Investment in rail freight imperilled by government and Labour plans

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Competing Conservative and Labour plans for a single, public body to oversee the UK railways both risk creating a “real problem” for investment in rail freight, a top industry figure has warned.

Tim Shoveller, chief executive of Freightliner, was speaking after the Labour party said that, if it wins power in elections expected this year, it would take all franchised passenger train operations into government hands as the existing contracts expired.

Draft legislation drawn up by the Conservative government, meanwhile, would give ministers powers to overturn rulings by the Office of Rail and Road, the regulator that guarantees freight operators’ rights.

Shoveller warned that both plans could imperil future investment by weakening rail freight operators’ confidence in their rights to “train paths” — permission to run a train on a specified route at a specific time.

The Genesee & Wyoming Railroad (GWRR), Freightliner’s US parent, would not commit capital to the operation without such robust rights, Shoveller said. GWRR is owned by a consortium of the US’s Brookfield Infrastructure and GIC, Singapore’s sovereign wealth fund.

“The security of tenure of those track access rights is absolutely essential if I’m going to be successful with GWRR in asking for investment,” Shoveller said.

Freight operators are currently awarded train paths under a process organised through Network Rail, the infrastructure owner. The allocation of paths is overseen by the Office of Rail and Road, the industry regulator, to which operators can take complaints about any unfair practice. The paths are generally guaranteed for either five or 10 years.

Freightliner was currently spending millions of pounds on a new terminal in north-west England, Shoveller pointed out.

“The ability to know we will be able to get trains into that is essential to getting that investment,” he said.

With the exception of Direct Rail Services, owned by the government’s Nuclear Decommissioning Authority, rail freight has been a private sector business since the mid-1990s. Neither of the big UK political parties plans to nationalise the operators and the sector depends on private capital for new facilities, locomotives and other investments.

There is a broad political consensus in favour of shifting more freight from road to rail. But a 14-year freeze on fuel duty has made it hard for rail to compete on price.

“Any weakening of our track access rights would be a real problem in terms of leveraging private-sector investment,” Shoveller said.

Shoveller took over as chief executive of Freightliner, the UK’s second-biggest freight operator by revenue, in August last year. He was previously head of the North West and Central region for Network Rail, the government-owned rail infrastructure owner.

Shoveller supports Labour’s overall plan for passenger train operations to be subsumed into a single organisation — provisionally called Great British Railways (GBR) — with Network Rail.

Labour’s plan — published on April 25 — pledged to include “safeguards” for freight operators and targets to increase the amount of freight going by rail.

However, Shoveller warned GBR staff would know when planning timetables that their organisation would receive all the revenue generated by any new passenger train. They would receive only a “track access charge” from a freight service. Safeguards for the sector would have to be very robust to mitigate the potential conflict of interest, he said.

“Freight has to be evaluated in the round,” he said. “The reason the duty to grow freight is so important is that otherwise you would always default to the additional passenger trains.”

Louise Haigh, Labour’s shadow transport secretary, stressed the party planned a statutory duty for Great British Railways to promote the use of rail freight. The party would also introduce safeguards to ensure freight trains would continue to receive “fair access” to the network, she added.

“Labour will go further and faster to grow rail freight on our railways,” Haigh said. “That is why our plan has the support of industry.”

Shoveller raised separate questions about the current, Conservative government’s plan That would also create a central body to oversee the railways but would retain an extensive role for privately owned passenger train operators.

Provisions in the draft legislation would allow ministers to change the rules about accessing the network or issue instructions to the ORR as to how to interpret access rules, Shoveller said.

“Those new instructions could create a situation where the ORR have to waive my rights or weaken my rights,” he added.

However, the Department for Transport insisted his concerns were misplaced. It said ministers would be unable to change the rules about access without the consent of parliament.

“We have set out a clear plan for the future of our railways and Great British Railways will play a vital role in our plans to use industry expertise to put passengers first and strengthen freight services,” the department said.