The Borders Railway folly: another trams debacle in the making

by Tony Mackay

I was disappointed to read Transport Scotland’s latest announcement of support for the Borders Railway project which is intended to reopen the railway line between Edinburgh and Tweedbank in the Borders. This line was closed in 1969 as part of the infamous Beeching cuts.

The proposed project includes about 35 miles of line and seven new stations, as illustrated here.

I do not believe that the Borders Railway is an economically viable project nor a good use of public sector funds, and I am very surprised that Transport Scotland thinks differently.

Some people have claimed that it is the next transport fiasco after the Edinburgh Trams and it is looking increasingly  like that.

Keith Brown, the SNP Transport Minister, made the following statement in Parliament a few days ago, "We expect to make an announcement with regard to the Borders Railway shortly once the commercial terms of the contract between Scottish ministers and Network Rail are finalised” The railway was originally scheduled to reopen in 2011, at an estimated cost of £115 million. The most recent start-up date is now 2015, four years behind.

Last year Mr Brown stated that the cost would definitely be in the range £235-295 million. However, recent media reports have claimed that it has risen to £350 million, which is three times the original estimate.

It is little wonder therefore that comparisons are being made with the Edinburgh Trams fiasco.

The SNP Government originally decided not to fund the line directly from public funds but to do it through a public/private partnership. Three private sector firms were shortlisted to finance, construct and maintain the railway. However, two withdrew. The Government was therefore forced to return to the public sector option and negotiate with Network Rail.

My understanding is that the main concern of the private sector bidders was not the rise in capital costs but the realization that the operating costs would be much higher than the revenues. That implied a high level of annual subsidy, which might not be forthcoming.

A few years ago I undertook a review of the project, which concluded that it would not be economically viable and would also be a poor use of the public sector funds which had been promised for it to go ahead. Nothing has happened since then to change my mind…in fact the project’s economics have almost certainly got worse.

An economic impact study was undertaken by planning consultants who concluded that the Borders Railway would create thousands of new jobs in the region and help revitalise the local economy. However, it was a very poor piece of work.

The main economic benefit claimed in the report was not actually job creation but the building of new houses. This claim seemed to me to spurious at the time, although if the local population increases there would obviously be some local economic benefits such as more spending in local shops and on local services.

Transport Scotland - set up in 2010 – appears to have accepted the claims of that very poor economic impact report. I would have expected them to review all the major projects with which they are involved but they do not seem to have done that with the Borders Railway line. If they had done so, I suspect they would not be supporting it today.

Public funds are very limited at the present time, as we all know. Transport Scotland should be trying to make the best use of their funds but the evidence from this project, and possibly others, suggests they are not doing that.

 Transport Scotland's website says the economic benefits will be

•  The potential for economic development and growth
•  Opening up economic and housing opportunities
•  Helping to prevent population decline in Midlothian and the Scottish Borders
•  Improving access to Edinburgh's employment market
•  Encouraging business development in Midlothian and the Central Scottish Borders
•  Acting as a catalyst for increased tourism in Edinburgh, Midlothian and the Scottish Borders;
•  Making further education opportunities more accessible to residents of Midlothian and Scottish Borders
•  Improving the quality of life for communities in Midlothian and the Scottish Borders.

These benefits will be very small and certainly do not justify the estimated £350 million investment. Transport Scotland claim that the line will increase the Borders’ annual economic output by £40 million but that is an unbelievably high figure in my opinion. I have seen no justification for it. The operating costs are expected to be much higher than the annual revenues; there would therefore also be a need for a large annual subsidy.

However, there is certainly a strong economic case for reopening the line to the outskirts of Edinburgh and to Gorebridge in Midlothian, but definitely not to Galashiels and Tweedbank. I believe that it would be sensible to complete the first part of the line and then review the extension to Tweedbank, in the light of the actual demand. However, any such review must be an objective economic and financial appraisal, unlike the previous studies.

I was surprised to read on the Transport Scotland website that the new Director of Rail, Aidan Grisewood, is an economist who previously worked for the Scottish Government and the Royal Bank of Scotland. Mr Grisewood should therefore surely know that the economic case for the Borders Railway is very weak.

I understand the support of local politicians for the Borders Railway, but there are many better ways of investing £350 million in the Borders economy.

Tony Mackay is a prominent Scottish Inverness-based economist. Reprinted with kind permission from the current edition of the Scottish Economy Monthly Report from Mackay Consultants.