Tag Archives: Channel Tunnel

High-speed rail: let’s just copy the French

So the potential route for a high-speed rail line from London to the Midlands, North and Scotland has finally been announced. Cross-party support for the concept suggests that it may be built one day. But in Britain, that’s no guarantee that it will.

We, as a nation, have a lamentable record on major infrastructure projects, especially regarding transport. The politics is wrong, the process is wrong and the funding is wrong. Take two examples from rail and aviation.

The French built their high-speed, long-distance rail link to the Channel Tunnel before it opened. Britain opened our 67-mile branch 15 years after the Tunnel opened. The French link was built with public money; ours with private money that was inevitably bailed out by the state anyway. The French decided their route quickly and got on with building it; we spent years blighting large areas of Kent while a wide range of routes was considered, as much for political-electoral impacts as for geography, heritage and ecology.

Heathrow’s Terminal 5 opened in 2008, 25 years after it was first proposed. The planning inquiry alone took four years, during which time the French conceived, planned, approved, built and opened two new runways and another terminal at Paris Charles de Gaulle airport. And T5 was to be built within the airport boundary, between the two runways, on land then only being used for a sewage farm.

I remember taking a party of UK transport journalists to Charles de Gaulle as part of the T5 campaign and asking my French counterpart how long the planning inquiry took to approve the new terminal. His bemused reply was: “But we had no inquiry. We just applied to the council and they approved it. It’s just like applying for an extension to your house.” Even the compulsory consultation over compensation for local residents only took three months. Then they just got on with it.

After the T5 debacle, the Government said enough was enough and Deputy PM John Prescott initiated a review of planning that led to the creation of an independent Infrastructure Planning Commission for major infrastructure projects of national significance. The aim was that Government would set strategic priorities (ie whether there should be a new high-speed line or runway), and the IPC would determine how and under what conditions a project is delivered.

So what hope for High-Speed Two to Birmingham and beyond? I can see several pitfalls that will at best, delay and at worst, kill off this bold scheme.

First, the route will drive through the Conservative Chilterns and I can’t see a Conservative Government being eager to alienate true-blue voters in Bucks, Beds and Oxon. A Labour Government wouldn’t care – as these people don’t vote Labour anyway (just as it was no surprise in 2003 that Stansted was chosen over Heathrow for a new runway, given the dearth of Labour seats in north Essex and the plethora under Heathrow’s flight paths).

Second, heritage, environmental and other interest groups will band together to fight it and join forces with affected communities. The National Trust has already weighed in. Other Luddites and flat-earthers will follow.

Third, there will be continual haggling over the inclusion of Heathrow. While a route via Heathrow would benefit business users and encourage a switch from some domestic air travel to rail, it doesn’t make economic sense for the project. That won’t stop the strong business and regional lobbies pushing for it, adding to delays.

Fourth, we just never seem to find the cash for mega projects like these. Crossrail will have taken 30 years from when it was originally proposed to opening in 2017, and just look at the mess over the London Underground upgrade – and that’s a crisis over a mere £460 million, not the £30 billion plus that HS2 will cost.

And finally, if the Conservatives win power they have resolved to strip the IPC of its independent authority and make the Secretary of State responsible for the final decision, making the whole thing rest on political, not economic, variables. Back to square one.

I didn’t expect ever to say this, but sometimes (not in matters of personal hygiene and military strategy, of course) I wish we could be a little more like the French.

Government for sale

Watch out: the Government is on the scrounge. Ministers are looking for about £500 billion to invest in the UK’s infrastructure over the next ten years in areas like energy, water, transport and communications.

Given the constraints on public finances, the Government is looking to the private sector to fund this investment. The increased capital requirements on banks largely rule them out. This means that pension funds and insurance companies are seen as the more likely candidates to be approached with the ministerial begging bowl.

In his Pre-Budget Report last year, the Chancellor, Alistair Darling, established Infrastructure UK to identify and attract new sources of private sector investment in infrastructure. It will develop a strategy and list of investment priorities for the next five to 50 years to be announced in Budget 2010.  And now that various ministers have “gaffed” by stating the obvious that the general election will be on 6 May, this will definitely be Alistair Darling’s Budget and not George Osborne’s.

Infrastructure UK will be a heavyweight body. It will be chaired by former Rio Tinto chairman, Paul Skinner. But crucially it will be the focal point for the Government’s infrastructure strategy and advice. It will swallow up the Treasury’s PPP policy team and Infrastructure Finance Unit and those functions of Partnerships UK that support the delivery of major projects and programmes.

Ministers have already approached the pensions industry. But rather than expect to have their tummies tickled as they are asked to stump up for the Government, funds and insurance companies need to be clear about what they need in return. For instance, how will risk be shared, particularly during early construction phases? What can Ministers do to raise credit ratings that are often graded at BBB? And will insurers enter into negotiations only to find themselves hammered by new Solvency II rules from the European Commission that restrict their freedom to invest in large-scale infrastructure projects?

Ministers are also looking to sell £16 billion of Government assets by 2013-14, possibly by establishing new companies in which the public as well as pension funds would be offered shares. These disposals will be handled by the Shareholder Executive, which was set up by the Government in 2003 to carry out its role as shareholder. The Executive manages a portfolio of 29 businesses with a collective turnover of about £21 billion. These include esoteric parts of the public sector such as the QEII Conference Centre (currently staging the Iraq war inquiry), the Covent Garden Market Authority and the UK Hydrographic Office.

Early candidates for disposal include the Tote (again), the high-speed rail line to the Channel Tunnel, student loans and the Dartford crossing.

Any investor thinking about taking these off the Government’s hands will need to consider more than just the financial aspects. There are some potentially tricky stakeholder and industrial relations issues which new owners will need to address, particularly if the Government tries again to sell a stake in the Post Office or when it comes round to disposing of Northern Rock.

Investors will need to think through their messages and what they offer for customers/users, politicians, public sector unions and regulators. Failure to do so could lead to costly reputational damage. They may end up paying a lot more than they bargained for.