The UK’s transport sector should brace itself for a bumpy Brexit ride. Things are changing fast, but here’s what I think will happen

 

 
Brexit

 
I am writing this column on Sunday, July 3, and do so with some trepidation. After all, there is no guarantee that what I write will not be hopelessly out of date by publication date.

In just 10 days, Britain has by a thin margin voted to leave the EU, the prime minister has resigned, the promises of the Leave campaign have unravelled like a ball of string rolling downhill, Boris Johnson has gone from hero to zero, and Michael Gove has destroyed his career. Meanwhile, my old boss Theresa May emerges from the shadows to become the likely next PM.

The Labour Party has seen over 50 shadow ministers resign (how many do they need, for goodness’ sake, and how many are left?) and has convulsed itself into a civil war as Jeremy Corbyn refuses to resign. Meanwhile tens of thousands have joined the Labour Party to make sure he stays in place, and thousands more the Lib Dems to get us back into the EU.

Oh, and a second referendum for Scottish independence is virtually certain if Brexit goes ahead, there are calls for a border poll on Irish unification, and Spain has begun aggressively eyeing up Gibraltar.

Economically, the chancellor has abandoned his policy of a budget surplus by 2020, there is great volatility in the currency markets and the stock exchange, growth forecasts have been cut sharply, and a cut in interest rates seems likely.

So if that has all happened in 10 days, you will understand that I am not confident that anything will be the same as today by the time you read this.

Nevertheless, being a brave, or foolhardy soul, I will venture a few predictions for the transport industry…

 

1. Acute economic uncertainty

We will have continuing and acute economic uncertainty for at least two years, and that will cause companies to postpone investment plans they may have had. If I learnt anything in my dealings with business over 28 years in elected office, including almost five as a minister, it is that business can adjust to almost any external environment, but only if the direction of travel is clear and set for some time ahead. That is the opposite of what we have now.

We now know the Brexiteers had no plan but insofar as aspirations existed, they were to continue trading in the single market while introducing strict controls on the freedom of movement of EU nationals into this country. But here among the uncertainties is one indisputable fact: there is no way that the EU will agree to that. They did not agree to go down this road when David Cameron was negotiating with them and they certainly will not agree to that now.

We also know that there are many MPs who reject the referendum result, either because they believe strongly that the Leave case was built on lies and false promises, or because they simply cannot bring themselves to vote for what they believe will cause immense damage to this country over decades.

My hunch is that even though most MPs were Remain supporters, the majority will vote to respect the outcome of the referendum – and it is ultimately a matter for parliament, as the referendum was only advisory – but will not have given up the thought of a second referendum when the negotiation terms are clear, some way down the track. More uncertainty.

What is not clear, and I have in vain sought clarification from the EU on this point, is whether, having triggered Article 50 which gives the EU formal notification that we wish to leave, the government could then rescind that later if it does not like the terms. In other words, is the triggering of Article 50 the point of no return? Nobody seems to know.

 

2. No snap general election

There is talk of a snap general election but excitable commentators in the media who ought to know better seem to have forgotten the Fixed Term Parliament Act. This requires a vote of no confidence in the government to be passed, hardly likely with a Tory majority, and then time to pass to see if another administration can take over. Otherwise there need to be two-thirds of MPs voting to dissolve Parliament, in other words Tory and Labour MPs voting together. Turkeys do not vote for Christmas. I predict that there will be no snap election.

 

3. No new initiatives

The government will for the next few months be so occupied by the Tory leadership challenge, by the need to cobble together a negotiating position with the EU, and to take action to firefight the economy that just about everything else will be on civil service autopilot. If you want a new initiative on transport, forget it. Can we really expect transport secretary Patrick McLoughlin and his ministers to be giving very much attention to transport between now and a new prime minister taking up office?

 

4. Bus Services Bill survives

That all being so, I predict that the Bus Services Bill, now on autopilot, will work its way through Parliament without very much changing at all.

I also expect bus and coach legislation more generally to remain unaltered, even in the medium term when the dust has settled. I have detected no clamour, for example, to revise the O-Licensing arrangements, or the work of the traffic commissioners. Nor are alterations to driving licences or Driver CPC likely, not least because they are a feature of the single market that everyone seems to agree we should try
to hold on to, whether we are in it or not.

 

5. Other rail projects in doubt

The new prime minister and chancellor, facing a significantly worsening position in the public finances, will re-evaluate expensive rail projects. Notwithstanding the determined efforts of Sir Peter Hendy at Network Rail, there must be a strong chance of projects planned for the next 10 years being deferred or cancelled, particularly those, like the electrification of the line to Swansea, which were introduced primarily for political reasons and which threw up a relatively poor cost-benefit ratio.

 

6. HS2 could be axed

It is with some dismay, horror even, that I have watched HS2’s costs accelerate like one of their planned trains, bursting through the generous optimum bias that was set. There must be a good chance that, with George Osborne and Patrick McLoughlin no longer in their present positions after a reshuffle, the plug will be pulled.

 

7. Trouble for rail franchising

In terms of railway legislation more generally, it is really Britain that has led the way in the EU to argue for the split between train and track and to remove the impediments to cross-border traffic. I see no reason why that philosophy should change though an exit from the EU does make it easier, I suppose, to reintegrate and renationalise the railways, should a Corbyn-led government wish to do so, though the prospects of a majority Labour government any time soon hardly seems likely. Britain’s absence from the EU will, however, strengthen the hand of the dinosaurs like SNCF.

I predict trouble ahead for the franchising regime, however. The assumption in recent years, and one which companies have based their bids, has been of relentless passenger growth. It can no longer be assumed that that will continue.

George Osborne has to date largely pulled off a neat trick: persuading the markets that, even if some of the statistics on the sustainability of the economy look frankly iffy, action has been taken as part of his famous long-term economic plan to bring it all round in the foreseeable future. I doubt if that bravado will work now.

We have already seen our credit rating downgraded, so increasing the already massive cost of borrowing. And of course the pumping of money into protecting sterling is money that could be spent on other things.

If jobs start disappearing abroad because big companies conclude that access to the EU market is no longer attractive from the UK – HSBC were first in line, 24 hours after the vote, with plans to relocate 1,000 jobs from London to Paris – then that is higher unemployment. That in turn means less disposable income, so less money to spend on travel, and scarce government money diverted away from growing the economy onto benefits.

What this raises is the prospect of more franchises failing financially, even handing back the keys to the Department for Transport. At the very least it will reduce interest in future franchises and depress the income the government can hope to derive from such franchises. That in turn will increase the pressure on the government to reduce capital investment.

 

8. A decision on airport expansion

My final prediction is that there will finally be a firm decision on airport expansion by the end of the year. I worked for a year with Theresa May (yes I am assuming she will win) and she is not afraid of taking decisive action. We rarely discussed transport when I was a minister with her at the Home Office, but I do note her constituency is Maidenhead, not that far from Heathrow.

 

Hold tight!

 

About the author:

Norman Baker served as transport minister from May 2010 until October 2013. He was
Lib Dem MP for Lewes between 1997 and 2015
.

 

This article appears inside the latest issue of Passenger Transport.

 

 

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