The Tories announced the scrapping of two major rail electrification schemes last week. One was the Midland main line. The other the Cardiff to Swansea route. Both have been long promised and both, I think are of as much, if not greater, importance than HS2, which is continuing.
And both are achievable. After all, the cost of government borrowing is actually negative at present, meaning that the funding for these projects could be secured at rates so low people might actually pay the government to take their money off their hands so that the projects might go forward.
Which point is precisely what got me thinking, especially in the case of the the Welsh route. I have long advocated the use of local bonds to finance infrastructure projects, linking the idea to the Green New Deal, pension investment and the fundamental pension contract about which I wrote yesterday.
My question is a simple one and is why can't the Welsh government promote a bond to raise the funding to pay for the electrification of the line? Offer 2.5% interest. Maybe add a little bit of inflation linking into the rate (say, make in third of the return inflation linked). Make sure it can be wrapped in an ISA. And put the idea to local people, their pension funds, and some institutional investors and see if the funding is likely to be raised.
If, as I suspect the money would be easy to find (it could even underpin a new Welsh National Savings system) then the political challenge to the UK government would then be obvious. In that case this project will not be proceeding because of a lack of funding or viability but because the government has decided it will not invest in Wales and will not invest in green transport infrastructure. Making the point tangibly is better than any number of words.
Of course it can be argued there may be legal obstacles to this. But it is the job of politicians to suggest ways to overcome these when they stand in the way of real progress, and not to accept them. In the case of the Midlands main line it is hard to see who can make the case for change. For Cardiff to Swansea it is obvious that Welsh politicians can, and should. I sincerely hope they will. They could provide Wales with the infrastructure it needs whilst pioneering reform in the savings and pensions sectors and deliver green investment. Those are goals worth working for.
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It was quite extraordinary to hear the government minister defending this decision on the basis that it would avoid disruption due to engineering works, and people living near the lines would not have their views obstructed by unsightly gantries and power lines!
Chris Grayling may be effective as a politician, but his track record as a minister is shocking. Everything he touches turns to … well, he is the opposite of Midas.
Welsh politicians developing a funding scheme for railways in Wales sounds like an excellent plan. I hope they are reading.
Agreed
I have written to my AM after reading Peter May’s proposal yesterday and your follow up today. Many in the Swansea region would invest, given a reasonable guarantee to keep up with inflation. What synergy for energy from a Swansea Bay Lagoon powering the railways. Swansea was first to build a public railway in 1804 and as for energy storage, essential for green projects, Sir William Grove PC FRS inventor of the fuel cell was a proud resident of the Gower in the 19th century.
Grayling did not give an economic case against this investment, he could not, he and GWR lamely trotted out sloppy excuses. Diesel (or diesel/electric) is yesterdays technology, we must move to green solutions which are less polluting, quieter, cheaper, more energy efficient and provide faster transportation [1]. An added benefit is that freight trains will follow suit and they transport enormous tonnage compared to passenger services.
British scientists in Cambridge, and elsewhere in the UK, are world leaders in new battery materials and technology [2]. Please Mr Grayling invest in UK Science and also electrify the whole rail network. Studies in the US have highlighted the enormous benefits of electrifying railways, and also employing energy storage [3].
[1] http://www.telegraph.co.uk/news/uknews/road-and-rail-transport/5892821/Electrified-rail-network-the-benefits.html
[2] https://www.ft.com/content/149ca550-7e30-11e5-a1fe-567b37f80b64
[3] https://sciforum.net/conference/wsf2/paper/855/download/pdf
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Is the Welsh government permitted to borrow? The Scottish government isn’t.
I think Scotland is now getting limited powers
But as I pointed out, that’s just a political obstacle to over come. Technically councils have such powers
This is a good idea. But I wonder if legal obstacles can be overcome. Can the devolved assemblies issue bonds at present?
Scotland has acquired limited powers to do so
I am not sure about Wales
I’m sure that you’ve seen this already:
https://www.theguardian.com/commentisfree/2017/jul/22/railways-nhs-britain-rail-electrification-politicians
It sums things up very well to me.
Obviously too many politicians see it as their job to just stop the State from doing anything useful in order to encourage the private sector (and rent seeking) to take over.
That is until the banking sector needs bailing out again.
The political mismanagement of this country is truly shocking. To live in such times……..!!? Really.
I’m a bit confused here; putting malevolent Tory political intentions aside, why is it desirable to borrow money for infrastructure projects at 2.5% plus some possible index-linking, with the returns being paid for by (likely poorer) passengers going into the hands of wealthy savers?
If the gov can borrow at effectively zero, or even negative rates, with no interest payments needed to reward savers, then surely that’s the better option?
What’s the difference between a local investment bond funded model and a privately funded project, given that any private project’s shareholders are very likely to be pension funds anyway?
There’s a wall of saving in the economy currently sitting in bank accounts
This turns that to positive purpose and the price is worth paying to ensure that people buy into the process, in my opinion
They don’t as pure government debt
And nor do I think this is a subsidy to the rich: few iof them would partake. Note that rail passengers also tend to be better off as well
As for the difference in structure; it’s the governance structure that matters. You might as well say having democracy does it matter if you’re indifferent to governance structures
“There’s a wall of saving in the economy currently sitting in bank accounts”
Maybe, but it’s declining dramatically:
https://www.theguardian.com/money/2017/mar/31/uk-households-savings-fall-record-low-warning-sign-economy
https://tradingeconomics.com/united-kingdom/personal-savings
And which section of population would be “buying into the process”, and at whose expense?:
https://www.theguardian.com/society/2017/feb/20/one-in-four-uk-families-have-less-than-95-in-savings-report-finds
“The gap between rich and poor in the UK is growing, as savings and home ownership decline among the poorest families but rise among the richest”.
The trouble is that people who can afford it *like* saving – although they are effectively getting zero percent on their savings at the moment – but then why should they be rewarded for hoarding cash?
Meanwhile the government should just get on with spending what is necessary for the optimum functioning of the country, regardless of the savings desires of the private sector.
I know all that
But let’s not pretend that there aren’t savings
And let’s not pretend that having them makes a person a social ovarian, kept alone a sociopath
In which case providing opportunity for best use of them makes sense
I must admit I was astonished by this decision to pospone these electrification plans, also the lines from Chippenham to Bristol and Didcot to Oxford. Will there now be any Conservative voters left in Wales and Sheffield, I wonder?
Here in Devon we have accepted that electrification will probably never get here but this morning I watched from my garden our newest steam loco, 60163 Tornado, racing down the Culm Valley at 75mph on the Torbay Express from Bristol to Kingswear. This loco has been tested at 100mph plus. This special train covers the journey between Taunton and Paignton in the same timings as our HSTs and Voyagers. Perhaps we should go back to steam.
In some respects the overhead masts are an intrusion but one only has to look at Austria and Switzerland where almost all routes are electrified and their spectacular scenery does not seem to be compromised. Those countries do have the big advantage though of inexpensive hydro-electric power always on tap.
I live in Cardiff and we had a couple of months of disruption last year and very slow trains while they upgraded the Severn Tunnel in readiness for electrification. To leave a popular project half done (and as a result, not done at all) while they talk up the HS2 despite its spiralling costs and huge protests, seems totally perverse. I will certainly be writing to my AM.
Improvements such as these are much superior in cost-benefit terms to HS2. I don’t think the problem is funding and not just for the valid reasons you give – I’m sure you would be able to get private investment via secure bonds to do this. The problem is firstly that the project management of the projects so far has been very poor and secondly that there are supply side bottlenecks, specifically shortages of key skilled workers (this is the reason why the electrification of the Liverpool to Hull route may well be stopped at Manchester). The excuses that the minister is giving are pathetic though.
Re the skills, the reason is Brexit, I am sure
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