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Welsh rail 'game changer' bogged down in devolution disagreement

Plans for a big improvement in local railways in Wales appear stuck as a row erupts between the Welsh government and Whitehall over funding and process attached to devolving rail powers.

The Welsh government's plans for setting up a revolution in local rail travel are being held up, with the Welsh Assembly and the Department for Transport at odds over who's to blame for a six week delay which is likely to get longer. Devolution of rail franchising in Wales to the Welsh Assembly has been timetabled for completion this year, but the assembly is now understood to have put back the date for launching the procurement process for selecting a preferred bidder for the Wales & Borders franchise until the end of September.

KeolisAmey, Arriva Rail Wales, MTR Corporation and Abellio Group are in the running as shortlisted bidders for the new franchise. Described as a 'game changer' for transport and economic development in South Wales, the new franchise is due to start in 2018 with the winner delivering around £3bn of infrastructure improvements as well as providing rail services and new rolling stock technology to introduce more light rail and metro services in the South Wales Valleys and Borders region. The Welsh government's economy and infrastructure cabinet secretary, Ken Skates, reportedly blamed government in Westminster for the delays, but a letter to Skates from transport secretary Chris Grayling, published by Wales Online, puts the ball firmly back with the Welsh government.

In the letter, Grayling says he remains committed to devolving rail powers in Wales, but refutes the accusation that the General Election was the cause of the change in the programme, which Grayling says are the result of cumulative delays in the process. DfT officials warned their Welsh counterparts that the tender launch date of 18 August was unrealistic, he says.

Grayling points out a number of problems still needing to be ironed out. These include several key documents and hurdles still at the assembly's door, such as a final agreement for asset transfer of the core valleys network still to be signed off by the assembly with Network Rail and an agreement for the assembly to take Railways Act powers over stations in England. There is also a disagreement over funding, with the assembly asking for an additional £1bn for rail maintenance over the course of the franchise, for which Grayling says he "sees no basis".

This dispute is understood to be over a £67m annual rebate paid to DfT by the incumbent franchisee Arriva Rail Wales, which the assembly says it will not receive while having to pay for maintenance costs. The assembly is understood to have requested a 'decoupling' of the issues of the funding and authorisation for the tender process so that this can start while negotiations over necessary agreements continue.

Authorisation for the Welsh government to exercise railway powers will only come once everything is agreed, Grayling says, so the Assembly and its bidders will all be liable for all risks until then. According to Wales Online, a Welsh government spokesman said: “Aside from a number of inaccuracies in the issues presented, we feel that the position the secretary of state has taken on rail funding in Wales misrepresents a complex devolution position. This is precisely the reason that we were seeking to de-couple the issues of funding and progressing with the franchise procurement.

“Linking the funding issue to the administrative process may be appear to be an expedient way for the Department for Transport to resolve a financial issue it has brought upon itself, however, this approach jeopardises the Welsh Government’s ability to award a replacement for the current Wales & Borders franchise, which if unresolved this will be a major issue for rail users across Wales and the Borders," the spokesman said.

The shadow economy and transport secretary in the Welsh Assembly, Russell George said: “This letter is damning and appears to suggest that the Welsh Government hasn’t fulfilled its role. Sadly, it’s the commuters which are going to pay the price and they will be extremely worried about that.

“The UK Government has provided a long list of incomplete and unfulfilled tasks, and we must now look to the Welsh Government for its response."

If you would like to contact Jon Masters about this, or any other story, please email jmasters@infrastructure-intelligence.com.