Transport Ten Year Plan 2000

Annex 3 - investment and charging assumptions

1. This Annex explains the assumptions that have been used to estimate the level and phasing of private investment over the Plan period. It also covers the assumptions that have been made about revenue from congestion charging in London and in other areas.

Private investment

2. Delivering the levels of investment necessary to modernise transport in this country requires a partnership between public and private sectors. The Plan estimates that total private sector transport investment over the ten-year period will reach £56 billion. The assumptions that we have made are set out here by spending mode. But in general:

• where investment decisions are taken wholly by the private sector with little or no direct subsidy from Government, the estimates are those of an industry body or reflect actual orders placed
• where investment decisions are taken jointly by the private and public sector with direct subsidy from the Government, the estimates reflect assumptions about the levels and mix of public and private investment.

3. In each case the mix and profile of public and private investment will be subject to change as specific projects emerge from the railways refranchising process and the SRA's Strategy, Local Transport Plans, the Mayor's Transport Strategy and multi-modal studies. All public investment will be assessed fully using our New Approach To Appraisal.

Railways

4. Total railways investment over the next ten years is expected to be around £49 billion, of which £34 billion is expected to be private investment. Our analysis assumes that around 60% of new investment required to deliver increased passenger capacity will be funded from fare revenue as passenger numbers rise (assuming that regulated fares continue to fall by 1% per annum in real terms). The public support for the remaining proportion will be provided as a mix of revenue support payments and capital support from the Rail Modernisation Fund.

5. The breakdown of the total investment is broadly:

• £38 billion of enhancement and renewals investment for passenger services. This estimate reflects an assessment by the Department and the sSRA of the enhancement projects proposed in Railtrack's 2000 Network Management Statement. It includes enhancement investment planned for the West Coast Mainline, CTRL, Thameslink 2000 and the East London Line extensions, and estimates of the further enhancement investment likely to emerge from the refranchising process
• £7 billion investment in new and replacement rolling stock. This forecast takes into account expected growth in the railways over the ten years, known orders placed by train operating companies, and also assumes that replacement of existing rolling stock continues in the second half of the Plan
• £4 billion investment in rail freight, including investment in gauge enhancements, new terminals, new rolling stock and capacity sufficient to meet a projected 80% increase in rail freight volumes by 2010.

Local transport

6. The Plan includes £9 billion of private investment in local public transport and roads. Our assumptions in putting together these estimates are as follows:

• £5 billion of private investment in buses and coaches. These estimates have been taken from information provided by the Confederation of Passenger Transport (CPT). They reflect increases in patronage expected as a result of the bus infrastructure investment expected in Local Transport Plans
• Around £1.3 billion, about 50% of the assumed total investment in light rail projects, is expected to be provided from local authorities, developer contributions and from the concession value of schemes. Some of the local authority contribution is expected to fall outside of the Plan period. Actual spend will depend on the particular schemes that come forward in Local Transport Plans. Depending on the procurement method, central government support will be provided either as capital grants or loans to local authorities or in the form of revenue support for private investment.

7. The Plan also provides for increases in local transport investment through Private Finance Initiative (PFI) schemes. The annual value of transport PFI investment is assumed to rise to £200 million by 2003/04 and to £500 million by the end of the period. No assumptions are made about the types of project that will be carried out under PFI schemes. However, these could include investment in bus infrastructure, light rail, road schemes, road maintenance, and street lighting. The assumptions have been informed by discussions with Public Private Partnerships Programme Limited ('the 4Ps').

London Underground PPP

8 The PPP for the Underground is expected to deliver a total of around £8 billion of new investment (and £5 billion of maintenance spending) by the private sector infrastructure companies by 2015. This is an estimate of the investment necessary to deliver the required improvements in capacity and performance, and has been provided by London Underground and their financial advisers (PriceWaterhouseCoopers). A firmer estimate of the level and phasing of investment will be available once the infrastructure service contracts have been awarded. For reasons of commercial confidentiality relating to the PPP negotiations, our spending figures do not include projections of London Underground's future cash flow, including provision for ongoing grant. However, these will be taken into account in setting the Government's Reserve.

London (excluding the Underground PPP)

9. Decisions about the projects and the procurement methodology for investment in London transport infrastructure are for the Mayor. However, there is a broad level of agreement as to the priorities for investment. The Plan assumes private investment in London(7) as follows:

• an east-west rail link is assumed to be financed by the private sector. In advance of a detailed economic appraisal of the options it is difficult to provide an accurate estimate of the cost of this project. We have included almost £3.5 billion as a broad indication of the cost of the infrastructure and new rolling stock. Public support is assumed to be provided in the form of revenue support following completion of the investment, but will depend on the precise project and on negotiations with the rail industry. London public expenditure includes a total of £154 million for preparation costs in 2001/02 to 2003/04. Depending on how the project is taken forward, this spending may be reallocated to the SRA
• light rail projects are assumed to be public private partnerships. Based on the Croydon Tramlink, the private sector is assumed to contribute around a third or more of the cost of such projects. Decisions about the mix and form of public funding (from London boroughs and the Mayor) will vary according to the project
• extensions to the Prestige smartcard ticketing project are assumed to be a PFI scheme.

Multi-modal studies and roads

10.The Plan provides the resources to fund the outcome of the multi-modal and roads-based studies. The outcome is likely to be a mixture of improvements to road, rail and other public transport infrastructure or services. On roads, the level of resources identified in the Plan would be sufficient to fund a targeted programme of road widening of around 5% (360 miles) of the trunk road network. The Plan assumes that around 25% of new investment by value will be funded by the private sector using Design, Build, Finance and Operate contracts. Combined with private finance projects already in the pipeline this gives total private investment of £2.6 billion. Other types of transport solutions could be expected to involve a similar proportion of private finance.

Local and London charging

11. The Plan assumes that London and a number of local authorities introduce local congestion charging or workplace parking levy schemes from 2004/05 onwards. The net revenues are separately identified in Annex 1 and include:

• £1.5 billion in London. Actual numbers and timing will depend on decisions taken by the Mayor as part of his transport strategy. He is currently aiming to introduce congestion charging before the date assumed in the Plan
• £1.2 billion income to local authorities in the rest of England. This assumes that 8 of our largest towns and cities introduce congestion charging schemes and a further 12 bring in workplace parking levies. This is assumed to be spent on a mix of local public transport and road investment. It excludes charging revenue assumed to cover local authority contributions to light rail projects of around £200 million.

(7) London bus and coach investment is included within the CPT estimates for local transport. These figures also exclude rail investment in London other than the proposed east-west rail link.

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