The Scottish Government

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Introduction

1. The Government wants more passengers to use the railways. Indeed, Britain now has the fastest growing railway in Europe. The Government is also committed to increasing investment in the railways. But from time to time, as in any industry, changes to service provision will be necessary to reflect passenger and freight demand. That is why there needs to be an open and transparent process to allow these changes to be made. The Railways Act 2005 allows that to happen - hence this consultation.

2. The Railways Act 2005 changes the way in which modifications to the rail network are effected. The Act distinguishes two types of modification, each having its own procedure:

• a "closure" involves the loss of a passenger service, a network (or part of one) or a station (or part of one);
• a "minor modification" involves some lesser change, such as the removal of railway equipment or the relocation of a station structure.

3. This document seeks views on the implementation of the legislation, including how it is proposed to take passengers' interests into account.

4. Because of the changes made by the Act, for the first time statutory closure guidance is to be published. This will make much more clear and transparent than under previous closure procedures what must be taken into account before closure can be considered. These are discussed in detail in the remainder of this document, but in short:

• all alternatives must be considered
• a full consultation must take place, including with passenger groups
• as well as passenger impact (both now and in the future), the Government's five objectives for transport - environment, safety, economy, accessibility and integration - and the resulting benefits/costs must be considered
• and in contrast with the current closure procedures where the Secretary of State determines closure proposals, the independent Office of Rail Regulation must determine whether the proposal meets the criteria set out in the published guidance

5. Under the Act, a closure can be proposed by a rail funding authority or a train or network operating company. The rail funding authorities specified in the Act are the Secretary of State for Transport, Scottish Ministers, the National Assembly for Wales, the English Passenger Transport Authorities and the Mayor of London. Where a train or network operating company proposes a closure, a view on whether it should be brought into effect must be taken by the rail funding authority. Proposals by both operators and rail funding authorities require ratification by the Office of Rail Regulation.

6. The rail funding authorities are democratically accountable bodies, with wide-ranging transport responsibilities. They require the ability to adapt their transport networks to meet today's needs, which may be very different from the circumstances which obtained originally

7. In deciding whether or not to close a line, network or station, an authority or operator will want to take into account a wide range of considerations. These will probably include:

• the other calls on funding, including investments unable to be undertaken or services unable to be supported, because funds are tied up supporting under-used assets and services;
• the willingness of national or local taxpayers to continue to subsidise the services;
• the inconvenience caused by closure to users of the existing service, particularly in cases where their journeys could not easily be made by any other mode of transport;
• the contribution which the provision currently makes - or could in future make - to the economic regeneration of the area which it serves;
• wider environmental, road congestion and social considerations;
• the scope for improving revenue performance by increasing or decreasing fare levels, by adding or removing intermediate stops, increasing service frequency, or by more aggressive marketing of the service;
• the scope for reducing the cost of the service by using shorter or lighter trains, or by changing the standard to which the track is maintained;
• the scope for promoting the use of the line by freight traffic;

8. The Government does not propose to issue guidance on all the different considerations that rail funding authorities or operators should take into account or how they should strike a balance between them. That would be unnecessarily bureaucratic and would run counter to the goal in the White Paper "The Future of Rail" of promoting local accountability.

9. However, the Government recognises that the closure of a railway is a more significant change to a transport network than the removal of a bus service or the stopping-up of a footpath. This reflects the fact that a railway closure has more far-reaching consequences and is less readily reversed. Once passenger services cease on a line, Network Rail will be under no obligation to maintain or renew it (unless, of course, there is a freight operator willing to bear this cost), and will be free to sell the surplus land in order to help fund its operations. Once a track-alignment has been lost, it can be a prohibitively lengthy and expensive process to regain it. Some of the Beeching closures, for example, have resulted in the loss of routes that would be extremely valuable to today's railway. It is important that a decision with long-term consequences is not taken purely in response to short-term financial constraints on an authority. It is also desirable that there should be an independent check that the benefits claimed for a closure do outweigh the costs.

10. The Act therefore provides for:

• Ministers to frame guidance on the conditions that must be satisfied before a closure can be made,
• the Parliaments and Assembly to approve this guidance,
• rail funding authorities, train and network operating companies to appraise closure proposals in accordance with this guidance,
• rail funding authorities to consult on closure proposals in accordance with this guidance, and
• the Office of Rail Regulation ( ORR) to determine whether a closure proposal satisfies the criteria set out in the guidance.

11. ORR's role is to provide an independent review of whether closure proposals satisfy the requirements of the guidance. However, the ORR does not have any responsibility for dealing with the consequences of the failure to close a railway service, such as the congestion problems elsewhere in an authority's area that would go unsolved because funding would not be available for re-allocation. Both the Government and ORR are therefore clear that it would not be appropriate for the ORR to become involved in second-guessing the rail funding authorities or substituting its judgement for theirs. It is also important that an authority seeking a closure - and any third parties who support or oppose it - should be clear precisely what tests the ORR will apply. ORR will publish its own procedures in due course.

12. A draft of the guidance which the Government proposes to put to Parliament for approval is attached. It is based on the following principles:

• the guidance does not purport to be comprehensive guidance on all the factors which a rail funding authority or train or network operating company might want to take into account when considering a closure. Instead, it focuses narrowly on the need to create an objective test which should be applied;
• this test is based on the rail funding authority's or operator's assessment of comparative value-for-money. The outcome must demonstrate that closure represents better vfm than any alternative option;
• the vfm assessment for a closure should be carried out in the same way as the vfm assessment for an investment in a new road or railway. It should apply the same benefit-cost calculation methodology. And it should use the same monetary values for time, safety benefit, road decongestion benefit, and all other quantifiable factors, as are in use for investment appraisals at the point where the authority submits its case to the ORR;
• the vfm assessment reviewed by the ORR should cover only those costs and benefits which are quantified in investment appraisals. The authority or train or network operating company may want to take into account a wide range of non-quantifiable costs and benefits, but it would not be appropriate to ask the ORR to do so;
• the calculation should be based on an estimate of the actual costs and savings arising from the closure. In particular, it should not use notional or industry-average costs or track access charges as a proxy for the costs that will actually be incurred in operating, maintaining and renewing a line or station;
• the Act requires the authority to undertake a public consultation on a closure proposal. Schedule 7 to the Act specifies the parties to be consulted. These include the Rail Passengers Council, LTUC (also known as London TravelWatch) and other bodies representing passenger interests. The consultation may be as wide-ranging as the authority judges appropriate. For example, the authority might want to consult on a broader package of transport proposals of which the closure is an integral part. The guidance does not seek to fetter authorities' discretion in this area. However, it does require that they demonstrate to the ORR that interested and affected parties have been (a) provided with the authority's estimates of the costs and benefits of closure, and the assumptions and forecasts on which they rest, and (b) given an opportunity to comment on or challenge the authority's calculation, eg on the basis that it has over-estimated the savings from closure or under-estimated the costs.

13. The Act requires the draft guidance to be subject to the approval of the Parliaments and Assembly as appropriate. It is obviously right that, if the guidance is substantially revised, it should be resubmitted for approval. However, the Government does not believe that it would be appropriate for the Parliaments and Assembly to have to re-approve the guidance on every occasion when the monetary values of time etc are uprated to reflect economic growth and inflation. The guidance is therefore framed in terms of the monetary values specified in the DfT guidance on investment appraisal, which are in turn based in the Treasury's 'Green Book'.

14. When the Government and other public bodies consider the case for a new investment, the calculation of the benefit-cost ratio is an important element in the process. But the BCR can only ever be an aid to decision-making; it cannot determine the decision. In the case of DfT, a BCR of 1.5 is currently used in considering whether a project represents 'low' vfm or better. However, Ministers will also take into account the unquantifiable benefits of schemes, the operational and political priorities, and considerations of affordability. In consequence, schemes with a BCR significantly lower than 1.5 are often approved and schemes with a BCR better than 1.5 sometimes have to be deferred. In the case of the Scottish Executive, the investment appraisal does not produce a value for money ranking in exactly the same way as DfT but reflects a similar approach to BCR values. Scottish Ministers also take into account the non-monetised benefits of projects in reaching a decision. The proposed position in relation to the benefits/costs of a closure is broadly similar. But the effect of the proposed guidance is that the funding authority can exercise its discretion in one direction only. It can decide not to pursue a closure which is justified on narrow BCR grounds. However, it will not be able to secure a closure which fails the narrow BCR test. At the margins, this could have an adverse impact on the authority's ability to meet the overall transport needs of its areas as effectively as it would wish. However, the Government considers that it is defensible to frame a guidance regime which errs on the side of caution where rail closures are concerned, for the reasons discussed at paragraph 9.

15. The Government would welcome comments on the following questions:

• Do you agree that the objective test to be contained in the guidance should relate only to the calculation of the quantifiable benefits and costs of closure? The ORR would review this assessment only.
• Do you agree that the funding authority should retain a broad discretion not to pursue a closure, but should only be permitted to make a closure where the quantifiable benefits exceed the quantifiable costs to a defined value?
• Do you agree that the guidance should be based on the same methodology and the same monetary values that are used to appraise new projects? If not, what changes would you suggest? And what would you see as the justification for these?

16. The second type of modification of the rail network is a "minor modification". The Act defines in some detail what changes to the network may be eligible to be treated as minor modifications. Minor modifications may be determined on a case-by-case basis by the Secretary of State or by Scottish Ministers. And the Act also provides for them to make a determination that a generic description of proposed closures shall be treated as minor modifications.

17. Essentially, minor modifications to the network are operationally sensible changes which have no substantive effect on rail users' experience of the railway. As such, the Act exempts them from the closure process described above. The Act does, however, require minor modifications to be notified to the Office of Rail Regulation.

18. The provisions in the Act are a development of the provisions in the Railways Act 1993, as amended by the Transport Act 2000 relating to "minor closures". Under the 1993 Act (as amended), minor closures were determined by the Strategic Rail Authority on a case-by-case basis. Based on their experience of the types of proposals put forward as minor closures, it is proposed that it would be sensible and cost-effective to make use of the powers available under the 2005 Act and make a determination that certain descriptions of closure proposal are to be treated as minor modifications, rather than determine each proposal individually. Initially, the following descriptions of proposals are proposed:

• The proposed closure of parts of a rail network other than track. This would include for example removal of installations such as power or signalling equipment that were no longer needed;
• The proposed closure of a part of a station in certain circumstances.

These are discussed in detail in the attached document. It is also proposed to utilise the powers available under the Act for the Secretary of State or Scottish Ministers to provide by Order that closures proposals are to be treated as a minor modification because of their temporary nature or limited effect on the provision of railway passenger services. The document discusses what it is proposed be included in such an Order.

19. The Government would welcome comments on the following questions:

• Do consultees agree in principle with any or all of the proposed descriptions of closures eligible to be treated as a minor modification, or do you have any other comments?
• Do consultees agree with the criteria that underpin each of the proposed descriptions of closure eligible to be treated as a minor modification?
• Consultees are invited to consider if the Secretary of State and Scottish Ministers should set down measures to define whether the closure of a facility may be progressed as a minor modification? For example, should there be maximum distances that facilities such as waiting rooms, footbridges or ticket offices may be moved? What other, or alternative, measures might be specified?
• Do consultees have any suggestions for other descriptions of minor closures of railway facilities used in connection with passenger services that could be taken forward as a minor modification?

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