Rail debt repayment row

Transport Correspondent

Wednesday 19 September 2012

MINISTERS have been accused of over-committing to rail investment programmes they could not afford after it emerged they made an extraordinary attempt to defer loan repayments on more than £2.5 billion of railway debt.

The bid to defer payments worth more than £140 million a year was submitted last November by government agency Transport Scotland to the Office of Rail Regulation (ORR), but it was turned down, The Herald has learned.

The Scottish Government later announced a £350m cut to the flagship Edinburgh Glasgow Improvement Programme (EGIP). This was presented as a “saving”, but opposition parties claim it was driven by a shortfall in funding. Labour, which is due to press ministers on the EGIP cuts in the Scottish Parliament today as part of a debate on rail funding, seized on the revelation. Richard Baker, the party’s Shadow Infrastructure Secretary, said: “This revelation is further evidence that the cuts to EGIP were not about delivering the scheme more efficiently but were simply about saving money. “Given that completing EGIP was a manifesto commitment made by the SNP when they knew what Scotland’s funding settlement was, they cannot simply blame Westminster for these cuts.” Alex Johnstone, the Conservative transport spokesman for Scotland, accused the ministers of “slashing investment” in rail. He said: “The Scottish Government is blaming the UK Government for financing difficulties because of budget constraints, yet says it is continuing with record levels of investment. Which is it? They can’t have it both ways.” Jim Hume, for the Liberal Democrats, added: “The Scottish Government has made a pig’s ear of this. It’s frustrating to learn that £350m may have been cut from the Edinburgh Glasgow Improvement Programme because of the Government’s financial ineptitude.” Borrowing by Network Rail, the non-profit company that owns and maintains Britain’s track and signals, is used by both Scottish and UK governments to fund a wide range of rail enhancement projects, including, in Scotland, the recently completed £300m Airdrie-Bathgate railway, EGIP and the £295m Borders railway, due to be completed by 2014. It is seen as an attractive source of funding as it avoids the need to burden the public purse with the up-front capital costs of major infrastructure projects. However, it soaks up a large amount of taxpayers’ money in loan repayments, and critics of the strategy say the recent wave of investment in the UK rail network has been built on worryingly high levels of debt. Accounts published by Network Rail show the value of debt it accrued for Scotland stood at £2.5bn in March this year. The cost of payments by the Scottish Government to cover interest payments alone on this debt was £148m during the last financial year – £9m higher than previously budgeted for, the accounts show. An ORR spokesman confirmed Transport Scotland had asked to defer its financing payments and the request had been rejected. Transport Scotland declined to discuss the request to defer repayment, saying it was part of “regular discussions” with the ORR that were intended to “maximise the scale of investment in Scotland’s railways”. A spokesman for the agency said: “In the face of massive cuts to our budgets from Westminster, the ORR was consulted on future investment plans to ensure that Scottish Ministers could continue to maximise the scale of investment in Scotland’s railways. “The Scottish Government is continuing with record levels of investment in rail as planned, including a £5bn package announced in the summer by Transport Minister Keith Brown to take Scotland’s railways into the next generation.” Network Rail played down the significance of the discussions with the ORR, describing them as “business as usual”. However, a spokesman for the company made clear it had not been informed about the request to defer repayments.

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Rail debt repayment row

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