The crunch time is looming for government capital projects with all departments fighting for a shrunken fiscal pie. (Labour had already earmarked cuts in net investment from £49bn last year to £21bn this year).
Philip Hammond has been fighting the case for his department on the basis that big transport schemes can have a net economic benefit to UK GDP – more so than libraries, schools and hospitals.
But for Hammond to save his biggest priorities, such as the London Crossrail scheme – and parts of the Thameslink upgrade – he may have to abandon several big ticket items of capital spending. Don’t be surprised to see the scrapping of a] The £7.5bn order for new Hitachi Inter-city Express trains, b] about a thousand new carrriages for other lines including Thameslink and c] countless upgrades of A-roads across the country. This is aside from the pressures on his revenue spending, where fares may have to go up by 10 per cent or a similar figure in the New Year.
There is a key meeting of cabinet ministers to discuss these big decisions tomorrow (Tuesday).
The complex public-private partnership between the Agility Consortium (including Hitachi) and the government would have costed £7.5bn. However, the payments would have been phased over many years. Neither Hitachi nor the DfT are forthcoming about the exact sequence of payments and how much taxpayers would be responsible for.
The alternative, upgrading existing high-speed trains – which are already over 30 years old – will also cost money, although it will be significantly less than buying the new ones.
At one point DfT officials were concerned about the possibility of legal action, even though a final contract was never signed. They are now more relaxed about this prospect, arguing that Hitachi will want to stay on side to be in pole position for future contracts – such as those relating to new high-speed rail lines.
The case for keeping it
Agility has argued that many jobs in the north-east will be lost by scrapping the contract, having promised to build an assembly line in the region. There are also concerns that the public may become increasingly unhappy with the state of Intercity 125 diesel trains that will soon be four decades old. The new trains could have run with diesel or on electric lines. Going ahead with the deal for 882 new carriages would be a powerful statement that the government is committed to getting people out of their cars and into more energy-efficient forms of transport.
The case for scrapping it
Scrapping the Agility deal would be more politically palatable than pulling the plug on, for example, Crossrail. The contract was already frozen in February by Labour transport secretary Lord Adonis, who commissioned a review by Sir Andrew Foster.
The Foster report came out this summer and questioned the “wisdom and practicality” of continuing it in its present form. It also recommended a further review on how to proceed given that the programme may no longer be affordable.
Christian Wolmar, the respected transport expert, has argued here why scrapping the new trains would not be the end of the world – although he makes the point that a replacement of some kind will still be needed before long.