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‘Damning’ leaked letter reveals the huge obstacles to delivering Wales’ rail revolution

A dispute between the governments in Cardiff Bay and Westminster risks throwing into jeopardy plans to bring in a new rail operator in Wales next year, we have learned.

WalesOnline has obtained a letter from UK Transport Secretary Chris Grayling blaming civil servants in Cardiff for failing to address major issues needed to move forward with the new franchise, whose operator would be responsible for implementing key parts of the Welsh Government’s ambitious vision for rail services in Wales.

New rolling stock, electrification of the Valleys and North Wales lines, a South and North Wales Metro and widespread structural improvements are all priorities for the next 10 years under the next Wales and Borders franchise.

The Welsh Government has already put back its plan to formally launch its search for a new operator by six weeks from this Friday, August 18, to September 26.

It has warned that further delays to the franchise, which does not include mainline high-speed services, could cost “tens of millions of pounds”.

Yet the major unresolved issues detailed in Mr Grayling’s letter, which he says make the “scale of the challenge” clear, raise questions over whether the new date is achievable.

Welsh Conservative transport spokesman Russell George described the letter as “damning” and warned that commuters “are going to pay the price”.

“The timeline for completing the next franchise seems some distance away,” he said.

Chris Grayling MP, Secretary of State for Transport, taking a train from Cardiff Central to Llanishen
Chris Grayling MP, Secretary of State for Transport, taking a train from Cardiff Central to Llanishen

Mr Grayling’s letter is a response to Welsh Economy and Infrastructure Cabinet Secretary Ken Skates who blamed the UK Government when he revealed the sixweek delay in June.

In the letter (reproduced in full below), Mr Grayling refuses to go along with the Welsh Government’s request to allow it to issue the final documents needed before the the bidding operators can submit their proposals.

He writes: “I recognise your concerns regarding the timings of the tender process. But I hope you understand that I cannot cut corners on the level of information or assurance required… to do so would present significant risk to Network Rail, taxpayers and most importantly the passengers served by the Wales and Borders franchise.”

He refuses to accept Mr Skates’ claim that the holding of the General Election was to blame for the delay and says his officials warned Welsh civil servants on May 26 that the major issues still to be agreed meant their planned timeframe was unachieavable.

He cites seven areas that are still unresolved, including:

  • A finalised written document setting out how the transfer of ownership of the Core Valleys Lines has not been received, and the Welsh Government and Network Rail are in dispute over the plans;
  • Welsh and UK civil servants have not agreed a protocol over how the Welsh Government will exercise powers over English railways stations served by the Wales and Borders franchise;
  • The Welsh Government is asking for an extra £1bn over the course of the franchise for which Mr Grayling says “I see no basis”;

  • There remains a dispute over payments [the letter does not make clear the nature of the payments].


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The letter also refers to other issues that remain to be agreed including a “funding and outputs principles document” and an agreement on how Welsh Ministers will undertake their “operator of last resort” responsibilities”.

The £1bn requested by the Welsh Government is understood relates to an annual rebate of £67m given by current franchise holder, Arriva Trains Wales, to the DfT.

The Welsh Government believes it will not be able to claim the rebate but says it will be responsible for maintaining the infrastructure so should receive it.

Four companies, including Arriva, have been shortlisted for the franchise and for the right to create and run a new south Wales Metro system.

Who are the bidders?

  1. KeolisAmey is a joint venture between French transport giant Keolis and public service provider Amey.
  2. Arriva Rail Wales is a bid from Arriva Trains Wales which is the current holder of the Wales and Borders franchise which runs until October 2018. It is owned by Deutsche Bahn.
  3. Hong Kong-based MTR Corporation is one of the world’s leading transport companies with interests globally from Australia to Sweden.
  4. Abellio Group operates bus and rail networks across Europe and is the international arm of the Dutch national rail operator.

The proposal includes elements that are proving controversial including the change of ownership of the Valleys Lines infrastructure.

The RMT union has claimed that the transfer of ownership is simply a £5bn privatisation, which it has described as appalling.

And Mr Grayling’s letter makes clear that Network Rail and the Welsh Government have not agreed who will be responsible if something goes wrong.

Mr Grayling concludes his letter by saying: “I will ensure my officials continue to do everything they can to support the process and enable the necessary agreements to be concluded as quickly as possible to ensure we deliver a satisfactory arrangement for passengers.”

When approached for comment a Welsh Government spokesman said: “We are disappointed with the line of argument pursued in the letter, particularly since we have been focusing on resolving the outstanding issues in discussions between the UK and Welsh Governments.

“Aside from a number of inaccuracies in the issues presented, we feel that the position the Secretary of State has taken on rail funding in Wales misrepresents a complex devolution position. This is precisely the reason that we were seeking to de-couple the issues of funding and progressing with the franchise procurement.

“Linking the funding issue to the administrative process may be appear to be an expedient way for the Department for Transport to resolve a financial issue it has brought upon itself, however, this approach jeopardises the Welsh Government’s ability to award a replacement for the current Wales & Borders franchise, which if unresolved this will be a major issue for rail users across Wales and the Borders.

“Being willing to subject people to the prospect of continued overcrowding and poor quality rolling stock to resolve a budgetary issue of their own making is no way for the UK Government to behave.

“Our focus now must be to work together to resolve these issues but frankly this whole issue is a direct result of the UK Government’s failure to deliver upon its 2014 promise to devolve rail franchising powers to Wales by the start of 2017.

“This cavalier attitude to devolution comes on top of the Department for Transport’s decision to walk away from its commitment to electrify the line between Cardiff and Swansea.

“Taken together, these examples underline the need for a radically new and lasting settlement where Wales can determine its own railway future without being held hostage to broken promise after broken promise from the UK Government.”

The Welsh Conservative shadow Economy and Transport Secretary Russell George said: “This letter is damning and appears to suggest that the Welsh Government hasn’t fulfilled its role.

“Sadly, it’s the commuters which are going to pay the price and they will be extremely worried that.

“The UK Government has provided a long list of incomplete and unfulfilled tasks, and we must now look to the Welsh Government for its response.

“It is vital that a project of this importance and scale is done properly.

“Cutting corners at this point would be an unacceptable risk to Network Rail and the taxpayers who depend on the rail network in Wales.”

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