in the estimated costs of the Great Western Main Line electrification programme which rose by £1.2 billion in the space of a year. The extent of the serious failings in the Department for Transport’s (the Department’s) and Network Rail’s management of the Great Western modernisation programme which led to these cost overruns and a delay to completion of up to three years are now clearer. Both the Department and Network Rail accept that there were significant failings in the design, planning and cost- estimating of the programme. The case for electrification and new trains were seen as two linked programmes, rather than being managed as a whole and the accountability arrangements put in place were overly complex and failed to provide the assurance the Department needed to be an effective client of Network Rail. The serious management failings evident in this programme raise concerns about the Department and Network Rail’s ability to manage similar projects in the future, such as the planned electrification schemes on Midland Main Line and TransPennine routes. The Department’s claim that many of the passenger benefits of electrification can be obtained without electrifying the whole route raises questions about whether full electrification is the most appropriate way to achieve benefits for passengers, and value for money for taxpayers. But whilst the Department is taking this optimistic view this cannot detract from the £330m additional costs that the delays to electrification will incur. 4 Modernising the Great Western Railway Introduction Modernising the Great Western Railway involves upgrading infrastructure, trains and passenger services along the rail route that connects London with south-west England and south Wales. The Department for Transport expects electrification of the railway line to increase capacity, reduce journey times, reduce operating costs and generate environmental benefits. The programme has seen significant cost increases and is taking longer than expected, and in November 2015 Network Rail replanned the modernisation programme. Electrification of the railway line between Maidenhead and Cardiff is now expected to cost £2.8 billion, which is an increase of £1.2 billion against the estimated cost of the project in 2014. The Department also currently expects to incur costs of up to £330 million as a result of delays to electrification. Electrification of some sections of the route will be delayed by up to 36 months. Some parts of the electrification project, such as between Bristol Parkway and Bristol Temple Meads, have been deferred to the next rail investment period (2019–2024). The Department is revising its business case for the entire modernisation programme, which is expected to be completed in March 2017. Modernising the Great Western Railway 5 Conclusions and recommendations 1. It is not clear whether the Great Western electrification project can be delivered to the revised target of December 2018 and budget of £2.8 billion. The estimated cost of electrification increased by £1.2 billion to £2.8 billion by the end of 2015 following Network Rail’s replanning of the project, which also identified delays to parts of the project of 18 to 36 months. The Department and Network Rail are confident that the project is now on track as important milestones have been met. But Network Rail admitted that there are still “very significant risks” to be managed and noted that “every single part of the programme is absolutely on the limit”.1 The most recent risk analysis indicates a financial exposure of £274 million, £49 million more than the £225 million of contingency currently available and risks still remain that costs could increase further. Recommendation: Network Rail must ensure that all risks to the project are identified, monitored and controlled and use this information to identify with the Department the critical path for the whole modernisation programme, setting out how the infrastructure, new trains and planned services will interact with each other by March 2017. 2. Network Rail failed to plan the infrastructure work properly. Network Rail admits that the early stages of the project were not carried out in an appropriate way. The initial design was incomplete. The cost estimating was not good enough and it started construction before it had the necessary permits and consents in order to try to meet the schedule. Network Rail’s failure to put in place an adequate plan to obtain the more than 1,800 separate consents it needed from local authorities, such as permission for works that could affect protected species or listed buildings, led to higher costs. Network Rail could not explain why it had not sought to avoid these problems by obtaining an Order under the Transport and Works Act enabling the Secretary of State to have granted planning permission for the whole scheme. Recommendation: Network Rail must improve its ability to produce realistic cost estimates, including making greater use of data from completed projects. Network Rail must make sure that robust and detailed plans, including a critical path, are in place for infrastructure projects before starting construction works and consider whether an Order under the Transport and Works Act would be preferable to multiple individual planning consents and other approvals. 3. The Department failed to challenge Network Rail’s plans effectively despite the very significant sums of public money at risk. Depite being liable to pay £400,000 per day to lease new trains that could not be used until the overhead electrification was complete, the Department did not adequately challenge Network Rail’s plans to carry out the infrastructure work. Instead, it left the role of scrutinising Network Rail’s plans to ensure they were both deliverable and the most efficient way of carrying out the work to the Office of Rail and Road. The Department accepts that this system was too complex, “much weaker and less reliable than [it] thought”, though it believes that it has since put in place a “very clear structure of accountability”. 1 Qq 55, 58 6 Modernising the Great Western Railway Recommendation: The Department must ensure that it has obtained suitable assurance over cost and deliverability before taking decisions on infrastructure investment and other major decisions which depend on infrastructure being available. It must set out how it will continue to develop its own programme management expertise, and how it will use this to monitor Network Rail’s delivery. 4. The Department failed to integrate all the elements needed to deliver benefits for passengers successfully at the planning stage, and did not manage the programme in a joined-up way. Until 2015, the Department managed the different elements as separate but related projects, rather than as one single integrated project, even though improving services for passengers required all the elements to be completed on time. The Department should have had an integrated business case for the programme sooner than March 2015, bringing together the new infrastructure, new trains and service patterns.