Germans in charge of Welsh railways is huge opportunity

Seeking to make sense of Deutsche Bahn’s takeover of Arriva, which among its other Europe-wide interests runs Wales’s railways, I put in a call to our resident transport expert Professor Stuart Cole, of the University of Glamorgan.

I located him, mobile in hand, stepping aboard a train at Cardiff station on the first leg of a 7-day ocean-going journey to the United States (booked before aircraft were cleared for takeoff following the Iceland ash cloud).

Professor Cole didn’t think the takeover of our railways by the German state-owned transport group would make much difference in the short or even medium-term because they would be locked into the 15-year contract with the government that Arriva signed back in  2003. This means that the Welsh Government, which took responsibility for railways in Wales following the 2005 Transport Act, will have its hands tied until 2016.

Listening to Professor Cole made me realise what a lousy deal the Department of Transport negotiated for us in 2003. It agreed a £112  million subsidy for running Wales’s railways which, if Whitehall had still been in charge, would have fallen to £100 million today and declined still further as we approached 2016. If this had been sustained then there would have been very little investment in the Welsh rail service for the whole of the 16 year franchise period. With 14 other franchises to look after in England, the London-based Department of Transport plainly had no interest in the Welsh railway system.

Fortunately, however, the railways were devolved in 2006 and as a result of the coalition agreement between Labour and Plaid following the 2007 Assembly election, these commitments were made in the One Wales agreement between them:

• We will develop and implement a programme for improved north-South links, including travel by road and rail.
• We will reduce rail travel time between the North and South of Wales.
• We will continue to improve the safety and quality of stations and platforms in all parts of Wales, introducing new trains and train services.

The result has been an extra £40 million investment a year over and above the £100 million subsidy stingily agreed by the Department of Transport, the extra money coming out of the Welsh block. The main result has been a dramatic improvement in north-south rail links, with a two-hourly faster service between Bangor and Cardiff. Transport Minister Ieuan Wyn Jones is planning to make this an hourly service within two to three years. Every other service will be a faster one, missing out stations when the train leaves the Welsh border to travel through England via Hereford, Shrewsbury and Chester.

A new passenger service has also opened between Ebbw Vale and Cardiff, other Valley lines have been  improved, and much of the rolling stock upgraded. None of this would have happened if the dead hand of the Department of Transport had lain heavily on the Welsh rail signals. In short it is a striking example of a devolution dividend, brought about by having our own Government giving priority to Welsh interests.

It will be interesting to see if Deutsche Bahn takes note of this. Their take-over of Arriva was undoubtedly determined by a commercial Europe-wide opportunity and not by any underlying concern to operate Arriva Trains Wales. It paid £1.59 billion for Arriva and as its chief executive Rudiger Grube put it on Thursday:

“Arriva’s activities will strengthen Deutsche Bahn’s strategic positioning in Europe, principally through Arriva’s successful targeting of Europe’s increasingly liberalised and fast-growing transport markets, which are of strategic interest to Deutsche Bahn. Arriva will give Deutsche Bahn the platform to expand in Europe and enhance its position as one of Europe’s leading passenger transport groups. It is only the beginning of market liberalisation and consolidation. At the same time local transport markets across Europe will continue to open up. We have the change to either enter these European markets or simply lie back and begin to shrink.”

Deutsche Bahn is a global player and as such it should provide a long-term opportunity for the Welsh Government. It is 100 per cent owned by the German state, and has 255,000 employees in 130 countries, with 60,000 employees outside Germany. In 2009, the group had revenues of €29.3 billion. It is the second-largest transport company in the world after Deutsche Post (the world’s largest logistics group) and is the largest railway operator and infrastructure owner in Europe.

In the short-term Deutsche Bahn has little incentive other than to take the Welsh Government’s subsidy and rake in the profit from its Welsh operation. But in the longer-term it has an interest in regaining the operation licence when it comes up for renewal in 2016. To do that it should be up for at least taking seriously a proposal from the Welsh Government to collaborate in investing significantly in the Welsh rail system.

Deutsche Bahn will know only too well how effectively and efficiently its domestic rail service operates. Ieuan Wyn Jones should be on the phone as soon as may be to Rudiger Grube and ask for a meeting.  When they get together he should point to Deutsche Bahn’s magnificent light rail operation in the Stuttgart region of southern Germany and say to him, “Rudiger, please help me put together a case for creating such a system in south-east Wales, linking the Valleys with Bridgend, Cardiff and Newport. This could be the biggest investment project overseen by the Welsh Government in its history, linked to ridding our Capital City of cars, funded by a bond-issue, and underwritten by expanded ticket sales. Let’s go for it Rudiger.”