Some Edinburgh City councillors already privately refer to the city’s tram project as the problem that “cannot be named”. Much as actors refer to Shakespeare’s tragedy as “the Scottish play”, superstitions of bad luck now bedevil the production. A dramatic shift from the optimism that initially characterised the development of the Edinburgh tram, towards pessimism.

That which cannot be named is no longer just the failure of a flagship local transport policy. The issue has engulfed the City of Edinburgh Council, and now risks destroying local politics completely: Not only the existing administration, but public trust in local government decision-making.

Political heavy-weights, who normally shy away from the minutiae of local governance, are now offering parental guidance in public: Alistair Darling (local Member of Parliament, and former United Kingdom Chancellor and Secretary of State for Transport) described the option to borrow £231 million ($370 million) to complete the city centre section of the tram line as “absolute madness” – the local population would be saddled with vast debts. Days later, Graham Birse (chief executive of the influential Edinburgh Chamber of Commerce) called the decision to not complete the city centre section, “bonkers” – far fewer passengers would use a tram that did not serve the city centre adequately. Even Alex Salmond (Scotland’s First Minister) has become directly embroiled, struggling to contain calls for an immediate public inquiry to identify who is responsible.

Burn the witches! This Scottish tragedy is rapidly descending into farce. That would be unfortunate, because this particular local difficulty goes to the heart of the Scottish nationalist agenda: A desire for greater devolution of public funds to local level. More localised independent entities have fewer financial resources, so are less able to manage expensive, risky projects. Consequently policy ambitions also need to be scaled back. Such scale isn’t necessarily a problem – small can be beautiful. The problem lies in pretending to be big, when not.

This article introduces the concept of risk in tram (and similarly large public transportation and infrastructure) projects, chronicles the decisions that lead a relatively small local authority to need to find hundreds of millions of pounds to support a single project, and explores the implications for future policy-making, especially in the context of a more devolved Scotland. On this page:

• Tram Cost Uncertainty
• Devolution of Chaos
• Scaling Ambition
• Appendix: Policy History of Edinburgh Trams

Tram Cost Uncertainty

I have previously discussed why estimations of the cost of large transportation infrastructure projects (especially light rail) are both inherently inaccurate, and tend towards optimism. Edinburgh Trams transpire to be an extreme example: From £375 million estimated for the original 3-line network, via £545 million for a more pragmatic 2-line network, to over £1 billion for today’s single line (which is still far from completion).

However, this uncertainty was somewhat predictable: The graph below is taken from Bent Flyvbjerg’s 2004 Procedures for Dealing with Optimism Bias in Transport Planning, guidance issued to central government alongside HM Treasury’s Green Book. It shows the probability that the cost of rail projects (including trams) will exceed the estimated budget.

Distribution of Rail Cost Overruns (Bent Flyvbjerg, 2004)

(Data is based on analysis of 46 rail projects from across Europe and North America – UK has few recent rail schemes, however comparison of road schemes suggests patterns are very similar for all regions.)

The average cost overrun is about 40%. In the planning/appraisal process 40% is literally added to the estimated cost of a project as “optimism bias”. Optimism bias is part of Scottish Transport Appraisal Guidance, to which the Edinburgh Tram was subjected, although the original tram analysis pre-dates formalised optimism bias.

The 40% value should protect the UK treasury:

• Over many separate projects, cost overruns will average to zero. Broadly, in the long-term, the treasury will remain balanced, without requiring individual projects to be micro-managed from the top of government.
• Individual project costs are in the hundreds of millions (£). These are still a tiny proportion of UK Gross Domestic Product, taxes collected, or ability for the UK government to take loans. The national economy will not be thrown into a crisis if one specific project goes badly wrong.

Unfortunately, merely adding 40% adds a sense of certainty to an individual project which remains uncertain. For the immediate funders of a project, the important question is, can we fund a cost overrun of 80%? For the City of Edinburgh Council, the answer to that question was effectively, “we cannot”.

A quick glance at the council’s budget puts the tram in perspective: The council’s total annual capital budget (for investment in everything) is only £235 million, less than a quarter of the capital cost of one tram line. Typically transport accounts for 20% of local government capital expenditure, so we might expect a local authority like Edinburgh to be investing around £50 million each year in transport projects. Placing over 10 or 20 years worth of investment into just one project suggests a tram scheme was far too ambitious to ever be a local government responsibility.

Not only do councillors appear to be losing a high-stakes casino game, but they seem to be playing with all theirs chips on the table.

However, the tragedy is not so simple, because while the City of Edinburgh Council are responsible for the tram project, they are not the only funder:

Devolution of Chaos

Conventionally in Britain, higher tiers of government act as financial guarantors for low tiers. A local authority has statutory (in law) responsibilities, and hence cannot “go bankrupt”, however badly it manages its budget. This hierarchical structure is not accidental: It is rooted in currency (money itself), for which central government is solely responsible. In practice central government imposes strict financial controls on local government, which limit the scope for mis-management. Historically important cities, such as Edinburgh, also tend to own a lot of local assets (like property), which can be sold in a crisis.

1990s Scottish devolution did not devolve money, it just altered the hierarchy slightly, with an extra decision-making tier (the Scottish Parliament and their civil service, the Scottish Executive) in between Edinburgh’s council and the United Kingdom’s central government.

In addition to keeping a watchful eye on how the council manages its budgets, the Scottish Parliament is part-funding the Edinburgh Tram – providing extra money beyond normal budgets or spending approvals. The Scottish Parliament’s contribution (currently via Transport Scotland) is limited to £500 million [PDF]. And herein lies the problem: When that funding package was agreed, the local council’s contribution was the remainder, just £45 million, a value broadly attainable by the local authority. But since Scotland’s contribution is fixed, every time the estimated price rises, the City of Edinburgh Council’s contribution rises out of proportion: Without other sources of funding, a doubling of project cost to £1 billion is actually a ten-folded increase in the cost to the council…

By attempting limit the Scottish Parliament’s exposure to the tram project, all the risk has been transferred down the hierarchy, towards the tier of government least able to raise large amounts of cash in a crisis.

Brinkmanship of the worst kind? In the interim, the council’s response is to control escalating costs by reducing the length of the route to be completed, with apparent disregard for whether the resulting tram track connects places large numbers of passengers might want to travel between. Underpinning their decision appears to be one of the worst assumptions of “modern” accountancy: That the asset value of a (tram) service is defined by the cost of constructing the infrastructure on which that service operates. Strategically, the value of the (tram) service to the city of Edinburgh is linked to the number of passengers that use it. Cynically, to the number that see it. Even commercial assets that are technically transferable (like land and tram vehicles) tend to sell for a lot less than they were bought. Scottish government’s reaction to the council’s decision was to withhold part of Scotland’s funding contribution, effectively forcing the council to reach a different decision [the following Friday, 2 September, the city centre section was added again].

With Scottish national government substantially funding the Edinburgh tram, and the project appearing too risky for local government, perhaps the Scottish level of government should have conceived and manage the project from the outset? The appendix at the bottom, Policy History of Edinburgh Trams, will help explain.

Haymarket Tram Terminus? Existing bus to Edinburgh Airport, with new tram station “under construction” on the left (August 2011)

Scaling Ambition

Broadly, there are 2 viable methods of containing risks on the scale of the Edinburgh tram:

• As a Scotland-level public project: Even £1 billion is only around 1% of Scotland’s Gross Domestic Product, a magnitude of (over-) spending that should be manageable by a truly devolved Scottish government. The Scottish Parliament has subsequently established an organisation (theoretically) capable of managing transport projects at this level, Transport Scotland.
• As a primarily private project: Most modern tram systems built in England transferred risk to the private sector (rather than Edinburgh’s model of merely contracting private sector suppliers). Scotland’s past record on private sector transport projects is poor (most obviously on the Skye Bridge), because policy changes too fast.

Unfortunately neither of these methods complement good local public governance: Decision-making and responsibility becomes remote from local politicians. Ultimately, this would dilute the role of local authorities: Logically to organisations that deliver (statutory) local services and act as “community council” talking shops, with no ability to actively shape or invest in the long-term future of their own areas.

That may be where Scotland is heading: Far greater centralisation of powers at Holyrood (the Scottish Parliament), drawn simultaneously from both Westminster (UK government) and Scottish local authorities. Such a structure might even work, and would address one of the major post-devolution issues – “too much democracy”.

However, the most important lesson of the Edinburgh tram is not that such projects should be managed more centrally. Rather, that capital investments should be scaled to match the scale of the government trying to deliver them: The tram’s fundamental failing is that it is too expensive (and consequently risky) a mode for a local public transport project. If an inherently local policy can only be enacted by a non-local government, then (I argue) it is the wrong policy. Local policy ambitions need to be scaled down to what is reliably achievable at local level.

The issue will become critical for a future Scottish government with financial independence from the rest of the United Kingdom (a distinct possibility, given the current dominance of the Scottish National Party). Scotland represents approximately 10% of the UK population and economy. This implies that a truly independent Scottish government could only safely manage 1/10 the amount of risk that the UK government is capable of managing. Meaning, the most ambitious project an independent Scotland could achieve would be 90% less ambitious than a UK-backed project.

Scotland’s current transport projects are still reasonably modest, like reopening short sections of old railway line. But it is easy to imagine the Scottish Parliament’s ever-increasing ambition proposing grandiose projects that the UK might contemplate, but which could bankrupt Scotland – like a new high speed rail network: A core route serving Scotland’s largest 5 or 6 cities, with an under-sea tunnel to Lerwick in phase 2…

The challenge for Scotland is not to pretend to be big, to still be part of the British Empire, or a modern-day China. Quite the opposite: To deliver the same (or better) policy impact, while the maximum cost of individual projects is limited to a tenth what the population has learnt to expect. Overall expenditure would not be reduced – there would simply be far more, smaller, projects. Fortunately, there’s a lot more scope to improve the humble bus stop than you might think!

I suspect Scotland’s history already contains the best example of what can happen when a nation stops pretending to be big, and instead focuses on itself: The original Acts of Union (with England) removed colonial and military distractions, allowing Scotland to develop domestically as an intellectual and commercial 18th century power-house.

The management of chaos (of which financial risk is a part), may become one of the great challenges for structured 21st century government, regardless of size. Paradoxically, the easiest way to manage chaos is not to have to: To foster a system where no one part is too important to fail.

Appendix: Policy History of Edinburgh Trams

The idea for the Edinburgh tram was originally developed by the Scottish Office (the pre-devolution civil service responsible for administering Scotland), as part of a package of transport measures for south-east Scotland, to be funded by road pricing (tolls on car journeys within Edinburgh).

3 conditions made Edinburgh a perfect target for such ambitious transport policy initiatives:

1. Transport was (is) a constant source of annoyance for many city residents – a “political hot topic”.
2. Edinburgh’s geography – densely populated, but hilly – historically lead to above-average local public transport use, with bus travel remaining socially acceptable among Edinburgh’s “middle classes”.
3. Minimal democratic interference (the Thatcher/Major governments contained almost no Scottish Members of Parliament) allowed Scotland’s civil servants to focus.

The first Blairite UK government (1994) heralded both devolution in Scotland, and a shift in transport policy towards public transport. That combination should have been perfect for Edinburgh, except that the Scottish Executive (the devolved equivalent of the Scottish Office) became considerably more focused on managing opinions. Which in transport, has a tendency to result in nothing…

Instead, policy momentum was picked up by the recently liberated (from Lothian Regional Council during local government reorganisation) City of Edinburgh Council: Local ambition steadily grew, from “Greenways” (networks of bus lanes) in the early 1990s, through guided busways and radical parking policies, to strategies based around trams and road charging.

Charging proved too radical: Scottish government compelled Edinburgh to hold a referendum – but only on road pricing, not the trams that pricing had originally been intended to fund. Edinburgh’s population naturally rejected road pricing in isolation – Turkeys don’t vote for Christmas – and the tram project proceeded with traditional forms of funding.

In spite of (initially) primarily being funded by Scotland, the trams were local in scope (with no tangible benefit to anyone outside Edinburgh), and hence construction was “managed” by the council. This was done through Transport Initiatives Edinburgh, a council-owned company established to deliver Edinburgh’s light rail scheme – something which it has since struggled to achieve.

It didn’t happen. Neither the threat to prosperity, nor the policy:

• Environmentalists rallied against the few early projects (famously turning the Newbury Bypass and Twyford Down into civil battlegrounds) – road-building became politically negative, rather than positive.
• There was never really enough money in national budget to fund the policy – increasingly obvious as the UK economy dipped into the recession of the early 1990s.
• Even with the policy, roads would still be built slower that road traffic was growing – it was not possible to “build your way out” of the problem. It’s worse than it first seems, because new roads generate additional traffic growth, requiring more road capacity, generating more traffic…

The legacy was apparent in Tony Blair’s first Labour administration (or more accurately, John Prescott’s, the minister who led the transport and environmental agendas in the late 1990s): Much greater emphasis on sustainability, local projects, and use of forgotten modes, like buses and shoes.

Now, step forward 20 years to 2010.

The Secretary of State for railways and other transport, Lord Adonis, announces plans for a new high-speed rail line between London and Birmingham. At least £15 billion ($23 billion) for the first phase, rising to £30 billion with extensions further north. (Read those figures with caution – the costs of the previous West Coast Mainline upgrade project increased so much that nobody could remember how low the initial estimate was.) Inflation means that the cost of this latest rail project is only about half the (real terms) cost of Roads for Prosperity. But Roads for Prosperity proposed thousands of miles of highway, across many different locations, compared to a few hundred miles of railway track between a few large cities. And “Railways for Prosperity”, as I’ve corrupted the latest proposal, doesn’t have the pretence of strategy.

Politically it’s work of genius – the benefits flow to the political class (who tend to use trains), especially those living in increasingly marginal electoral territories in the West Midlands and North-West of England. Meanwhile, the Peoples’ Republic of Great Missenden (and soon likely every other other community near the route) is up in arms because the totalitarian regime they likely never voted for, has decided to build a railway – without the local station necessary for them to commute to London. I exaggerate, but only slightly.

Forget the “high-speed” aspect of the title. Operationally, the need is to increase capacity (see the box below). Make space for more trains on one of the busiest railway lines in Britain. More capacity creates more redundancy in the system, which makes it easier to recover from operational problems, and so makes trains more reliable. From bitter personal experience as a passenger, I suspect reliability is worth more than speed here. Of course, “better reliability” sounds a lot vaguer than “30 minutes faster”.

Read beyond the concrete, and the talk is all about “economic growth”, and “jobs”, and.

It’s at times like this that I want to pick up a shotgun and blow my brains out. 20 years later we’re back where we started. And nobody seems to have noticed.

This article uses historic examples to question the strength of the relationship between transport and the economy. It highlights the political biases towards railways, and their funding. The article explains why grand transport projects remain popular, when their overall impact on problems is often minimal. Rough analysis is presented that demonstrates the futility of building new railways – the 21st century reality, that we simply cannot afford to continue enlarging our transport networks in response to increased passenger demand. Finally, a stark comparison is made between communications and “transport” policy, which questions the validity of spending 15 times more on a new railway, than on a core element of “digital” inclusion. Along the way, the article clarifies a few popular misconceptions, from the influence of Unionism, to the impact of “integration”. On this page:

• Transport and Economy
• The Allure of Railways
• Train Sets
• Sorry, We Can’t Afford It
• Digital Britain

The title illustration is of a life-size Thomas the Tank Engine, at Kidderminster, by Mike Warren (with apologies to Chris Haynes).

Box: How Empty Tracks can be Full
The West Coast Mainline is the busiest (long-distance) inter-city route in Britain. It links the 3 largest cities in the country (London, Birmingham, Manchester), as well as serving their hinterlands. And Liverpool. The southern section, from Birmingham to London, is especially busy. Yet someone observing the track would spend most of their time doing just that – mostly, the track would not be occupied by a train. A road under the same conditions would be considered “empty”. It is unrealistic to operate a high-speed train at intervals smaller than about 5 minutes, because safe distances need to be maintained between trains moving on the same tracks – especially those slowing down to stop at stations. Unlike cars, trains moving at over 100 miles per hour take rather a long time to stop. It’s probably unrealistic to operate trains along the West Coast Mainline every 5 minutes reliably, because of the complexity of the railway: Trains from many different cities have to seamlessly fall into a timed “paths” along the southern section of the route. That sounds easy, until you realize that long-distance trains often use the same tracks as local and freight trains, any one of which can cause delay. For example, a late-running local train at Coventry delays an inter-city train from Wolverhampton, delays another from Glasgow… and the whole schedule starts to collapse like a “house of cards”. Junction improvements and faster train acceleration (the previous “Virgin Trains” upgrade) can help. But eventually more trains just require more track to run them on, even if everything still seems rather empty and under-utilised.

Transport and Economy

The “Highway Development Survey 1937 (Greater London)” is a fascinating read. Not because you can clearly see the route of London main orbital motorway, the M25 – a road that wouldn’t open for another 50 years. Nor for sections like “Access to Aerodromes”, which notes the “unsatisfactory character of the surface communication between towns and their aerodromes” – something London Heathrow is still struggling with. It’s that the strategy is built on the analysis of burgeoning road traffic growth. Between 1922 and 1936 the number of motor vehicles per mile of road in Great Britain tripled. Tripled! In little more than a decade. Probably would have quadrupled were it not for the Great Depression. 15 vehicles per mile of road won’t have caused many traffic jams. But it surely indicates what is to come…

Post-war, US-style, multi-lane urban freeways (motorways) were proposed, which by the late 1960s had simply proved too expensive to construct. London’s drivers were destined to struggle through endless traffic jams. It’s public transport users doomed to rely on much the same railway network as their Edwardian ancestors.

So surely the economy of London collapsed as a result? Erm. It transpires not. London’s economy generally leads UK’s economic growth, in spite of (by popular agreement) having the worst “traffic problems” of any British city.

Curiously, Birmingham, which did build an urban motorway round its city centre, has spent the last 20 years trying to get rid it again. Why? The inner ringway constrained the geographical size of city centre, which actually inhibited economic growth. By making it more desirable for pedestrians to cross the ring-road (by diverting traffic, or demolishing the road entirely), people and businesses were prepared to use space outside the traditional centre, and the (tertiary) economy bloomed: The result is most visible in the old Bull Ring area of the city, where former light-industrial land is now covered in expensive retail and office development. Ironically enough, this is close to the location of new (technically, reopened) Curzon Street railway station – the proposed terminus of the new railway.

That economies thrive in spite of imperfect transport systems should not be a surprise. For a few decades prior to the 1880s, influential London residents (in particular) were worried about the rapid expansion of their city, and the growing need to transport goods (in particular) across that city. Remember, an urban population, by definition, are not growing the food they eat – freight transport is absolutely fundamental. “Solving transport” is seen through a very similar prism as previous improvements to water supply and sewers: An essential part a modern city. Many of the engineers involved with water schemes, such as Joseph Bazalgette, later became involved in transport projects. While the early development of the London Underground (a passenger system) tends to dominate popular history, there were many freight-based proposals, some of which were even built – Pneumatic Dispatch (wagons propelled by air through underground tunnels), Hydraulic Power (distributing hydraulic power to industries, instead of moving raw coal), networks of pipes conveying telegram messages.

The 1866 financial crisis dampened enthusiasm for funding these marvels of modern engineering. Those networks that did exist, failed to expand as fast as the city. Yet people didn’t starve. In fact, London became one of the most (financially) successful cities on the planet. Freight was largely forgotten, even though freight transport remains far more important to a modern human’s survival than most humans realise. Meanwhile, passengers complain when travel impedes their lives, because they (generally) didn’t even want to travel, so lose patience rather quickly. Add the mixed public-private ownership of most transport systems (for example, government provides the roads, individuals provide the cars) – and the general confusion over “who is responsible” this causes – and passenger transport became a political issue.

My examples are all urban, because the impact of local transport is altogether easier to understand than long distance (inter-regional) transport. For example, a cynic might conclude that long-distance transport simply makes it easier for economic activity to be located somewhere else. Consequently specific transport improvements just move the same economic activity round the country, on balance, gaining nothing. I’m not that cynical, but you can see how complex this debate can become.

Transport clearly does have an influence on economic activity. Modern freight distribution systems are fundamental to the existence of urban society. Passenger railways made it possible for European cities to extend into suburbs, much as mass-ownership of automobiles in North America fuelled “endless” suburbia. Modern academic studies tend to support the idea that transport fosters and supports economic development – The Eddington Transport Study provides a lot of fairly recent “economic” evidence. Indeed, rudimentary economics states that transport is a derived demand (you move in order to perform some other economic activity, the movement itself is wasteful economically), so there has to be a link, otherwise we wouldn’t bother moving.

But looking back through history, 2 conclusions emerge:

• Transport has a relatively unimportant influence on economic activity, compared to other activities within the economy.
• The impact of transport on the economy always seems more important to decision-makers at the time, than it actually transpires to be.

Ah. But. No. I’m not going write a thesis on transport and economic development.

But you should start to question “motherhood and apple pie” statements made about the impact on the economy of expensive “train sets”. History suggests that investment in big transport projects isn’t half as important as anyone promoting it thinks.

The Allure of Railways

One of the most fundamental misunderstandings in British public transport policy is that all modes are not created equal. A bus and train are not inter-changeable units of carriage, even though both appear to do the same thing – move lots of people from one place to another.

People that travel by train tend to avoid buses, and vice-versa. Rail tends to be a more expensive method of travel, more likely to serve wealthier suburban areas, while buses pick up passengers from deprived inner cities or estates. Issues of social status and “class” lurk. This doesn’t apply to everyone, and there are local variations: For example, in parts of Hampshire, rail and bus fares can be very similar. In a city like Edinburgh, professional “middle class” people happily ride around on buses. But overall, the situation looks like this:

Data is from the Great Britain National Travel Survey, 2006, Table 5.4. Travel behaviour is divided into 5 household income “quintiles”, the poorest people on the left, wealthiest on the right. Annual miles travelled by bus (and coach) is shown on as a dotted line, rail as a solid line. The poorer your household, the greater the reliance on buses. The wealthier, the more use of trains.

This is important for 2 reasons:

1. Biasing government investment towards rail is a bias towards the wealthy members of society. The opposite of just about every social policy agenda (concerns about income inequalities).
2. Those with higher incomes tend to form the “political class” – people that will let their politicians know when they’re unhappy. Naturally, the political class tend to use trains. So political policy tends to favour trains, especially in the absence of a clearer strategy.

The best evidence for the second point can be found in industrial relations. The box explains how the travel preferences of the political class have influenced the pay of their drivers. The second box explores why we still seem so emotionally attached to a mode of transport we mostly don’t use.

Box: The Raven
Britain’s train driver now earn about twice as much as bus drivers. My figures are approximate, un-sourced, but I doubt anyone would dispute that there is a large gap, nor that the gap has widened over the last 25 years. Both jobs are similar: Safety critical, yet rather dull and repetitive. Skilled work but, not, I would argue, as skilled as professional roles like teaching or management. Yet train drivers often earn far more than those 2 groups. How have train drivers managed to inflate their earnings so high? One word: Strikes. No rail operator can survive its drivers (in particular) withdrawing their labour for a long period. Training a railway driver takes upwards of a year. The operator is probably already employing everyone that knows how to drive their trains along of their routes. The political classes travel on trains, and suddenly not being able to travel on trains, annoys these people. Rail services are (almost always) operated as government-let franchises, so politicians have genuine leverage over operators that are “upsetting” their customers. And since staff costs are still less than third of total operating costs, drivers can be paid even more, without immediately bankrupting the business. In contrast, when bus drivers strike, misery tends to be inflicted upon the people that don’t complain loudly. Alternatives like “just walking” are more viable, because buses tend to serve shorter distance journeys. New drivers can be trained in a matter of weeks, or imported from other operations, or Poland – presenting many more negotiating options. Staff turnover (churn) is much greater among bus operators – the constant arrival of new staff makes new working practices easier to introduce. And, perhaps most importantly, wages are already at least two thirds of total costs, so managers have almost no flexibility to increase wages without increasing the fares charged to passengers. So while labour relations are also rather poor in the bus industry, the same escalation of wages hasn’t happened. Bus driver wages are much more closely linked to prevailing wages for similarly skilled work.

Box: A Curious Love Affair
This British “love affair” with trains may seem curious, given that they account for under 2% of all journeys and only 6% of all miles travelled [NTS]. Travel is fairly unpleasant, so historically, “glamour marketing” has been used to offset the unpleasantness of the reality. This works especially well for a new mode of transport, that only the wealthy can aspire to travel upon. For example, flight involves being suspended high in the air, with only some rather flimsy-looking engineering separating you from certain death. Why would anyone want to do that? Yet until the arrival of low-budget airlines, aviation maintained much of the glamour that had been associated with flight in the earlier part of the 20th century. And much the same was true of railways. There was nothing terribly pleasant about bumping along behind a hot water tank on wheels, that would occasionally deposit hot embers and sooty ash upon you. Yet we still continue to romanticise “the age of steam” – even a population that (mostly) never experienced it. Perhaps it provides a subtle reminder to Empire – a time when “Britain was Great”? Not that most people are old enough to remember that either.

Train Sets

I attribute the phrase “train set” to a director of one of the large public transportation operating groups. But sadly, almost anyone working in local public transport at a strategic level, could have said it.

The term is typically applied to “pet projects” of government, planners, politicians, and other interest groups, such as local business organisations. These proposals can pre-occupy their supporters for decades, even though their net contribution to overall problems and issues is relatively minor. The unspoken parallel is to a child playing with a scale model/toy train. I think train sets have 3 defining characteristics:

• Organisational problem solving prioritised ahead of user problem solving. For example:
  • Local government often pursued tram (light rail) projects during the 1990s, even when very few were being funded. A common reason was that they could exercise political control over the operation of trams, while bus services had been de-regulated – in some cases, literally “taken away” from local politicians and sold to commercial businesses.
  • Commonly a project will solve a problem that has been really annoying certain people for a very long time. Maybe every good idea they have seems to falter because of this problem. Or it’s on their route to work each morning. Their bias is not intentional, but it will build up over years. The problem may be real, but solving it might not have such a huge impact. Which leads us to:
• Single project prioritised ahead of area-wide schemes. A major project like a railway will only ever be routinely used by a fraction of the people living in the places it serves. And most people don’t live anywhere near. It’s simply inevitable that one grandiose project will fail to influence the travel patterns of most people. In contrast, area-wide strategies can have much a broader impact, potentially affecting far more people. “Train set” projects are focused because they are grand, expensive creatures, which are consequently far too expensive, requiring too many specialist resources (such as railway signalling engineers) to build everywhere at the same time. As I will explain later, they are actually too expensive to ever build everywhere, which is a far more fundamental problem. So why propose such single projects? There are “spill-over benefits”: For example, businessman now commutes to Birmingham more often, does more business, employs more people. But the real explanation lies in:
• Perception prioritised ahead of effectiveness. Most major transport projects have almost nothing to do with transport. Really. They’re built to convey image. Change perceptions. The fact they happen to be useful for travel is almost secondary. The people being influenced may not even use the new transport service. This marketing function is very important: Cities and countries thrive (or not) on their ability to attract certain people, businesses, and so on. But understanding that we’re buying prestige is important, because other methods may be more cost-effective. The box compares the perception of trams in Manchester and Birmingham. (I could equally have selected Edinburgh’s trams, the development of which was influenced by the local business community’s desire to look a little bit more like London – more trains, less buses. Or just picked on my favourite sacrifice on the altar of “better than you”, North Korea’s Ryugyong Hotel.) Ironically, given the tendency of perception projects to contribute little to transport, such projects are increasingly used by politicians as physical evidence that “something is being done”. As I discussed in Valuing Nothing, effective government policy often addresses intangible problems, yet the political arena is still structured around tangible things.

Box: Tram Spotting
Birmingham has a tram line. Manchester has a tram line. Manchester’s tram line runs through the city centre, physically apparent to anyone that visits. Birmingham’s tram line terminates at the edge of the city centre, physically invisible to anyone that isn’t already riding. Both lines provide an adequate transportation function (for those that are travelling along the route). But Manchester is the clear winner in terms of perception. Such is the rivalry between Britain’s “second” largest cities, that it became inevitable that Birmingham’s tram should be extended through the city centre. And sadly for Birmingham, almost 15 years after the first detailed public consultation on the extension, the project is still “being planned“. I can only assume that Birmingham’s politicians will have been cheered by the news that Manchester’s high-speed link has been relegated to a sometime-maybe-never second phase of construction…

I’m not privy to all the politics surrounding the latest railway announcement, but it isn’t hard to fit the “train set” analogy:

• The lack of spare track capacity on the southern section of the West Coast Mainline has been the bane of railway planners and schedulers since as long as anyone can remember. While there is a genuine issue here, it might not be as important as, say, access of pensioners to Post Offices.
• Rail travel accounts for a tiny proportion of all journeys nationally, and one line simply doesn’t have the capacity to grow that share significantly. Not the mention that the vast majority of those journeys aren’t anywhere near the route. Anyone expecting to see measurable changes to wider national travel behaviour will be disappointed.
• Not only is it a train, beloved of the British political classes, but it goes really fast too! Which has to be a good thing, right? I mean, Britain invented this stuff, even if France, Germany, Japan, China (I could go on) boast far more extensive high-speed networks. But does it help me get to school/work/hospital/shops? Probably not. Travel to some-place I can’t already travel to? Doubt it. Or maybe it helps lower-income groups that don’t travel much and certainly don’t travel much on expensive trains? Or did you just answer your own question… Only by assisting the higher-income groups first (that rather curious modern Socialist logic).

Not everyone has been busy “playing with train sets”. The box tells the recent history of the other London to Birmingham railway.

Box: Counterpoint – Chiltern Railways
Since the Beeching era (1960s), there has only been one mainline railway between London and Birmingham (that’s the same one that has the capacity constraints). Remnants of the former Great Western/Great Central route from London to Birmingham were retained, but only for local services. By the mid-1990s, these local services from London Marylebone to Banbury had been extended to Birmingham, but merely for the convenience of local passengers: Trains were infrequent (from memory, every other hour, compared to every 30 minutes on the main route), and slow (over an hour longer than the main route). Following “privatisation”, the commercial franchisee – Chiltern Railways (originally management-owned, now part of Deutsche Bahn) – exploited the opportunity to capture some of the long-distance market – especially potential passengers in the poorly-served southern hinterland of Birmingham (Warwick, Kidderminster). Track was improved, new trains purchased, stations built or rebuilt. City-to-city journey-times came down to 2 hours, with a train every 30 minutes. Still about 40 minutes slower than the main route, but normally more reliable, and better serving certain parts of the West Midlands region. While Chiltern Railways’ initiative wasn’t merely as grand or fast as the new high-speed railway, it also cost about £15 billion less. The example contrasts pragmatic commercial business development, with “predict and provide”, government-led projects.

Sorry, We Can’t Afford It

After generations of year-on-year increases in both the average annual distance travelled per person, and number of journeys made, the last decade saw no overall increases [NTS again]. That change coincided with both the rising importance of substitute communications technology (“the internet”), and the fact we had stopped building major new transport infrastructure. Shrewd observers will note that economic growth continued to rise through most of the 2000s, apparently unrelated. How curious!

Within this overall flat trend, one mode continued to grow patronage: Railways. The box below explains why I think rail travel continued to grow, while overall, other public transport patronage remained static – in spite of policies intended to encourage both bus and rail usage.

Box: Crippling Integration
The late-1990s “Integrated Transport Policy” caused much confusion. Was it aiming to integrate transport modes with one another, or integrate transport with non-transport activities? The answer was “yes”, but tended to focus on the first. Unfortunately, integration within public transport remains a rather poor replacement for good land-use planning – any requirement for interchange represents a significant barrier to “multi-stage” public transport journeys. In practice, “integration” strived to make all public transport modes equal, when they are not: The Allure of Railways demonstrated the income differentiation between bus and rail. Within local networks, differentiation can also occur – such as setting fares by geography (socio-demographic variations) or time-of-day. Yet this became increasingly difficult to develop in a political environment where “everything is the same”. (London (somehow) managed to buck the trend, by clearly differentiating Underground trains and buses by fare – bus travel became roughly half the price of the Underground, increasing bus patronage, and easing “Tube” overcrowding.) Meanwhile, society is getting richer. Whether they’re actually getting richer, or the intangible economy (“house prices”) are merely making them think they are, is moot. Travel behaviour gradually shifted towards modes of transport favoured by the wealthy, such as trains. Bus operators that have sustained real growth in patronage through this period (places like Brighton or Edinburgh) are those that still convey people from the middle of society: Their “product” kept pace with the rising aspirations of their markets. The needs of local markets for travel differ, so a “one size fits all” mentality can easily alienate potential passengers, and reduces the flexibility of business development. Differentiation is hard to achieve in transportation, and clearly somewhat harder when government is simultaneously trying to sell a unified, generic network to the travelling public.

More railway passengers inevitably need more trains, which eventually require more track to run them along, which finally results in proposals to build new railways. It seems to make sense, but much like Roads for Prosperity, it’s all rather futile, as the following rough analysis highlights.

Let’s make a few assumptions:

• The distance travelled by rail passengers increases by 50% every 10 years. That was approximately the trend prior to the recent recession (rail is especially income-sensitive, so recessions have a significant impact on rail patronage).
• The current railway network is operating at capacity. Clearly untrue, however many of the busiest routes, junctions and stations are constraining future growth.
• Half of all subsequent growth in distance travelled will require entirely new railway infrastructure. This half is an arbitrary estimate – it’s going to require some new railways to accommodate 50% growth each decade, but there’s also under-used track, and other methods of managing increased patronage.
• There are no technical or administrative constraints on railway building. For example, an infinite number of skilled railway signalling engineers are available.

The estimated cost of construction of the 190 kilometres from London to Birmingham is £80 million per km. The Channel Tunnel rail link (“High Speed 1″) cost over £50 million per km. Light rail (trams) typically cost £10-15 million per km. For now, let’s assume an estimate of £30 million per kilometre of new “heavy” railway built.

The current UK railway (route) network is about 17,000 km in length. Following our assumptions, in the next 10 years, we’re going to have to build an extra 50% x 50% x 17,000 = 4,250 km of railway. At £30 million per km, that’s £128 billion over 10 years, £13 billion per year.

Too many big numbers. For context, £13 billion ($20 billion) per year is:

• £400 from every taxpayer.
• £10 supplement on price of every rail journey (based on 1.2 billion rail journeys per year).
• 160% increase in total government funding for railways (which was already the biggest single component of state transport expenditure).

The logical commercial solution, that £10 supplement on the price of every rail journey, simply exposes deep flaws in “railway economics”. The box below will help explain why the public sector tends to fund railways.

Box: Public and Private Funding of Railways
Like most British railways, the original 1830s London-Birmingham line was funded by private capital. While London to Birmingham was profitable, many of the later railways were built on little more than financial market speculation. The First and Second World Wars brought the fragile finances of commercial railway operation into focus – the First resulting in the “grouping” of railways into 4 large operations, the Second leading to full nationalisation (public ownership). Infrastructure investment on the nationalised railway was limited to half-hearted attempts at modernisation, such as electrification (infrastructure allowing the use of more trains powered by electricity). Operational finances lurched from one crisis to the next. The 1990s saw the private sector make forays back onto the railways. Often successful where delivering something the public sector was ultimately still paying for – such as leasing rolling stock (carriages), or as a franchised train operator. But often unsuccessful where unsupported by government – notably the Channel Tunnel (debts bought that company to the verge of bankruptcy), and Railtrack (the stock-market listed provider of track/stations, subsequently reclaimed by the state as “Network Rail”). The unfortunate truth is that railways aren’t terribly commercial. For example, David Serpell’s 1983 analysis showed that just 16% of the network could be operated commercially, without government support. It therefore appears inevitable that the public – that is, government – will end up paying for new railways.

But nothing is so simple: In subsequent decades, the cost of our railway-building programme will rise above inflation, costing an ever-greater amount year-on-year, because:

• Land prices are a significant part of overall construction cost, and land (property) prices consistently rise above inflation (this modern-day feudalism isn’t just a social problem).
• We are building a percentage of an ever-larger network – always building 25% more new railway kilometres than the previous decade.
• We can assume that new railways generate traffic growth, just like new roads. The more we build, the greater the increases in patronage, the more new railways are needed.

Now consider that:

• State support of railways transfers tax revenues back to the richest members of society. Social policy, what social policy?
• Railways have no direct benefit to 98% of the populations’ journeys. A proportion that won’t be changed dramatically by the first few decades of railway-building. Minimal impact on conventional transport policy and (for those that think trains will “save the planet”) environmental policy.
• The reliance of the economy on railways is questionable, and, consequently, so is the effectiveness of the new railway’s return on investment (returned as additional growth in the wider economy). Specifically, other forms of investment may contribute more – example below. Unconvincing net long-term contribution to the national treasury.

Yes, my assumptions are very vague. And there will still be cases where a modest improvement can unlock a lot of potential. But the sheer magnitude of the figures must make us question just how strategically sensible, or even possible, building extra railway capacity is.

Yet this analysis is only the “tip of the iceberg”: The problem applies to all conventional transport networks. Briefly assume that railways account for 5% of domestic transport, and that supporting unfettered growth in transport capacity across all modes would (in the first year) cost 20 x £13 billion. £260 billion each year. That figure won’t be accurate, but it’s still more than the cost of the entire welfare state. Over twice expenditure on the beloved National Health Service. 10 times current government expenditure on transport. It’s “a lot of money” to be throwing at problem that then continues to perpetuate itself.

So it appears that we simply can’t afford to continue enlarging our transport networks. It’s a defining reality that separates 20th and 21st century approaches to the topic. I’m not yet certain what the “21st century approach” is. But I suspect it won’t rely quite so much on wheels:

Digital Britain

Digital Britain outlines the UK’s current policy on communications infrastructure, media, and internet. At best, it’s 10 years too late. At worst, it risks the creation of “bad law” relating to rights ownership. Regardless, it allows a fascinating comparison of approaches to the same thing.

Same thing? Yes.

Given the correct application of technology, many socio-economic activities can occur through communications infrastructure. Forget tele-conferencing. Think recreational fishing. I reckon if that can transfer seemlessly from a physical to a virtual environment, almost anything can. As with previous technological revolutions, we won’t completely abandon what went before, but it’s likely that the vast majority of economic growth and social change will be built around the new technology, not the old.

One of the headlines from the policy was a proposed monthly tax of 50 pence ($0.75), levied on fixed phone lines. The tax would raise somewhere between £200 million and £1 billion (later sources tend to cite the higher figure), to be used to provide every household with a 2Mbps “broadband” connection. It’s the virtual equivalent of surfacing a dirt track with tarmac. While South Korea is busy building virtual freeways. But Britain is as least trying to ensure equality of access to the modern-day printing press.

Just not trying terribly hard: That a government should invest at least 15 times more in a single railway line, than at the core of its digital inclusion strategy, is rather revealing of that government’s priorities.

I might forgive the lack of foresight, if the West Midlands’ economy was 15 times larger than the digital economy. But it isn’t. Definitions vary but the “digital economy” already represents about 10% of the national economy – rather similar to the whole of the West Midlands region. And a “broadband tax” that directly benefits about 10% of households nationwide, would seem to have much greater economic and social potential than a railway line that will likely be used by 1%.

The method of funding is also revealing. The “broadband tax” at least tries to spread the burden among users – even if ultimately it’s still “unfair“. Yet nobody in political office would dare to try and fund a railway by raising the fares paid by those travelling on it. At least, not since the darkest days of the 1970s. What kind of madness is this?

In the final analysis, digital communications are a fundamentally cheaper method of transport to provide than railways. And since it transpires that we can’t afford to keep expanding our conventional transport networks, perhaps digital communications deserve a little more emphasis?

Of course, that rational argument rather assumes that large transportation projects have anything much to do with transport. You can “cut the ribbon” on a shiny new high-speed railway line, and everyone immediately appreciates where all the money went. But a bunch of fibre-optic cables can’t even be seen – things on the internet surely just happen… So perhaps first we need to solve the politics of the intangible?