Third World Class Capacity: Cancelling Tube Upgrades
On Friday, 13 October 2017 TfL officially announced a ‘pause’ to its Jubilee and Northern lines World Class Capacity programme. This harked back to a similar statement made by Patrick McLoughlin, then Transport Minister, about rail electrification – a project later restarted (albeit with omissions). The case here is rather different. This is a cancellation with a brave face put upon it.
‘Pause’ – as in ‘cancellation’
In fact, TfL’s formal announcement of the pause was rather belated. The writing had been on the wall since the previous Tuesday, when a verbal statement was made by David Hughes, Director Of Major Programme Sponsorship at London Underground.
Those who had been following the current Northern line upgrade (often abbreviated to NLU2), in particular, knew immediately that, when it came to Northern line trains, there could be no such thing as a pause. Here it was a case of if it got delayed, it got cancelled. Whilst the Jubilee line situation is slightly different, few commentators or informed sources believe that this is an electrification-style pause there either.
If NLU2 were delayed, then it may be a better strategy to abort this project and consider other strategic options for delivering additional capacity.
In one sense, we should not be surprised. It has been known for some time that money is short at TfL. This doesn’t, however, paint the whole picture. TfL have repeatedly said that the capacity work on the Jubilee line represents good value for money and that it was a project that should go ahead in preference to others. Meanwhile, a lot of other projects, both within and without London Underground that seemed likelier to be cancelled, delayed, pruned or not envisaged in the current financial climate have gone ahead.
So whilst money is almost certainly at the heart of this matter, it is not simply a case of the project being too expensive.
To get some understanding of what probably went on, we need to return to the recently explored (in an Overground context) topic: the economics of ordering trains. In particular, the economics of ordering Underground trains.
The need for a production line
Ever since the days of Henry Ford, it has been the ideal of most manufacturers to have a high-volume production line as it dramatically lowers costs. Nowadays, manufacturers go a step further and look towards achieving as much automation as possible on that production line. To this day, the epitome of a company that is centred around the production line is the car manufacturer.
Lagging behind the car and other motor vehicle manufacturers are the train (‘rolling stock’) and plane manufacturers. They may be unable to attract the orders for large numbers of vehicles on the scale of car manufacturers, but they can still make their products cheaper if they can get a production line going. Also the bigger the order, the smaller the proportion of cost spent on development and testing.
Standardised yet flexible
In recent years there has been a strong trend amongst rolling stock manufacturers to have one flexible model that can be configured to the customer’s needs. This is not so different from BMW having an assembly line for Minis, yet giving the customer the ability to specify many options – from left- or right-hand drive to the choice of entertainment system installed.
As well as enabling the production line principle, a flexible train model means that development costs incurred upfront are not repeated on a large scale. It also significantly reduces acceptance costs. After all, a train horn is a train horn and you don’t need to get it separately approved each time it is incorporated into a variation of a common design. Finally, flexible off-the-shelf designs mean that manufacturers can respond quickly to demand should that be necessary.
Tube trains – non-standardised and inflexible
Small Tube trains on standard-gauge track can be found in London, but demand for such new trains with these specifications is probably unique. The idea of taking a readily-available type of train and tailoring it to fit the requirements of London Underground’s deep tubes is pretty much a non-starter.
For London’s deep tube trains, a train manufacturer pretty much has to start from scratch. This means that all the development costs have to come out of that individual train order. The best a manufacturer can thus hope for is a relatively large order, so as to minimise both development and startup costs as a portion of the total. A relatively large order also ensures that some economies of scale can be achieved during production.
As a train manufacturer, what you really don’t want to bother with is a small order for tube trains with a unique profile – unless the customer is prepared to pay considerably above and beyond the normally expected price in order to get them. It is notable that a recent contract for replacing all the rolling stock on the Glasgow Underground went to Stadler – a company better known for its tram manufacture. As a manufacturer of trams, Stadler is used to adapting to be flexible and it is also used to accepting small bespoke orders.
Bigger (orders) is better
In recent years, when it comes to rolling stock procurement, London Underground has started to shift its strategy. This started in a big way with a single order for all of the Sub-Surface Railway consisting of only two variant types – the S7 and the S8. The number represents the number of carriages. There is some variation on seating pattern but apart from that the S8 is essentially the same train as the S7, but with an additional carriage added.
This policy was then taken even further, with a single order planned for the rolling stock for the Piccadilly, Waterloo & City, Bakerloo and Central lines (the ‘New Tube for London’ project or NTfL). As on the Sub-Surface Railway, there will be variants for each line and these will primarily relate to the length of the train. It would not be surprising if the eventual replacement for the Northern line was either a follow-on from the lines previously mentioned or the forerunner of new stock intended for the Northern, Jubilee and Victoria lines. Either way, the long-term outlook could well involve just three types of rolling stock for the entire London Underground.
DLR almost follows the same practice
In a similar way, the DLR has now decided to go for replacement of all but its newest trains as one big order. The remaining trains are relatively new, as they were only ordered for the Olympics in 2012.
Overground not so constrained
In contrast to London Underground and the DLR, London Overground is in a better position as it can utilise off-the-shelf trains built to their requirements as regard to elements such as seating layout and walk-through gangways. Nevertheless, when possible, they too seem to be going for fewer, bigger orders with options for additional trains. Crossrail too will get all its rolling stock from one order, with options exercised when additional trains are needed. Although Crossrail stock was originally ‘one of a kind’, it formed the basis for Bombardier’s new base model. Hence the similarity between Crossrail’s Class 345 and London Overground’s new Class 710 – also from Bombardier.
The cause of the pause
Back to the paused order. The order for the Jubilee and Northern Line Additional Trains (JNAT) – those needed for current, short-to-mid term capacity improvements – was tiny in relation to other orders for Tube trains in the past 25 years. Many options were considered at an early stage, but the numbers got whittled down to 10 x 7-car trains for the Jubilee line and 17 x 6-car trains for the Northern line. So that is just 172 carriages. By way of comparison, the original S Stock order (which excludes the extra train for the Croxley Rail Link) consisted of 1,387 carriages.
To make it worse, not only was the order relatively small, but the trains also had to be functionally similar to existing ones on the Northern and Jubilee lines – and the trains on these two lines are not actually identical. So, for example, they would have to feel the same to drive as existing stock on occasions when the train operator was driving it. Ultimately, even the 27 trains in the intended order could not be fully considered to be part of the same fleet, although there would have been a lot of commonalities.
Timing is everything
It probably is no coincidence that the JNAT programme was cancelled during the phase when London Underground was evaluating tenders for the additional trains. This suggests that it was the trains themselves – rather than the considerable amount of associated infrastructure work – that led to the cancellation. The appendix of the latest TfL investment programme report suggests that the JNAT contract award was made on 2nd October 2017. Much more likely, that was the date when they decided not to award it. Slightly worryingly the same document states that:
We have… also placed contracts for radio and CCTV equipment for the additional trains
which really does suggest that the cost of the trains came as an unexpected and unwelcome shock.
World Class Capacity paused
It is important to emphasise that without the new trains the outstanding part of TfL’s World Class Capacity programme to improve frequency on the Northern and Jubilee lines makes little sense. Most, but not all, of the work in that programme was about providing the infrastructure necessary to enable those trains to operate. This is likely why the formal pause announcement makes it clear that it relates to the entire World Class Capacity programme.
At this point, it is pertinent to compare the current situation on the Northern and Jubilee lines with the successful ‘World Class Capacity’ upgrade of the Victoria line. This increased the frequency during peak hours from 33tph to 36tph. The Victoria line upgrade (known as VLU2) had one very big thing going for it, however: it did not require extra trains.
Doomed from the outset?
If the reason for the for cancellation of the World Class Capacity programme was the unexpectedly high cost of the small number of additional trains then, unknowingly, London Underground probably doomed the project several years ago. The moment they decided, quite late on in planning phase, to go for the minimum number of trains consistent with getting the necessary additional capacity was probably the moment things would turn out to be untenable.
London Underground’s approach to the size of the proposed order was understandable. It was they themselves who emphasised the issue of the trains only being in service for less than half of their potential working life as they would almost certainly be scrapped when the remainder of the respective fleets were scrapped sometime after 2040.
Think of the money saved
The cancellation of the Jubilee and Northern lines upgrade is not just a matter of cancelling the order for a few trains. There was a large infrastructure programme planned to support their introduction. In fact, the cost of these works was far larger than the cost of the trains. That there would also be saving on infrastructure costs if the trains were cancelled may well have swayed minds and made the decision to cancel easier to make.
According to latest Investment Programme Report the World Class Capacity Upgrade – excluding trains – was a programme with an estimated final cost of £528 million. Currently, £74m has been spent. Most of that spending will have been on the Victoria line, which would have been by far the cheapest of the three lines to upgrade. So it is understandable why there may be a desire to cancel a programme that, when looking at the bigger picture, does not achieve that much yet will cost a further £454m.
The cancellation of the trains raises a number of issues. Some centre around what the current situation is and what can be done to make the best of it. We hope to look at that in a later article. For the moment we concentrate on a single question.
Why did this happen?
Much has already been written concerning the reason for this cancellation. It undoubtedly boils down to money – but, as we have already highlighted, that is not the full answer. The Mayor’s fares freeze cannot have helped but its contribution to this should not be overstated. The loss in government support in funding TfL’s capital programme is far more significant. But this loss of funding was already known at the time when TfL were still actively pursuing both the JNAT programme for the purchase of additional trains and the World Class Capacity programme which provided the enhancements to the infrastructure on which the JNAT project depended. Consequently, it doesn’t explain why the cancellation has happened now – as opposed to a year ago, for example.
Unexpectedly high Inflation (especially with a fares freeze) and uncertainty of future passenger numbers in the aftermath of Brexit must also be factors though to what extent is hard to tell. We suggest that, apart from the cost of the trains themselves, four things came together to produce a climate which rendered JNAT untenable. These are:
- A change of Mayoral Policy
- Unbudgeted Items
- Cost of maintaining older Tube stock
- The need to protect more important programmes
A change in Mayoral Policy
Probably more significant than anything else as a cause is the fact that the current Mayor has identified different priorities within his transport plan. Strictly speaking, this is perhaps better thought of as a change of emphasis and priority, rather than policy, but the consequence is the same.
In crude terms, the previous two mayors had a primary policy of keeping London moving. It was roughly the same policy, though the individual mayors in question sought to achieve their objectives by different means. For both of them, making the most of the existing Tube network was absolutely fundamental to their plan.
What we have seen from Sadiq Khan, the current Mayor, has been a change of emphasis. Whether he is right to do this largely irrelevant. The policies he is pursuing were in his manifesto, he was voted Mayor of London and TfL’s primary duty is to implement the Mayoral policy – providing it is legal.
New plans for old
As a consequence of this change of emphasis, we are now seeing quite expensive programmes being implemented that were never budgeted for in TfL’s long-term plans. So, for example, we are seeing a retrofitting of catalytic converters to buses in order to improve air quality at a cost approaching £100 million. The Rotherhithe – Canary Wharf crossing (expected to be a pedestrian and cycle bridge) is now also part of the plan at £65 million. The Mayor has also placed great emphasis in having accessible Underground stations. Consequently, the expensive programme to increase the number of Underground stations that are disabled-accessible has been enhanced and accelerated. This is in contrast to the previous mayor who cut back on this somewhat financially-crippling item.
The Mayor’s ‘change of direction’, if it could be called that, was probably making it very difficult to implement the JNAT programme but, on its own, it was probably not fatal.
The second of the four devastating blows at least has some sort of silver lining when it comes to enhancing London’s rail service. It concerns the number of unbudgeted items that have been getting approved recently. There is a good reason for these items to appear but, until recently, it was rare to see items on a TfL Committee agenda which asked for approval of significant expenditure that weren’t already in TfL’s budget.
One of the recent notable unbudgeted items put forward for approval was for four extra Crossrail trains for the enhanced service now planned west of Paddington. Details are commercially confidential but it is inconceivable that the trains will cost less than £40m. Indeed £50m would seem more plausible. The commercial case for ordering them is probably very good, as indicated by the benefit-cost ratio (BCR). This does not help the fact that, with TfL approaching the limit of what it can prudently borrow, cash up front has to be produced – however good the case is. What is more, that cash is something that hasn’t been previously earmarked for this purchase – and TfL does not have a large piggy bank of unallocated money.
More recently, on the same day that the press release was issued about the pause, we saw the Programmes and Investment Committee approve a further sum for more London Overground trains. The amount was commercially confidential but the cost of these trains is also unlikely to be less than £40m. In reality, this purchase is probably far better value for money than going through the expensive business of procuring Underground trains together with all the costly complexities of upgrading infrastructure in order to run a more intensive service on a Tube line.
Sometimes the requirement for money is not for an unbudgeted opportunity but for an unforeseen urgent need. Thus it was that TfL’s Head of Crossrail 2, Michèle Dix, had to ask for an additional £13m to keep work on Crossrail 2 going up to the point of presenting a hybrid bill to Parliament. Dix made it quite clear that the only reason the money was needed was to cover the cost of delays caused by the unexpected general election that took place earlier in the year. It is an unfortunate fact that the election and campaign may have only been around six weeks long and have seen the same party returned to government, yet the disruption caused to presenting a Crossrail 2 bill to Parliament has probably put the project back by a full year.
Unbudgeted items so far do not appear to add up to a substantial amount of money when compared with the total transport budget. Nevertheless, for those controlling the purse strings, it is probably a worrying trend. Possibly more worrying still is that the Mayor’s Transport Policy is only currently available in draft form. There may be future items of policy that lead to more unbudgeted expenditure. It is not so much a case of ‘how much unbudgeted money has been spent?’ as ‘how much do we have to allow for future unbudgeted items?’
Cost of maintaining older Tube stock
The third reason that we would suggest led to the decision to cancel the planned extra trains for the Jubilee and Northern lines is the need to hold back money to ensure that the existing (older) fleets can keep running on the Piccadilly, Bakerloo, Central, and Waterloo & City lines. In one sense this is just a specific example of unbudgeted items, but in this case, there is unlikely ever to be much choice as to whether to spend the money or not.
London Underground’s long-term deep-level Tube train replacement programme has been fairly disastrous. To replace trains on the four previously mentioned lines and to bring the service on those lines up to a modern, 21st century standard is an enormous – and very costly – undertaking. Indeed if inflation rises above its historical low then it may turn out that the final cost of doing so will have been as much as £15bn – comparable with the cost of Crossrail. Of course, much of the cost could be regarded as ongoing replacement and renewal that takes place as part of the normal asset cycle, rather than a capital investment. It is also slightly unfair to compare outturn costs of one project with the outturn costs of another project when there is approximately a difference of around 15 years between their completion dates. Nonetheless, it does give some idea as to the scale of the programme so far.
Despite the expense of the Deep Tube Upgrade programme, formerly known as New Tube for London, it was seen as both necessary and cost-effective as it would come at a time when rolling stock on the lines affected would be due for renewal anyway. Unfortunately, a failed resignalling contract for the Sub-surface Railway (Metropolitan, District, Circle and Hammersmith & City lines), which had to be retendered, meant that a significant amount of extra expenditure would be incurred on the replacement contract until around 2022. The fiscal implications of this delay must have impacted on the Deep Tube Programme.
It has never officially been stated that huge cost of resignalling and providing automatic train operation on the Sub-Surface Railway has delayed funding of the Deep Tube Upgrade programme. However, it is hard not to believe that the years of resignalling delay has done exactly that.
Meanwhile, the existing trains on the lines involved in the Deep Tube Upgrade programme haven’t been getting any younger and need more maintenance. More than that, they need a lot of tender loving care and wholesale replacement of some of the equipment on them which is outdated. Although every effort is made to predict the cost of this work, it is inevitable that it is only once the work gets underway that an accurate assessment is made of the true cost.
Clearly, ensuring one has the money available so that the existing fleets of Tube trains can remain in service is a higher priority than spending on new additional trains on lines which have a more modern stock anyway.
It is not just the trains either. With resignalling on the line years away, London Underground has recently spent around £40 million on a new Piccadilly line signalling control system which was developed in-house in order to reduce delays due to equipment failure. As with other items, this is probably extremely good value for money and prudent use of funds but, almost certainly, it is also something that wasn’t originally budgeted for.
The need to protect more important programmes
Important though the Jubilee and Northern Line World Class Capacity programme was seen to be, it really is not in the same category as some very expensive upcoming programmes for the Tube. As well as the need to update and upgrade what we already have in London, there is seen to be a vital need to get on with Crossrail 2, which is the only programme around likely to have a genuine, game-changing impact on London’s transport and housing issues.
Currently London Underground is well into the signalling upgrade of the Sub-Surface Railway. Over £1bn has been spent on this so far and it is estimated that at least another £1bn is needed to complete the job. The signalling needs to be replaced so, even if some savings can be identified, this is a sum of money that just has to be available. It is budgeted for, but with the uncertainty current in Britain and passenger numbers appearing to stagnate – so budgeted income figures are not being met – it is only prudent not to spend wildly on other things until one is absolutely confident about being able to fund such projects.
The Deep Tube Upgrade is mainly in the design phase at the moment which at least means costs are only measured in the millions not billions. Nevertheless, the rolling of the full project has had some eye-watering figures identified with it. As a long-term, value-for-money essential project it is vital it gets protected in preference to a relatively short-term fix for the Northern and Jubilee lines. The long-term solution can be looked at again for the Northern and Jubilee lines once the Deep Tube Upgrade programme is complete.
Finally, it is important not to forget about Crossrail 2 and keep the wheels turning on that project. The Northern line upgrade would have done very little for the problems on the Kennington – Morden section of the Northern line, which really need Crossrail 2 for a suitable bold solution. Crossrail 2 might be incredibly pricey, but it does comprehensively tackle issues that other schemes only tinker with.
One does wish, however, that sometimes TfL would just call a spade a spade, rather than a ‘temporary soil relocation device’. The cancellation of the World Class Capacity programme probably did not come as a surprise to some people. Arguably, it is also a prudent measure given the circumstances. Nevertheless, to claim (at least in part) that the work is no longer as necessary is more than a little misleading. Many of the issues that this project was designed to address still remain.
In another article, we hope to look at those issues in a bit more detail and see what options remain to deal with them.
Cover (and S8 stock) photo: mattbuck