The light rail experts at Bircham Dyson Bell explain what they would like to see in Steve Berry’s report on the costs of light rail.

Steve Berry’s eagerly awaited report on the costs of light rail is due to be published in September by the Department for Transport. Many in the light rail industry have high hopes that it will contain measures designed to encourage more schemes to be undertaken in the UK.

The promoters of light rail schemes have long complained that the cost of implementing light rail schemes in the UK is much higher than for our European neighbours. Over the last 30 years, many European cities have successfully built tram systems where the UK has failed to so, due to high costs, the length of time it takes to authorise and implement schemes, and the uncertainties regarding central government policy toward light rail. It’s hoped that the Berry Report will address why the UK has such obstacles and explore ways to overcome them.

“The current system requires a lot of upfront investment by promoters,” explains Aaron Nelson, associate, Bircham Dyson Bell LLP.

“Because the DfT holds the purse strings, local authorities spend a lot of time convincing the DfT of the schemes advantages and value for money – making the DfT a crucial but costly ‘layer’ in the process. And because the DfT controls most of the funding, and has seen projects overrun in the past, it often adds as much as 50% optimism bias – increasing the costs of each new project.

“Then, when the local authority hands over the project to the private sector, to build the scheme, there is another whole-scale transfer of risk, with re-designs and costs recalculated again – and so the layers of costs and decision-making continue. It’s easy to see why schemes are not realised.”

These difficulties are not new: the House of Commons transport and public accounts committees, which each reported in 2004-05, sought answers to many of the same questions. But it seems that their recommendations have failed to make a real difference.

“There must be some fundamental changes if the UK is to keep up with the rest of Europe and deliver a modern city environment,” says Stuart Thomson, public affairs consultant, Bircham Dyson Bell LLP.

“Reducing the discretionary role of the DfT would remove many of the inefficiencies in obtaining central funding. If the DfT had a pre-defined and well-established set of criteria, a local authority would know if it had hit those criteria prior to submitting its proposal for funding, making things quicker and simpler.

“A bolder solution would be to pass control of fund raising to the local authority, along with the means to sustain policy and political support to delivery. Localism is a key driver for the government and the concept is mirrored in the way that the European cities raise funds for their tram systems.

“In France, for example, central government provides around 35% of funding for a scheme, and the remainder is raised via taxes on local businesses over a certain size. In the UK, the DfT provides up to 75% of funds, and only 25% is raised locally. A move away from central funding to local and community funding could lead to more light rail systems in our cities.”

Certain “localised” financing initiatives are already in existence; Nottingham’s Workplace Parking Levy, which will help fund NET Phase 2 (which sees a rough split of 67% of costs from the DfT and 33% from the local authority), the Crossrail Levy (where new developments pay a levy per square footage), and the Community Infrastructure Levy – all used in particular areas to raise funds for infrastructure.

So what does this mean for the future role of the DfT?

“The DfT should focus on reducing costs. Standardising our light rail systems – many of which are different – would reduce vehicle, equipment and maintenance costs,” explains Nelson.

“Further, the DfT needs to address the cost of diverting utilities; utility companies pay only 7.5% of the costs associated with a light rail scheme, compared to 18% for a highways scheme. Why should they be different?

“The DfT clearly has a role to play, but if we want to reduce the amount of cars in our cities in line with European policy, we could think about empowering our local authorities to do that.”

For Nelson and Thomson, the proof of success for the Berry report will be whether new tram systems are delivered in Britain’s major cities.