Taxpayer bore whole risk from £10.5bn new train deal

The UK taxpayer bore all the £10.5 billion risk when the Department of Transport bought new trains for the Thameslink project and for the Intercity Express Programme, says a Public Accounts Committee report.

If passenger demand were lower than expectations, the taxpayer would have to cover all the costs, the Committee wrote.

According to the report:

“These two major projects also demonstrate yet again that the department has limited capacity and capability to manage large-scale procurements, and that it remains overly reliant on consultants.”

The Committee accused the Department of Transport (DfT) of starting the procurement of the Intercity Express trains with no clear idea of how many trains would be required, what form of power they would need, and which routes they would take.

The Members of Parliament (MPs) who wrote the report said they were disappointed that Siemens would be manufacturing the Thameslink carriages abroad. However, they were pleased that Hitachi’s 592 carriages would be built in County Durham, creating about 900 new jobs.

Margaret Hodge

Ms. Hodge said it was a bad deal for the taxpayer and British jobs.

Siemens is building the carriages in Germany, but says about 2,000 jobs will be created in the British supply chain.

A consortium of companies led by Hitachi is supplying the carriages for the Intercity Express programme. They will replace the old ones on the East Coast and Great Western lines.

A total of 1,140 new Thameslink coaches are being supplied by Siemens to expand capacity on cross-London rail routes.

Margaret Hodge, Committee Chairman, said:

“The department has no previous experience of running a procurement of this kind, let alone two with a combined value of £10.5bn. Yet it has chosen to break with its previous approach of leaving it to rolling stock companies and train operators to buy trains, transferring risk away from the rail industry back to government.”

“The only way the department can limit this risk is by requiring train operating companies to use these new trains to run their services regardless of whether they best fit the services they would like to offer.”

Transport union RMT General Secretary Mick Cash said it was a disgrace that the profits are privatized while the taxpayer has to carry the risk burden.

A spokesperson for the DfT said:

“Successive governments have considered how best to deliver these orders and have come to the same conclusion, that government should lead with expert support and advice from the train operating companies.”

“IEP and Thameslink are making excellent progress and are on track to deliver very good value for taxpayers and improved services for passengers. They are also creating thousands of new jobs across the UK rail industry.”

“Government Response to the Transport Select Committee Report on the Draft National Networks National Policy Statement,” Department of Transport.